Online Reporter
Martin Kadzere
The Public Service Pension Fund is seeing strong returns from its growing and diversified property portfolio, spanning from residential property to large-scale real estate development projects.
PSPF chief investment officer, Dr Farai Gaba, revealed this in an interview during the launch of the Midlands Park, a mixed-use complex that provides both residential housing and community facilities in Zvishavane on Tuesday.
He said the strategic shift to real estate was expected to deliver significant returns that outperform negative real money market returns and the sometimes volatile equities, providing the fund with inflation-hedged stability.
The PSPF was established to provide decent pensions, gratuities, and other benefits to State employees upon retirement, discharge, resignation, or death.
The fund is actively expanding its real estate portfolio, focusing on diverse, income-generating projects across Zimbabwe.
Apart from the Midlands Park project, officially commissioned by President Mnangagwa, the fund is also making a major move into the education sector, with multiple projects aimed at creating student housing and ensuring a steady stream of rental income.
These developments are underway in Kwekwe, Bulawayo, and Chinhoyi.
In the capital, Harare, the PSPF is already working on two residential projects: Madokero Creek and Westlands properties.
According to Dr Gaba, the middle-income housing developments will pilot an innovative rent-to-own programme, which will offer civil servants an alternative route to home-ownership.
In the future, the fund plans a large-scale urban renewal project at the Samora Machel Precinct in Harare’s Central Business District.
To safeguard against currency fluctuations, leases for this planned, mixed-use complex will be linked to the United States dollar.
The PSPF also intends to build dedicated housing for civil servants in the provinces of Bindura and Lupane.
The fund’s recent acquisition of the Monomotapa Hotel is also a strategic move to secure a valuable asset. The purchase is expected to consistently generate a significant flow of foreign currency.
Residential properties, a core component of the fund’s strategy, are anticipated to deliver net yields of 6-9 percent, providing a stable and reliable stream of income.
Student housing is a key focus for its high-yield potential, with the sector projected to generate stable returns of 8-10 percent, underpinned by consistent demand.
In the hospitality sector, the fund’s strategic acquisition of assets like the Monomotapa Hotel is targeting a robust Internal Rate of Return (IRR) of 12-18 percent.
This is seen as a crucial hedge against currency volatility, as earnings in this sector are often backed by foreign currency.
The most ambitious projections come from own development projects, which are expected to achieve impressive gross margins of 15-25 percent.
These ventures, including the Madokero Creek and Westlands properties, offer the potential for substantial capital appreciation, positioning them as the most profitable segment of the portfolio.
“These returns significantly outperform negative real money market returns and volatile equities, giving the fund inflation-hedged stability.
“Importantly, the drivers of performance are non-traditional investments, housing tied to essential demand, forex-earning hospitality assets, and embedded development margins,” said Dr Gaba.
“PSPF has demonstrated that creativity in structuring, from mortgage-linked models to renewable energy projects, increases both returns and sustainability, allowing the Fund to remain resilient even in volatile markets.”
