Methods of Housing Finance in Urban Tanzania

Abstract

Purpose-. Essentially, there are different housing finance methods applicable in mobilizing financial resources for housing development in developed and developing countries. The type and usefulness of these methods differ among countries, as well as within countries geographical area. Long term mortgage finance methods which perform better in developed countries, invariably underperform in developing countries. Large number of urban households are excluded in mortgage finance system. This paper seeks to determine the sources and methods of housing finance among households as well as their applicability in urban Tanzania.Methodology- The paper starts with a presentation of the sources and methods of housing finance and discusses housing finance system from the perspective of system theory which encompass demand and supply subsystems. Several hypotheses based on questionnaires are tested through a questionnaire survey sent to 370 homeowners in surveyed and surveyed areas of Kinondoni Municipality, Dar es salaam city.Findings-The study revealed that mortgage finance method is irrelevant in Tanzania. There is dominance of informal equity based methods such as personal income and profits from petty business, sweat equity, small loans from friends and relatives, pensions and gratuity, and remittances from family living abroad and within the country. Use of microfinances such as Saccos, Vicoba as well as microcredits from banks and other microfinance institutions also increases. The study further revealed that it takes 3 to 20 years to complete housing development with an average period of 8 years. These findings imply that incremental finance methods dominate housing market in urban Tanzania. Majority use multiple methods through progressive phases to finance housing development. Originality/value- Despite the constraints of mortgage finance and other long-term housing finance methods in developing countries. Microfinances which are compatible with incremental housing finance methods if improved can be useful to urban Tanzania housing market. Incremental housing strategy fits the requirements of urban poor which calls for fundamental policy innovations of this strategy and microfinance institutions.