Mortgage resurgence no joy for workers

THE Construction Industry Federation of Zimbabwe (Cifoz) says the resurgence of mortgage finance could be a drop in the ocean for the troubled industry reeling from underfunding despite buoyant government projections.

Businessdigest understands that local building societies now offering up to US$100 000 in mortgage finance are on a recovery path since last year’s adoption of multi- currencies.

But the terms and conditions of this facility could be restrictive for many workers currently earning wages far below the poverty datum line.
Cifoz president Daniel Garwe on Monday said the construction industry, which at peak contributed 8,5% to the Gross Domestic Product, was yet to benefit from the emerging mortgage finance being offered by financial services institutions.

Mortgage lending became redundant 10 years ago at the start of a decade-long economic recession.
Garwe said government, which traditionally funds the bulk of major construction projects in the country, failed to float any significant tenders in the first six months of the year owing to lack of funds. The state suspended the completion of all public projects in 2008 at the height of hyperinflation and this has resulted in the construction industry operating at an average 15% capacity.

 “The two-year mortgages being offered at the moment at interest rates of up to 22% are too high. The maximum one can get is US$100 000 which is only enough to buy a concrete mixer. In that regard the Mid Year Fiscal Policy Review was a mere ritual because it did not address our concerns,” he said.

“There is no clear path on how mortgage finance is being financed. Building societies have not given us clear direction. The absence of cranes hovering around cities and towns automatically means that the economy is still down.”

With revenue constraints under the prevailing cash budgeting framework, no major projects have been commissioned since the formation of the inclusive government. Pension funds that have in the past funded construction projects are still recovering from the ravages of hyperinflation which wiped their savings base. For Cifoz, crafting enabling laws for Public-Private Partnerships could be critical in attracting foreign investment in a sector currently dogged by lack of skilled labour and obsolete equipment.

Sam Ruturi, chairman of the Mortgage Banking School of Southern Africa, based in Harare, said the resurgence of mortgage lending could be a desperate attempt by building societies to grow business under the current economic conditions.

“The market is subdued. The bulk of mortgages that are being offered at the moment have got terms ranging from three months to two years which means that the borrower must be in a position to repay the mortgage loan or roll it over,” Ruturi said.

“But each time a loan is rolled over the borrower incurs an extra cost in the form of loan commitment fees. Sustainable mortgage lending does not function in that manner. It is  a desperate attempt to utilise service deposits that are in existence at the moment whilst ensuring that depositors will fund the institutions as and when  savers want to withdraw their money.”

At peak, savings which form the backbone of mortgage financing, contributed nearly 8% to the GDP when building societies offered 25- year mortgages.

Bernard Mpofu

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