Business Writer
WESTPROP Holdings Limited says the local banking sector and Government should work on introducing more mortgages and “formal funding” in order to grow the property sector.
Sentiments by the property development firm comes on the back of a ballooning informal economy, whose liquidity continues to circulate unaccounted for yet it is the biggest segment of the local economy.
WestProp says mechanisms should continue to be put in place to have more formal funding of productive sectors of the economy including the real estate sector.
A mortgage, which is a loan provided by a financial institution to buy or build a property, is one of the most popular ways to purchase a property the world over.
Various types of mortgages are available in Zimbabwe, including ordinary mortgages, USD mortgages, equity releases and employer-assisted mortgages.
According to the Reserve Bank of Zimbabwe (RBZ) monetary policy statement, mortgages constituted 5,58 percent of total loan distribution in 2023.
Speaking on the sidelines of an analyst briefing a fortnight ago, WestProp chief executive officer, Ken Sharpe, said local banks were unable to give out mortgages given that they were inundated with short-term funds.
He said more effort should be directed at establishing access to the international market mortgage-backed securities.
“The current problem in the banking sector is all the money that has been put into the local banking sector is not long-term deposits, it is short-term money. So, banks are restricted to lend it out onto a long-term basis because they cannot afford a run on the bank where depositors come and say, I want my money and they do not have the money to pay out.
“Money in the informal economy is very difficult to tap into. So, the only answer to the long-term solution of this economy is how do we introduce more mortgages and more formal money in the system? When those two things are solved, the economy will balloon.
“It will actually be a phenomenal growth to take us to US$150 to US$250 billion dollars, which is possible in the next five to 10 years, which is also the vision of the President (Mnangagwa) of an upper-middle-income economy. But it requires government and all stakeholders, including the private sector,” said Sharpe.
Banks have moved to be major constructors of housing properties around the country, but their offerings are meeting a limited uptake owing to the exorbitant charges, or interests to the mortgages.
They have created some sprawling residential areas but they are rather limited or below par.
Sharpe implored the local finance sector to be active and tap into the huge mortgage market in the country.
He said the government recently increased the statutory reserve from 15 to 20 percent and extracted US$100 million from the bank’s liquidity. He pleaded with the Central Bank to lend back those funds at concessionary rates to the commercial banks and in tern to people.
“My message to the Governor and the Minister of Finance ( and Economic Development) is please, can we have access to some of those funds as the real estate sector, as the manufacturing sector, because we know we are productive? We are not going to put those funds into consumption, we are putting them into permanent infrastructure that develops the country and creates value. And when we do that, the economy grows,” said Sharpe.
WestProp Holdings Limited chairman, Michael Louis, said the company had a pipeline of projects that would change the face of the local real estate sector.
“As chairman, I believe that we cannot take WestProp to where we want it to go alone. I think the questions about raising capital are so real, we are not going to be able to raise capital the conventional way, that is to get a bond. We have to have creative thinking of the best minds on how to raise funds,” said Louis.
He indicated that WestProp would continue building relationships that steer company performance ahead. Recently, WestProp formalised a public-private partnership with the City of Harare on the development of the Hills project, which the chairman alluded “could not be done alone without City of Harare”.
