Housing finance in Zimbabwe

While Zimbabwe has a sophisticated banking system, government policies restrict the ability of the finance sector to mobilize the resources needed for sustained growth in the housing sector. Section I looks at the financial sector in general, describing the structure and trends of financial institutions, which since independence in 1980 have had to respond to the opening of their economy into the world market and increased demand for public sector financing of social services and state-owned enterprises. The result has been increasing expenditures and revenue shortfalls. Section II descibes the housing finance sector in particular. Two public sector funds, the National Housing Fund and the Housing and Guarantee Fund, are available. The former, which provides money to local authorities for low-cost housing, has had problems with deficits and in resource generation. The latter, which guarantees mortgages and operates a housing ownership and management scheme from revenues on foreclosures, represents a sustainable source of housing loans for a large number of Zimbabweans. In the private sector, three building societies represent the most significant formal source of finance, but their capacities have been inhibited by strong government controls and by competition for deposits with the Post Office Savings Bank. In Section III, means of increasing the availability of housing finance are explored. Domestic resources for housing credit may be increased by allowing the building societies to compete fairly with the Post Office Savings Bank, increasing downpayments on guaranteed loans, encouraging the creation of savings clubs for individuals, and raising the interest rate on government loans. Additional resources may be available from other institutions, such as insurance companies and pension funds. However, there are several constraints on the finance sector: the national budget deficit has led to increased tax burdens, making savings difficult for most persons; rent control has reduced incentives to invest in housing construction; and, in their attempts to reduce demand, government policies for the finance sector, e.g., increased interest rates and statuatory reserve requirements, have further reduced the amount of available resources. Recommendations to improve the housing finance sector and direct additional resources to housing are offered in Section IV. (Author abstract, modified, derived from PN-AAV-887, p.6.)