Slow uptake for Old Mutual houses

Written By Enacy Mapakame

CABS, the country’s largest building society by market share, is currently experiencing a slow uptake for its residential properties as the market continues to fret on the discouragingly steep mortgage terms quoted for its properties.

Sources familiar with the transactions told The Sunday Mail Business last week that only 440 units, or 37 percent, of the 1 186 units completed so far have been sold since the houses went on sale earlier this year.

CABS has tried to make interventions meant to stimulate demand from the market.

In March, the bank adjusted the tenure of the mortgage from the initial 10 years to 20 years, meaning potential buyers are now required to pay US$7 200 as deposit for a four-roomed unit; US$6 800 for an incomplete two-roomed structure with additional slab; and US$6 200 for a two-roomed unit.

However, home seekers will still have to prove they net a minimum monthly income of US$756 to qualify for the CABS mortgage, which is beyond the reach of many workers employed in the formal sector.

The Zimbabwe National Statistics Agency (Zimstats) 2012 report claims that only 2,8 percent of working Zimbabweans earn US$756 or more each month.

Even though the tenure of the mortgages were extended, those intending to buy the Budiriro residential units still have to pay monthly premiums of more than US$200 – almost equivalent to what the majority of low-income earners take home.

A single housing unit being sold under the project costs between US$20 000 and US$27 000 depending on size.

The houses are being sold in partnership with the City of Harare, which provided the land.

Old Mutual group chief executive Mr Jonas Mushosho confirmed last week that sale of the houses was disappointingly slow, adding that the cost of the properties soared when the company invested additional funds to service the land, a function that should have been carried out by the Harare City Council.

Old Mutual, CABS’ parent company, is sinking US$62 million into the development of 15 000 high-density houses countrywide.

“Sale of the houses is slower than we would like it to be . . . Priority is given to those on the waiting list and they could be struggling to raise the money.

“It is important to note we incurred costs in servicing land, something that should be done by the city council.

“This has pushed the price higher than what was expected. We invested funds that belong to pensioners, widows and orphans and we have an obligation to recover all costs to ensure they have their money when needed. But we have to adhere to the agreement we entered into with City of Harare,’’ said Mr Mushosho.

He noted that low-income earners were particularly facing difficulties taking up houses.

“We have exercised flexibility; spouses can combine their salaries to meet the minimum salary cap required,” he said.

Mr Mushosho added the group was engaging with stakeholders for the development of similar projects in Hatcliffe and Bulawayo.

The Hatcliffe project will see the development of 900 housing units for low-end income earners.

Since independence in 1980, housing delivery has remained a huge challenge to both Government and local authorities, with more than one million home seekers on the waiting list.

Harare alone has half a million home seekers on its waiting list.

Over the years, housing delivery has been virtually surrendered to housing co-operatives, many of which are allegedly unscrupulous.

It is believed that structured and bona fide housing developments such as those by Old Mutual will be able to protect and provide descent accommodation to home seekers.

Since dollarisation, working capital has been a challenge for most companies, with others resorting to borrowing at unsustainable interest rates or significantly scaling down operations.

Old Mutual group reported adjusted operating profit growth of 2 percent to US$32 million for the half year ended June 2014.

Premium income increased 9 percent to US$81,9 million, while funds under management went up 6 percent to US$1,7 billion, mainly driven by the increase in net client cash flow, which went up by 50 percent to US$62,2 million.

The group expects the obtaining economic environment to continue.