Dar Es Salaam: The New York of East Africa in Rent Prices

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Rent in Dar es Salaam: Highest in East Africa

When most people think of expensive cities to live in, they may imagine New York, Japan, Paris, and Lagos, however, those of us living in Dar es Salaam know that the ‘struggle is real’ here too. In fact,  the cost of living index by Numbeo shows that Dar es Salaam is the most expensive city to live in East Africa, surpassing Nairobi and Kampala.

While there are many factors that contribute to the high costs of living in Dar es Salaam, housing prices are the main reason why so many of us are broke (kidding!).

About 60% of Dar es Salaam’s population are renters, and spend more than 30% (one-third) of their monthly income on rent. While this is not as bad as New York City where people spend over 60% (two-thirds) of their income on rent, the current housing market in Dar es Salaam isn’t easy on the wallet.

So how did we get here?

Well, those of us who paid some attention in economics class can guess that the housing issue is caused by an imbalance in demand and supply. Simply put, there are many people moving to Dar es Salaam from other (usually rural) regions in Tanzania, and there is enough housing available. According to the National Housing Corporation (NHC), in 2015 urban areas like Dar es Salaam had a demand of up to 200,000 housing units, but only 15,000 units can be supplied each year.

So why don’t the government and private developers just build more housing units?

Well, there are a number of reasons that prevent them from doing so.

1. Bureaucracy in getting permits

According to the World Bank’s ‘Doing Business’ report, it takes contractors and developers in Dar es Salaam up to 205 days to go through all the procedures (18 in total) required to get a building permit. This is much longer than the overall average number of days it takes to get a construction permit in other Sub-Saharan countries, which is 162.

Therefore, because of the extensive bureaucratic processes,  private developers are not able to quickly build new housing units and meet the demand in the city in a timely manner.

2. High-interest rates on mortgages

Unlike South Africa, Kenya, and some other African countries, the financing options for people who want to build property in Tanzania are incredibly limited.  In short, if you don’t have the money already, you may be out of luck.

Mortgages are still under-utilized and inaccessible to both individual citizens and private companies who want to build or buy property. For instance, depending on the bank, developers looking to get a loan are required to have somewhere around  30 to 60% of the capital already. That means that if the housing project costs TZS 100,000,000 (one hundred million) than the developer will contribute TZS 30,000,000 to TZS 60,000,000 to the project.

Moreover, they have to repay the loan with high-interest rates that range from 17% to 26%. As a result, this greatly discourages people from getting loans for property development, and only one percent of the total loans in Tanzania are mortgages.

3. Lack of development of low-income housing

As mentioned above, the high-interest rates and bank requirements make building new housing developments an expensive endeavor. As a result, many developers choose to concentrate on high-income housing projects ( apartment complexes, villas, high rises etc) because they know that they can get their money back through high property values and charging high rents.

As a consequence, there are few projects aimed at developing mid to low-income housing, which is what most people in Dar es Salaam are looking for. This, in turn, drives up the prices for the mid to low income housing that is currently available, as demand continues to rise while supply is limited.

4. Infrastructure drives up price

While there are more and more tarmacked roads, street lights, and sewage systems popping up in the city, development is mostly concentrated in the city center, Upanga, the peninsula (Oyster Bay), and middle to high income neighborhoods (Mbezi, Msasani, Mikocheni). At the same time, many parts of Dar es Salaam (usually further away from the city center) still lack proper infrastructure.

This, coupled with factors like traffic, make certain Dar neighborhoods more appealing to live in than others and greatly drives up the housing prices in these locations.

Think about it, renting a house in Mikocheni costs twice almost thrice as much as renting in Kinondoni.

Don’t believe us? Find out for yourself with our real estate classifieds.

5. No regulation of prices

Currently, there is no government regulation of renting prices and so the forces of demand and supply completely control the renting market. This gives landlords the freedom to charge rents as high as tenants are willing to pay. Moreover, it also enables them to increase the rent yearly, and use reasons such as increased electricity or water costs.

Nevertheless, landlords aren’t (always) the bad guys, and are just passing down the costs set by the market. So if the average price of rent in your area is TZS 800,000, why would they charge you any less?

We still need a place to live

Solving the housing issue in Dar es Salaam, and Tanzania as a whole will take effort and collaboration from both the public and private sector. For instance, processes like getting construction permits and mortgages will have to be simplified and made more accessible. Moreover, the government needs to create a system to regulate renting prices and develop infrastructure in areas further away from the city center.

However, in the meantime, we all still need a place to live. Luckily, we can help you find a home that isn’t too hard on your budget.

 

Iman Lipumba
A digital storyteller, experienced in creating content that improves website visibility on search engines, enhances the user experience, and nurtures brand loyalty. With a background in the social sciences, an expert in researching complex ideas, and communicating them in engaging language to multiple audiences.