Dissertation 65 Kongela.Indd
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21 mm Band 65 Schriften zur Immobilienökonomie Since the mid 1980s, Tanzania has been implementing policy and structural Hrsg.: Prof. Dr. Karl-Werner Schulte reforms, which have created a conducive environment for private sector and foreign Prof. Dr. Stephan Bone-Winkel investment growth. Although the last three decades of economic reforms have Prof. Dr. Wolfgang Schäfers witnessed a surge in commercial real estate development projects especially in large urban centres, the sector has not been growing at a pace that is economically justified. The slow pace of the sector’s growth is partly due to its inability to exploit the value drivers which create competitive advantage. Tanzania’s real estate sector has been analysed based on Porter’s competitiveness model and Poorvu’s and Cruikshank’s model. Modifying the two theoretical models, the book comes up with a tailored competitiveness model and development framework for the real estate sector suitable for the setting obtaining in Tanzania. The proposed models could also be applicable to other countries with similar business environment to that of Tanzania. Sophia M. Kongela Sophia Marcian Kongela Owing to the infancy of the Tanzania real estate market, there are still many problems hindering the sector’s growth and its chances of achieving competitiveness. Framework and Realisation of the sector’s full potential requires real estate developers and investors’ objectives and motivations to be aligned with the sources of competitiveness. This book is a first step in establishing a benchmark for Tanzanian’s and other sub- Value Drivers for Saharan Africa’s real estate markets’ research in the area of competitiveness. Real Estate Development in Sub-Saharan Africa Assessment of the Tanzanian Real Estate Sector Development in Sub-Saharan Africa in Sub-Saharan Development in the Context of the Competitiveness Model Framework and Value Drivers for Real Estate Estate for Real Drivers Value and Framework ISBN 978-3-89984-332-3 Ein Unternehmen der Gruppe Rudolf Müller www.immobilienmanager.de Sophia Marcian Kongela Framework and Value Drivers for Real Estate Development in Sub-Saharan Africa Assessment of the Tanzanian Real Estate Sector in the Context of the Competitiveness Model Bibliografische Information der Deutschen Nationalbibliothek Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar. ISBN 978-3-89984-332-3 © Immobilien Manager Verlag IMV GmbH & Co. KG, Köln 2013 Ein Unternehmen der Gruppe Rudolf Müller Alle Rechte vorbehalten Umschlaggestaltung: Rainer Geyer, Köln Druck: SDK Systemdruck Köln GmbH, Köln Printed in Germany Das vorliegende Buch wurde auf umweltfreundlichem Papier aus chlorfrei gebleichtem Zellstoff gedruckt. Dedication Daddy (Marcian Gerald Chiwambo), I know how you would feel to see me achieve this. I really miss your presence when making this achievement, but I will always cherish your wisdom. May your soul rest in peace. Amen. Preface I In many countries, real estate is a major component of the economy. For instance, for some countries, the contribution of commercial real estate to the GDP in 2010 was 28% (US), 28% (UK), 25% (Germany), 18% (France), 15% (Italy), 8% (Spain). In 2009, the sector accounted for 5% and 12.6% of India and China’s GDP respectively. The real estate sector in Tanzania is currently still underdeveloped, but the ongoing institutional reforms have significantly improved its growth. Over the reform period, the sector has attracted a considerable number of institutional and private investors, both local and foreign developers. Using local and foreign real estate developers, real estate professionals, land officers, officials from financial institutions, Tanzania Mortgage Refinance Company (TMRC), Tanzania Investment Centre (TIC), and Tanzania Bureau of Standards (TBS), this study reveals that, despite a more active property market which has come as a results of the reforms, the sector is relatively still growing slowly. Generally, the sector is not growing at a pace that is practically and economically justified. The average growth rate for the past 20 years (1992-2011) was 4.9%. Over the same period, the sector’s average contribution to the GDP has been only about 4.5%. The Tanzania real estate sector is analysed using Porter’s competitiveness Model provided. The study comes up with a number of strategies for achieving the sector’s competitiveness and growth. In addition to that, a number of recommendations on the best practice that the sector should pursue are given. Owing to differences in market settings between developed and developing countries, Porter’s Model was modified to fit the Tanzania setting. In addition to Porter’s competitiveness Model, the study also uses and modifies the framework provided by Poorvu and Cruikshank. Poorvu’s and Cruikshank’s Model is used to analyse the property development framework for enhancing the sector’s growth. The study reveals a number of barriers to the sector’s growth. Ineffectiveness of various institutions dealing with real estate activities seems to discourage real property development and investment. Having been exposed to a foreign market, foreign real estate developers and investors seem to face more challenges compared to local property developers. The study also reveals that, the slow pace of the sector’s growth is partly due to its inability to exploit the value drivers which create competitive advantage. The findings further show that, abundant land, rise in demand for properties, political stability, presence of TIC and its investment incentives for the real estate sector, institutional reforms and improved key economic II Preface indicators are necessary criteria but not sufficient factors for achieving the state of competitiveness in the real estate sector. There is a need of addressing the sector’s weaknesses. Realisation of the sector’s full potential requires real estate developers and investors’ objectives and motivations to be aligned with the sources of competitiveness. This book is a first step in establishing a benchmark stone for Tanzanian’s and other sub-Saharan Africa’s real estate market’s future research activities focusing on economic sectors’ competitiveness. The work is distinctive as it applies Porter’s Model to explain how real estate sector would achieve growth and competitiveness. Apart from stimulating debate and thinking on the subject, future research may be carried out to empirically test the applicability of the proposed competitiveness model in sub- Saharan African countries. Additionally, the study could be used to rank the importance of the competitiveness dimensions so as to identify the most significant dimensions for the real estate sector in the different countries within the region. THE FACULTY OF BUSINESS ECONOMICS AND MANAGEMENT INFORMATION SYSTEMS AT THE UNIVERSITY OF REGENSBURG has awarded the author with a Dr. rer.pol. Apart from the academic contribution, the findings of this study also have significant implications for policy makers, construction industry, institutions dealing with real estate matters, real estate professionals and stakeholders in achieving sector’s full potential through enhanced competitiveness and growth. Prof. Dr. Karl-Werner Schulte Prof. Dr. Stephan Bone-Winkel Prof. Dr. Wolfgang Schaefers IRE|BS International Real Estate Business School University of Regensburg Foreword III First and foremost, I would like to give my heartfelt thanks to all who assisted me in one way or another to complete this study. I feel however indebted to give distinguished thanks to my supervisors; Prof. Dr. Stephan Bone-Winkel and Prof. Dr. Gabriel Lee for providing me with the necessary guidance and investing time reading and making valuable comments on my thesis. I would also equally like to express my special and sincere thanks to Prof. Dr. Karl-Werner Schulte for being my academic advisor throughout my time at IREBS, Regensburg University. Prof. Schulte and his wife Dr. Gisela Schulte-Daxboek will always be a source of inspiration to my life. My appreciation is due to Deutscher Akademischer Austausch Dienst (DAAD) for sponsoring my study at IRE|BS Regensburg University. I am equally thankful to the IREBS Foundation for African Real Estate Research for financial support. I am similarly grateful for the manuscript printing support I got from Prof. Dr. Stephan Bone- Winkel, IMMOEBS e.V.and gif e. V. I am also very grateful to all professors and colleagues at IRE|BS, especially Stefan Glossner and Ms. Gerlinde Karl for their invaluable support which went beyond my expectations. My appreciation also goes to my employer, Ardhi University for granting me a study leave to pursue my PhD. I would also like to extend my sincere thanks to my colleagues in the School of Real Estate Studies at Ardhi University. Special thanks should go to the former Deans, Dr. Samwel Waigaima and Dr. Agnes Mwasumbi, the Head of the Department of Land Management and Valuation Dr. Cletus Ndjovu, and the former Head of the Department of Real Estate Finance and Investment Dr. Charles Lucian for taking part in my study in different ways. Moses, my husband, I just cannot imagine realising any of my successes without your kind support. I am so grateful for your enormous contribution to this study. Your love, support and encouragement led to successful completion of this study. You have always given me strength and confidence. Thanks a lot my husband!