Most Malawians do not qualify for mortgage finance because of the low levels of income and high rate of informal employment, the African Housing Finance has said.
The 2018 African Housing Finance book for Malawi observes that since only 30 percent of a household’s income is allowed towards servicing of loans or mortgage payments, a borrower needs to earn at least K700 000 ($978.9) to afford the house while at the same time, prices of a newly-built entry-level house or built by a developer averages K8.5 million ($11 643).
Mortgage is a debt instrument secured by the collateral of specified real estate property, which the borrower is obliged to pay back with a predetermined set of payment.
Reads the report in part: “Few banks offer mortgages in Malawi, namely the National Bank of Malawi (NBM), Standard Bank, FDH Bank and NBS Bank. However, overall, access to mortgage finance is limited by household affordability and strict eligibility criteria, including a minimum 10 percent cash deposit, a minimum of three to six months history with the bank and three months of pay slips.
“Furthermore, banks only offer mortgages on properties located in areas “deemed acceptable to the Bank”. This means that the unbanked population and the casually self-employed [for example, small-scale farmers] are largely excluded.”
One of the players in the financial industry observed that banks are reluctant to offer mortgage finance because of increased risk of default due to uncertainties in the economic environment.
Nico Asset Managers chief executive officer Emmanuel Chokani said it is difficult for non-salaried employees to access mortgage financing due to lack of financial records.
This, he said, could lead to limited access to properties, development of low quality housing, use of significant personal savings to build a house, which limits other investment opportunities that could have been explored.
Housing-related policies feature among national priorities in Malawi’s strategic papers, including Malawi’s Vision 2020 and Malawi Growth and Development Strategy (MGDSIII).
The country has also ratified the Global Agenda for Housing, Habitat III, which binds governments to ensure everyone has access to adequate, safe and affordable housing and basic services by 2030.60.