Property development in Malawi

In this country, we have a huge shortage of real estate which could be used for residential, commercial and industrial purposes. Those that are in a position to build do not do so adequately. Why?

It has recently been observed by eminent professional people, lecturers at the University of Malawi’s The Polytechnic, that this country has the highest building costs in the Sadc region and I would add that maybe in the world. In fact, materials such as cement are so expensive that it is cheaper to buy them from foreign lands such as Zambia and even Pakistan.

Apart from that, it also appears that our laws in this area do not create an enabling environment but instead hamper development as they discourage and impede construction. Imagine a situation where a new and occupied residence and a brand new residential estate with a number of units already built and completed having no water and electricity for over one year! And continue imagining a private developer who has built several houses and has developed plots for sale and has duly paid a service provider for water and electricity, but has to wait for four years to get that particular service. There is no need to imagine because this happens in Malawi and has been happening for the last 12 years and yet nothing is being done. Elsewhere, that would be unheard of. If the seed capital were borrowed, then we all know what would happen.

The procedure required to be followed before one develops a piece of land appears to be long. Developer’s plans must be approved by the local planning authority before anything can happen. The local planning authority is supposed to meet at least once a quarter but in practice, they meet less regularly than that. That obviously has the effect of delaying a development proposal and that happens quite a few times. Planning authorities are a committee of the local authority and usually they consist of technical people, some of whom are representatives of service providers. These people will, therefore, be aware of a development proposal quite early.

It is customary for a developer also to pay for reticulation of services such as water, electricity and also sewerage if applicable. This is termed ‘capital contribution’.  The developer is also required to provide for access roads, drainages, etc.  The services, once they are paid for, are supposed to be provided within a reasonable time. But as we know, the services so paid for could come at their own time and could be so late that it would affect either the start of a project, its completion or both.

What we must know, however, is that all these requirements are in our laws and they are followed to the letter.  The Electricity Act, the Water Works Act and so on, contain clauses that require a developer to pay capital contribution. However, if a supplier does not provide a particular service, there appears to be nobody who can force them to do so.

The effect is that this makes developing property in Malawi so expensive and non-cost effective that investors see it as unattractive and run away from it. The result is that there is a huge property deficit which we expect government agents to provide but which, of course, they cannot do.

This affects all developers, including government itself. What is important to know is that this cost is passed on to the consumer and this makes the property very expensive and unaffordable.

It is rather unfair to expect a buyer of a house to pay for a portion of the road they use, for electricity and water to their property, and also continue to pay through the meter, for sewerage and municipal rates if applicable.

So, what needs to be done to make construction affordable?

It seems that one of the most effective way is to change the laws that affect the provision of services.  For example, if all the major services were to be provided for by a local authority as its duty, this would make developing property a little cheaper. Provision of these essential services would then be undertaken by the local authority.

The local authority then would recover the cost of services over a much longer period. The government may find it necessary to subsidise the cost of bringing services to a site if that is a cost borne by a local authority. This suggestion has advantages and of course, several disadvantages. But one clear advantage is that a local representative would readily be available to deal with any queries from members of the public. n

To be continued….