Considering the development landscape of Zambia’s property sector
Zambia’s Property Forum (ZamReal) is a highlight on the Zambian real estate calendar in that it provides property developers, owners and financiers with an opportunity to consider growth prospects, acknowledge those factors contributing to the country’s development, and reflect on challenges that could impact the growth of Zambia’s property sector. Khazila Mambwe, a senior project manager at Profica, attended ZamReal earlier this month, and provides an overview and insight into the factors that inform Zambia’s real estate landscape.
The medium-term outlook for Zambian real estate is positive although not without challenges. A key challenge for development is access to finance. Micro and medium-sized real estate players are subject to high interest rates, with financial institutions requiring figures of around 25 to 28 percent, despite inflation sitting at single digits. In general, the yield on properties has fallen. Residential yields are less than 10 percent while office rental rates have dropped from $22-$23/m2 to around $18/m over the past 5 years.
Development in the country is driven by key players that include pension funds such as the National Pension Scheme Authority and African Life (Sanlam), asset management companies and a number of private developers. The National Housing Authority also dominates the landscape given that it holds large tracts of undeveloped land, although the challenge here is that the Authority is in need of financing and development partners in order to scale up development. Another key player is Zambia’s National Building Society which is mandated to provide cheap mortgage finance for individuals looking to acquire or build residential properties.
The Zambian government has set up a programme consisting of a Multi-Facility Economic Zone that supports economic development by attracting significant domestic and foreign direct investment. The programme specifically seeks to drive growth in the industrial sector by establishing world-class enterprises and infrastructure within the zone. The government is also encouraging private-sector development of similar zones by providing tax incentives to developers and private investors. Additionally, the government has set up a committee to support the promotion of Private Public Partnerships which have traditionally had a slow uptake in the country as a development vehicle. Lusaka city authorities are driving investment with an ‘urban renewal concept’ that seeks to improve the city’s infrastructure and traffic decongestion problems through the creation of bus lanes and ring roads. Slum areas are being redeveloped and sprawled-out shanty towns are being reconfiguration to make way for high-rise residential developments that in turn free up land for commercial development.
Consumer spending patterns and habits are slowly changing and this is reflected in Zambia’s retail sector which has seen exponential growth over the years, especially in Lusaka. The success of retail development can be attributed to developers looking beyond a one-size-fits-all strategy. The flip side to this growth is a fast-growing saturation of large shopping centres. Particularly in Lusaka’s east node, large shopping centres like Manda Hill Arcades and East Park are within touching distance of one another. There are three large malls to the south; the Embassy, Makeni and Cosmopolitan Mall. To attract feet, large centres are having to compete by adopting new and innovative strategies. There is also the beginnings of a shift from the large 10,000m2 plus centres to the development of smaller, community-based centres.
Zambia has distinct real estate growth opportunities and possible growth strategies were articulated at ZamReal. For example, there is the potential to develop in the new districts particularly within mining towns such Kalumbila in the north western province. Currently, retail nodes are driven by economic activity along the rail line that extends from Livingstone through Lusaka to the Copperbelt. Infrastructure development beyond the rail line could open up exciting opportunities. Lusaka’s international airport is currently being redeveloped to make it into a regional air traffic hub. Along with this is a new international airport in Ndola (Copperbelt) both of which provide development opportunities.
Considering the competitive nature of property development in Zambia, Profica is well situated in-country to shape and fulfill developer ambitions and expectations by providing deep and relevant project management experience and a strong ability to successfully bring diverse quality developments from all sectors to market.