THE NATIONAL HOUSING CORPORATION STRATEGIC PLAN FOR 2010/11 2014/15 (EXECUTIVE SUMMARY) PRESENTED TO THE MEMBERS OF PARLIAMENT AT DODOMA ON 4TH JULY, 2010 1
2 Strategic Plan Highlights
STRATEGIC PLAN HIGHLIGHTS STRATEGIC DRIVERS: 1.0 Preamble This strategic plan is motivated by a number of strategic drivers. The drivers are constituted by major factors that are expected to influence the future of the Corporation. The highlighted strategic drivers include, the property market situation; public perception; Government expectations; and the role of housing in fostering economic growth. These drivers which are in a way interrelated, form the base for NHC s strategic goals, objectives and targets to be pursued for the 2010/11 2014/15 period. 1.1 Property market situation The current housing deficit in Tanzania is estimated at three (3) million units and growing at a rate of 200,000 units per annum. The problem is more pronounced in urban areas where according to statistics, the urban population has grown from 14.8% in 1980 to 37.5% in 2005and it is expected to reach 46.8% by 2015 (UN Population division estimates http://globalis.gvu. unu.edu). The growth of housing at the top end of the market has been remarkable. Few institutional developers have been targeting the niche market leaving the middle and low ends to individual household funding. The latter types of houses have mainly been concentrated in unplanned and un-serviced settlements. The housing supply has greatly been hampered by the long standing problem of near absence of formal mortgage finance. This problem has led to around 99% of the houses to be built out of pockets. Such houses are built on incremental basis taking 5 to 10 years to complete instead of 9 to 12 months. Consequently, colossal amount of capital is immobilized for a long time. This tied up capital is likely to be greater than total bank deposits in the country. 3 The above housing market situation is both a challenge and an opportunity to NHC. It is a challenge because the corporation will be required to devise mechanisms for
reaching the majority of house seekers and including government employees as well as competing with emerging developers. In terms of opportunity, the serious housing shortage unfolds a ready market for envisaged housing schemes. Being a major real estate firm in Tanzania, NHC is expected to address these challenges. 1.2 Public Perception on NHC Due to housing funding problem NHC has not been able to deliver its products (rental properties and houses constructed for sale) to the expectations of the general public. There have been different perceptions on services provided by the corporation to the public: 1.2.1 Positive perceptions: It is expected to provide affordable accommodation countrywide. It is expected to alleviate housing shortage in the country. As a developer it is expected to provide credible service in building houses. It has the capacity of providing reliable and quality building materials. Most preferred land lord and estate developer. 1.2.2 Negative perceptions: It has failed to deliver in line with the growing housing needs as expected by the public. Accusation of malpractice by NHC officials. Since most of the houses were acquired, it is perceived that NHC has the obligation of maintaining them without reviewing rent in line with increasing operational costs. It has failed to deliver as social housing developer. It provides tenancy in perpetuity. NHC has failed to assert itself as a big contractor 4 1.3 Government expectations on NHC: Following the existing and increasing demand in housing, the Government has redirected NHC to broaden its operations. The government now expects NHC; among other things, to focus on the following:
To balance the real estate portfolios so as to move from predominant real estate management business and put more efforts on real estate development. To promote home ownership by taking advantage of the Mortgage Financing (Special Provisions) Act and the Unit Titles Act of 2008 which have been recently enacted. To build affordable houses for the low income group countrywide. To take advantage of its wealth (properties that are strategically located) so as to operate commercially and alleviate housing problems. To partner with private investors (under PPP arrangement) in undertaking large scale investment projects while ensuring that public interests are safeguarded. 1.4 The role of housing in fostering economic growth: In some developed countries contribution of the housing sector on GDP is between 50% and 60% per annum. Such countries include United Kingdom and USA having 58% and 55% respectively [http://finance.mapsofworld.com/mortgage/]. In Asian countries it is between 7% and 31%. Malaysia (31%), China (15%) and India (7%) [http://sweethome.overseaspakistanis.net/node/773]. In Tanzania the housing sector contributes less than 1.0% on the GDP per annum. The current housing deficit of 3,000,000 units with an annual growth in demand of 200,000 units [Ministry of Lands, research]. The current deficit coupled with the annual growth in demand and the urban population growth; offer a big hypergrowth opportunity for the national economy. NHC intends to increase the housing sector contribution to GDP to 4% in five (5) years time. This could easily trigger growth of the economy in the following areas: Creation of about 200,000 direct and 500,000 indirect employment opportunities for unskilled, semi-skilled and skilled labour. A minimum direct tax increase of TAS. 120 billion in form of VAT, property tax, land rent, PAYE and corporation tax. Growth of the financial sector through increased liquidity, growing profits and even lending at lower interest rate as well as growth of the insurance industry. Creation of ready market for utility and infrastructure providers. The growth of housing sector by an average rate of 30% to 50% per annum over the next 20 years is possible provided that structured housing finance is in place. 5
THE NHC VISION 2.1 Vision. The vision constitutes NHC s greater aspiration underlying the objectives and targets of the strategic plan. The vision was evolved with full participation of the Extended Management Team during the 8 th - 10 th April, 2010 retreat. Vision Statement To be a leading Real Estate Development and Management firm 2.2 Mission. NHC s mission is a road map which is based on its mandate provided in the Act of Parliament No. 2 of 1990 as amended in 2005. The mission from which the vision emanates also hosts the goals and strategies meant for driving the NHC s growth. Mission Statement To provide and facilitate the provision of quality housing and other buildings for use by the general public while operating on sound commercial principles 2.3 Core Values The core values of NHC revolve around Integrity, Transparency, Efficiency, Team work, Professionalism and Innovativeness. These core values reflect the NHC ideals and principles and hence serve as guidelines for the Corporation as well as its officials in the conduct of their responsibilities. 6 Statements of Core Values Integrity: We will always strive to be credible and consistent in our actions. Transparency: We endeavour to convey correct, timely and complete information about our services and products. Efficiency: We will always satisfy our customers by delivering services skilfully and timely. Team work: We will always work together to achieve our corporate goals. Professionalism: We will always adhere to ethics and uphold quality and standards in performing our duties. Innovativeness: We will always develop new methods and ideas that will bring positive changes in the organisation.
2.5 Goals: This strategic plan revolves around six goals that are based on the current NHC s performance, the highlighted strategic drivers, situational analysis and risk analysis which are derived from the internal and external business environment. It should be noted that One of NHC s role is to operate as a building contractor and consultant. However, given the expected expansion of its own construction activities, NHC will concentrate more on executing its own internal works. 2.5.1 GOAL ONE: To become a leading real estate developer. Strategic Objectives: 1. To develop a minimum of 15,000 houses for sale and lease by June 2015 It might sound prudent to construct more houses to the low income group than to the high and medium income groups. However, in a situation where NHC is expected to operate commercially while utilizing funds from financial institutions and banks, it is also expected to repay the loans in time. Houses constructed for the low income group will not be able to sustain the needed funding arrangement. Therefore, NHC intends to construct more houses for the high and middle income groups so as to be to make profit and possibly subsidize the construction of a minimum of 5000 houses for the low income group. A) To develop a minimum of 10,000 medium and high class houses for sale and lease by June 2015. Despite the enormous demand for houses in Tanzania, which is in a tune of three million and growing at a rate of 200,000 units per annum, NHC has not been able to undertake mass housing schemes due to lack of conducive funding environment. The changing funding environment coupled with housing shortage will now enable NHC to undertake massive construction of houses. 7
B) To develop a minimum of 5,000 affordable houses for the low income group by June 2015. Provision of affordable housing is necessary in order to uplift the living conditions of the low income group. However, NHC will only participate in provision of social housing if it is assured of at least to break even. Otherwise, the government is also expected to participate by giving support or setting up a special programme. 2. To play a role of a master developer by June 2015. In its other role of facilitating the provision of housing and other buildings, the NHC endeavors to become a master developer. It will acquire parcels of land, plan and service them. Furthermore, it will sell some of the projects to other developers and retain some for development. It will also ensure that other developers comply with development regulations and standards. 3. To mobilize investment funds to the tune of TAS 1.5 trillion by June 2015. In order to achieve the target of constructing a minimum of 15,000 units, mobilization of funds is necessary. Funds will be mobilized from different local and foreign sources. NHC will use its property wealth to leverage these funds and service the costs of loans. 4. To embark on intensive marketing of houses constructed for sale by December, 2010. 8 Aggressive marketing is necessary in order to appreciate the market needs, tastes, life style, spending patterns, fashions as well as creating interface between buyers and
banks so as to stimulate demand. NHC shall commence serious marketing strategies to ensure business continuity. 5. To develop a strategic relationship with Local Government authorities, utility agencies and other strategic stakeholders. Provision of cost effective housing projects depends on several factors including availability of services and infrastructure. In Tanzania there is no readily available serviced land for new constructions. Consequently, NHC has been forced to bear the cost of providing for roads, electricity and water. The ensuing cost burden is passed over to the house buyers. As a result houses remain un-sold for long due to unbearably high prices. NHC therefore intends to forge relationship with the service providers so that they play their role. 2.5.2 GOAL TWO: To become an efficient real estate manager. Strategic Objectives: 1. To become the most reputable real estate manager in the country. NHC is the biggest landlord in the country and owns properties in most regional headquarters in mainland Tanzania. Therefore, NHC has vast experience in property management. NHC intends to use this experience to conduct modern real estate management and expand its business to also manage others properties. 2. To ensure fair value for NHC assets by July of every year. 9 Apart from conforming to accounting practice, yearly valuation of assets enhances corporate credit worthiness. NHC shall undertake annual valuation of its properties so as to ensure that its books of account represent fair value of its assets.
3. To improve housing allocation system by September 2010. Due to high demand for rental properties, prospective tenants are dissatisfied with the current allocation system. NHC will streamline the current system by making it more transparent and ensure that the prospective tenants are treated equally and enquiries are timely responded to. 4. To ensure that property maintenance undertaken is adequate and reflects value for money. Most of Corporation s properties are old and sometimes inadequately maintained. The current situation requires undertaking intensive maintenance works on all building elements to restore and/or improve property s value and lifespan. This move requires substantial funds. NHC need to deploy effective monitoring and evaluation mechanism to ensure a balance on cost and quality of maintenance works. 5. To increase the rate of return on investment. Considering the value of NHC assets, the return on investment is extremely low. The low return is caused by various factors that include rents that are far below market levels. In redressing this situation, NHC will ensure that it achieves the best return on investment within acceptable risks. 6. To reduce the amount of rent arrears by 50% - June 2011. 10 There are several reasons causing rent arrears. Amongst is the fact that some of rent is paid beyond agreed period which is one month in advance, thus accumulating arrears. NHC will ensure that the collection mechanisms are improved to minimize such arrears.
2.5.3 GOAL THREE: To strengthen operational efficiency and control mechanism. Strategic Objectives: 1. To enhance operational efficiency and compliance by June 2015. The core functions of NHC have to be complimented by efficient operations of all supporting units. These operations are guided by various regulations, policies and professional norms. NHC will be required to exercise high standards of compliance to these guidance in order improve corporate governance, efficiency and credit worthiness. The improved operations will also enable the Corporation to have reliable records and obtain clean Audit Reports. Such reports are important in winning confidence of lenders. 2. To establish risk management system. The envisaged business expansion by NHC will require revisiting of the measures to mitigate risk factors which might exert adverse impact on Corporation s undertakings. The existing risk mitigation measures are inadequate to cope with the new business thrust. Risk management programs will be put in place to ensure corporate goals are achieved with minimum disruptions. 11
2.5.4 GOAL FOUR: To optimally deploy human resources base. Strategic Objectives: 1. To enhance effective human resource utilization by December, 2011. The envisage NHC business operations will involve expansion of activities. Such expansion will inevitably require the Corporation to restructure its setup. In this endeavor the balancing of the professionals and supporting staff is necessary for efficient and effective human resource utilization. NHC will therefore take necessary steps to ensure its human resource is effectively utilized. 2. Continually enhance human resource development and capacity building. In order to make the intended turn achieved effectively, it will be imperative to develop necessary skills. The NHC will embark on promotion of professionalism through skills development in order to keep abreast with property market dynamics. 3. Enhancing staff health care services Rationale Healthy work force enhances productivity. Increasing workload, change of life style and emerging of communicable and non-communicable diseases may affect health of the workers and hence productivity. Therefore, NHC intends to maintain a healthy workforce by introducing a health scheme. 12
2.5.5 GOAL FIVE: To review and improve all contracts and legal environment. Strategic Objectives: 1. Streamlining all contracts binding the Corporation by February 2011. The corporate business stability has been affected mostly by unfavorable contractual agreements. The involvement of the Legal Unit should be from the initial stage of preparation of contracts rather than towards the end. This will help on addressing the problem and thence improve credibility and mitigate losses to the Corporation. 2. To propose and fast track necessary amendments of NHC Act No. 2 of 1990 by June 2011. Unfavorable and outdated provisions in the Act contribute much in bogging down the Corporation s business. Amendment of these provisions might alleviate some of the anticipated problems. NHC will liaise with stakeholders to propose amendments of these provisions. 3. To prepare regulations under NHC Act and put in place guidelines and procedures by September 2011 Rationale Most of NHC activities are guided by NHC Act of 1990 and its amendment of 2005. This Act, like any other statute constitute provisions providing for its general applicability. For better functioning of the Corporation, there is a need to have in place regulations which will expand the statutory provisions into specific activities by providing for procedures and guidelines required. 13
4. To minimise disputes and reduce backlog of court cases by June 2011. Disputes and court cases delay development and some operational activities. Avoiding or minimizing such disputes will promote smooth operations of the Corporation s activity. 2.5.6 GOAL SIX: To boost the corporate image. Strategic Objectives: 1. To restore NHC public image by June, 2011 NHC is perceived by the public positively and negatively. However, the negative perspective tends to be adhesive. This is costly because it tarnishes the image of the Corporation. NHC intends to ensure that its reputation is restored. 2. To develop Corporate Social Responsibility (CSR) by June, 2011. NHC has the obligation of paying back part of its profits to the community especially the underprivileged. Despite the Corporation contributing towards social activities, there has been no clear cut policy to support CSR and therefore the contributions given were inconsistent and unfocused. NHC intends to establish a focused CSR policy that will promote developmental activities which are sustainable and have long term socio-economic effect. 3.0 CONCLUSION AND RECOMMENDATIONS 14 This strategic plan provides an integrated framework that is designed to strengthen the coordination of NHC s real estate activities and the operational systems in a coherent manner in order to achieve the following broad objectives:
To redress the problem of shortage of housing in the country by constructing a minimum of 15,000 units over the next five years. To enhance the position of the real estate sector in the national economy. To earn a fair rate of return on corporate investment. The strategies provided in the plan are expected to ensure effective and efficient utilization of the corporation s property wealth, operational and human resources in order to achieve the above objectives during 2010/11 2014/15 period. In order to achieve the foregoing objectives, the NHC will pursue the following broad strategies: To mobilise investment funds to the tune of TAS 1.5 trillion from both internal and external sources. To foster institutional partnership in order to provide houses that are affordable to different income groups. To push for the inclusion of the real estate sector on the government s main development agenda. It is important that NHC remains alert and continually monitor and evaluate developments projected by this Strategic Plan. To achieve this, the implementation of this Strategic Plan will be monitored and evaluated from time to time. NHC shall make annual review to measure successes and identify short comings. This review will provide feedback for the corporation in strengthening its performance. Key performance indicators (KPI) illustrated in the implementation plan are to be used as basis for measuring the effectiveness of each strategic objective. It is recommended that the implementation of the Strategic Plan be monitored and evaluated annually by a coordinating committee comprising of senior officials of NHC. September of each year the committee shall submit a report to the Management Team and Board of Directors. In turn, the Management Team will assess the progress of implementation for the year under review and propose any necessary adjustments. At the end of the fifth year of the plan, a more intensive review will be undertaken so as to measure the general performance and also to provide input into the preparation of the next five year Strategic Plan. 15
16 NATIONAL HOUSING CORPORATION, Nelson Mandela Road, P. O. Box 2977, Dar es Salaam Tel: +255 22 2851590 Fax: +255 22 2851442 Email: dg@nhctz.com Website: www.nhctz.com