This surge in demand has pushed up top rentals in Dar es Salaam, with developers capitalizing on the demand and bringing forward a slew of new residential and commercial complexes, primarily in & surrounding the Peninsular, Mikocheni, Kariakoo, Kigamboni, & Goba, to mention a few. This has turned Tanzania’s real estate market into a lucrative investment opportunity for both domestic and foreign investors. This article provides guidance to new entrants looking to venture into the real estate sector in Tanzania, particularly those intending to buy residential property for the purpose of developing apartment buildings.
KEY PROCEDURES PRIOR TO PURCHASING A PROPERTY
MARKET RESEARCH
Imagine purchasing a property in a low-demand area without realizing it lacks future development prospects. After construction, you struggle to find tenants due to the poor location, leading to significant financial losses. Proper market research ensures you choose the right location with long-term development potential; By consulting professionals such as real estate agents, valuers, and legal experts, you gain valuable insights into market conditions, property availability, and pricing trends.
CONDUCTING DUE DILIGENCE
Consider the disastrous scenario where you buy a property without verifying its ownership. Months later, a legal dispute emerges when another party such as a Bank claims ownership, revealing that the Seller didn’t have the right to sell and that the property was mortgaged. You’re forced into a costly legal battle, and in the worst-case scenario, you could lose both the property and your investment.
Due diligence is a non-negotiable step in any real estate transaction. Ensure the land is registered & free from encumbrances by conducting official searches at the Ministry of Lands, visiting the site, making an inquiry to the neighbors living near by the property, and consulting local authorities. It’s crucial to verify property boundaries and the legitimacy of ownership, skipping a site visit could mean discovering too late that the property is encumbered by unpaid land taxes or environmental restrictions.
ENGAGING LEGAL COUNSEL
Real estate transactions, especially for foreign investors, are complex. A legal expert will guide you through compliance, drafting contracts, and ensuring the purchase process is legally binding. Furthermore, the legal counsel can assist in negotiations to secure favorable terms. If you’re a foreign investor, the absence of legal guidance could lead to a misunderstanding of local laws, resulting in a breach of regulations that jeopardizes your ownership or subjects you to hefty fines.
OBTAINING NECESSARY APPROVALS
After signing the sale agreement, submit the necessary land forms to the Municipal Council to calculate registra- tion and stamp duty fees (2% of the purchase price). Afterwards, the Tanzania Revenue Authority (TRA) shall also assess the Capital Gains Tax (10% of the purchase price), which must be paid before the transfer is completed by the Ministry of Lands.
Upon payment of the Capital Gain Tax, an application shall be submitted to the Ministry of Lands to initiate the transfer process and obtain approval for the new ownership.
Imagine closing the deal and skipping the approval process to save time. Months later, you discover that the property is still legally owned by the Seller because the transfer process was never initiated. The Seller, who remains the legal owner, could sell the property to someone else, leaving you without any legal recourse. Failure to complete this process means your ownership is not legally recognized, leaving you vulnerable to disputes.
CONDUCTING DUE DILIGENCE
APPROVALS TO BE OBTAINED PRIOR TO CONSTRUCTION
This is obtained from the local government authority. This involves submitting architectural & engineering plans, along with proof of compliance with local zoning laws if applicable.
Depending on the scale & location of the project, an EIA from the National Environment Management Council (NEMC) may be required to assess the potential environmental impacts & propose mitigation measures. For example, constructing a residential building in an industrial area is highly discouraged. Doing so may prompt authorities, such as NEMC and the Local Government’s Town Planning Department, to order the developer to cease construction, as it violates the land laws & policies.
BUILDING PERMIT
In this thriving market, being prepared means having the right guidance, legal expertise, and commitment to adhering to the regulations that govern this promising frontier. Through careful planning and compliance, the rewards of real estate investment in Tanzania are within reach, secure, sustainable, and immensely profitable.
ENVIRONMENTAL IMPACT ASSESSMENT (EIA)
Depending on the scale & location of the project, an EIA from the National Environment Management Council (NEMC) may be required to assess the potential environmental impacts & propose mitigation measures. For example, constructing a residential building in an industrial area is highly discouraged. Doing so may prompt authorities, such as NEMC and the Local Government’s Town Planning Department, to order the developer to cease construction, as it violates the land laws & policies.
COMPLIANCE PRIOR TO APARTMENT BUILDING DEVELOPMENT
- Pursuant to the Unit Titles Act, Cap, 2008 and its Regulations:
- Upon project completion, the developer or purchaser must register the units individually (apartments) with the Ministry of Land.
- Preparation and registration of a Unit Plan before construction, specifying whether the development is phased or completed as a whole.
- Securing certificates from a registered land surveyor; an architect, and the local government, each approving the unit plan.
- Paying the relevant fees depending on the project’s scope (turnkey or phased).
CONCLUSION
In this thriving market, being prepared means having the right guidance, legal expertise, and commitment to adhering to the regulations that govern this promising frontier. Through careful planning and compliance, the rewards of real estate investment in Tanzania are within reach, secure, sustainable, and immensely profitable.
