Category: Buying Land

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ZNBS Launches Timange Housing Loan:

A New Path to Homeownership

Zambia’s housing landscape is evolving, and the Zambia National Building Society (ZNBS) in collaboration with Habitat for Humanity has just introduced a new product aimed at expanding access to homeownership. The “Timange Housing Loan” is designed to cater to a wider demographic, specifically targeting low-income earners, including those in the informal sector. We watched the launch event on February 27 2024 and here’s what we understood after all the speeches.

Key Features of the Timange Housing Loan:

  • Target Audience: This loan product is geared towards both formally employed individuals and those in the informal sector, acknowledging the diverse economic realities of Zambians. However, it seems to only target women (to be clarified)
  • Accessibility for Non-Salaried Individuals: A significant aspect of the Timange loan is its inclusion of non-salaried individuals, a segment often overlooked by traditional lending institutions.
  • Village Bank Group Requirement: A crucial component of the loan process is membership in a village bank group that holds an account with ZNBS. This collective approach aims to build trust and shared responsibility.
  • Flexible Repayment Terms: The loan offers repayment periods ranging from 3 to 36 months, providing flexibility to suit different financial situations.
  • Competitive Interest Rates: Interest rates start from 3%, making the loan potentially more affordable.
  • Application Requirements:
    • Employed individuals require a 3-month payslip and a letter of employment.
    • All applicants must belong to a village bank group that has an account with ZNBS.
  • Fast Approval: ZNBS aims to provide loan approval within 48 hours, streamlining the process for applicants.

What This Means for Aspiring Homeowners:

The Timange Housing Loan represents a significant step towards financial inclusion in Zambia’s housing sector. By incorporating village bank groups and catering to the informal sector, ZNBS is attempting to break down traditional barriers to homeownership. The short approval time also adds to the attractiveness of this new product.

Now, we’d love to hear from you: How do you think the village bank group requirement will impact the accessibility of this loan? What do you think about getting a loan to build your home. Share your thoughts and experiences in the comments below!

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Build a Servants Quarter Before Your Dream Home as Your First Home in Zambia

Start Small, Dream Big Later

The dream of owning a home in Zambia is a powerful one. Visions of a beautiful, custom-built house often dance in the minds of first-time builders. I have seen several people chase this dream and fail or give up. While ambition is admirable, practical considerations should guide your initial steps. Building your “dream home” as your very first project can be a risky endeavor, often leading to unexpected costs, delays, and frustrations.

The First Build is always a Learning Curve

Construction, even on a modest scale, is a complex process. It involves navigating permits, sourcing materials, managing contractors, and understanding local building codes. Your first project will inevitably be a learning experience, filled with valuable lessons that you simply can’t learn from books or online resources.

Why risk your dream home on a process where mistakes are almost guaranteed?

I believe building a smaller, simpler home is the best way to go. A long time ago (apologies to people born in the 60’s-70’s), government houses would have a main house and a servants quarters. These servants quarters would be 3 roomed houses (Not bedrooms) with a toilet/shower attached outside. No tiles, ceiling just basic finishes. Okay so maybe they were a bit too basic but here’s why you should start with a smaller project. Building a small first project allows you to do 4 things:

  1. Minimize Financial Risk: Construction costs can quickly spiral out of control, especially when unforeseen issues arise. Starting with a smaller and simpler project limits your financial exposure and allows you to gain experience without jeopardizing your entire savings.  
  2. Gain Practical Knowledge: You’ll learn firsthand about budgeting, material selection, contractor management, and quality control. This experience will be invaluable when you’re ready to tackle your dream home.
  3. Avoid Costly Mistakes: Mistakes are inevitable during any construction project. By starting small, you can make those mistakes on a smaller scale, minimizing their impact on your finances and your overall satisfaction.
  4. Secure a Place to Call Home: Building a smaller, functional home provides you with a comfortable and secure place to live while you plan and save for your dream project.

The ideal first step is a simple, functional home.

Instead of jumping into a complex, expensive project like building your dream house or multiple flats, consider building a smaller, simpler home to start. A one or two bedroom (maximum) house with basic amenities can provide a comfortable living space while you gain experience and save for your dream home. Of course, this means when you buy a plot, buy as big as possible.

This approach offers several advantages:

  1. Lower construction costs.
  2. Faster construction time.
  3. Reduced stress and risk.
  4. Valuable learning experience. You will now practice what you learned on your main house.
  5. You get to monitor progress of your main house/dream house at close range since you will probably already live on the property and have acclimatized to living in the new area.

By starting small, you’ll be better prepared to build your dream home with confidence and avoid the pitfalls that often plague first-time builders. Your first home should be a stepping stone, not a financial and emotional burden. With careful planning and a realistic approach, you can turn your dream of homeownership into a reality, one step at a time.

What do you think about building yourself a small servants quarter first? post your comment below.

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PART 2: Is Buying a House in Zambia worth it? Should you just buy for the sake of it?

Disclaimer: This information is for general knowledge and guidance only. It does not constitute financial or investment advice.

Is Buying a House in Zambia worth it? Should you just buy for the sake of it? In the last article we talked about how to calculate your return on investment (ROI) using Capitalization Rate. If you haven’t read that article yet, please read it here (https://zambiahouseplans.com/?p=811) 

Let’s continue our assessment by using another method called Cash on Cash Return.

The following methods are suited for people who are interested in knowing the cash flow before investing in a property.

Cash-on-cash return measures the annual pre-tax cash flow generated by a property relative to the total cash invested. In simpler terms, it tells you how much cash you’re getting back on your initial cash investment.

Let’s use the same example of a block of flats in Chalala, Lusaka. Grab a pen and paper.

STEP 1. CALCULATE YOUR ANNUAL PRE-TAX CASH FLOW (APCF)

This is the net income you receive from the property after deducting operating expenses and mortgage payments, but before accounting for income taxes.

  1. Determine Gross Annual Rental Income
  • Research comparable rentals in the area to set a competitive market rate. Be realistic.
  • Consider factors like size, amenities (e.g., parking, appliances), and property condition.
  • Rent in Chalala 2 by 2 bedroom house R= 5,500 x 2= 11,000 per month
  • Multiply monthly rent by 12 months account for potential vacancy periods (e.g., between tenants). 
  • Gross Annual Rental Income= K11,000 * 12 months= K132,000
  1. Determine Annual Operating Expenses (AOE)

Add up all the annual operating expenses you expect for example:

  • Mortgage Payments: Include principal and interest.( Let’s assume 4,500/month
  • Insurance: Many people in Zambia don’t take this seriously but please insure your house.
  • Utilities: (If you pay any)
  • Maintenance and Repairs: (Estimate for routine and unexpected costs)
  • Property Management Fees: (If applicable)
  • Vacancy Costs: (Estimate potential lost income during vacant periods)
  • Total Annual Operating Expenses (AOE)= K90,000 (just an example factoring in all the above, )
  1. Annual Pre-tax Cash Flow (APCF)

= Gross Annual Rental Income – Annual Operating Expenses

= GARI – AOE

= 132,000 – 90,000

APCF = K42,000

STEP 2. CALCULATE TOTAL CASH INVESTED

This is the total amount of cash you put into the property upfront. This includes down payment, closing costs and any initial renovation or repair costs.

Let’s assume you purchased the property including closing costs and renovations for K1,000,000.

Then:

  • Cash-on-Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100

= (42,000/1,000,000)*100

Cash-on-Cash Return = 4.2%

This means you’re getting a 4.2% return on your initial cash investment each year. Is this good enough for you?

  • Interpretation:
    • Higher Cash-on-Cash Return: Indicates a higher percentage of your initial investment is being returned annually in cash flow. This can be very attractive to investors.
    • Lower Cash-on-Cash Return: Suggests a lower immediate return on your initial investment.

To increase the percentage, you can either have higher rent or ensure your initial investment is as low as possible by negotiating and making sure you assess the renovation costs accurately before buying by engaging a professional. It can also help you choose which loan/finance to use.

  • Key Considerations:
    • Investment Strategy: If your primary goal is immediate cash flow, a higher cash-on-cash return is more desirable.
    • Pre-Tax: Cash-on-cash return is calculated before taxes, so it doesn’t reflect your actual after-tax profit.  
    • Leverage: Cash-on-cash return is heavily influenced by the amount of leverage used (mortgage financing).  
    • Cash Flow Focus: This metric primarily focuses on cash flow, not property appreciation.
    • Short-Term View: It provides a snapshot of the current year’s return only, not the long-term overall return on investment.  

Cash on cash return is a very useful metric, but should be used in conjunction with other metrics such as cap rates.

So tell me, does the result of this calculation matter to you or are you buying real estate regardless of the returns?

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New Housing Project Announced in Lusaka South

The Ministry of Infrastructure, Housing and Urban Development, in partnership with the National Housing Authority (NHA) and Ongos Valley Development (PTY) Ltd of Namibia, has announced a new housing project in the Lusaka South Multifacility Economic Zone (MFEZ).

Project details

  • A total of 10,000 housing units will be constructed, with the first 2,000 units available from June 2025.
  • Units will cater to low, medium, and high-cost categories. Something for everyone.
  • Units will be available for purchase or rent-to-buy options, including mortgage and installment payment plans.

Project Aims

The project aims to address Zambia’s housing deficit by providing affordable and decent housing options for all socioeconomic groups.

Our Take

This project has the potential to provide much-needed housing for Lusaka residents. The variety of housing options and financing plans should hopefully cater to a wide range of needs.

Here are some additional points to consider:

  • It is important to carefully review the details of the project, including the eligibility criteria and the terms of the financing options, before registering your interest.
  • The construction timeline for the entire project is not yet clear.
  • It is advisable to conduct your own research on the developer, Ongos Valley Development (PTY) Ltd, to learn more about their experience and track record.

We will continue to monitor this project and provide updates as they become available.

Disclaimer: We are not endorsing this project and recommend you DO YOUR OWN DUE DILIGENCE before making any decisions.

Here’s the link to the announcement by the Ministry.

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Is Building a Block of Flats on Your 20×30 Plot Profitable?

Couple smiling at each other

Disclaimer: This information is for general knowledge and guidance only. It does not constitute financial or investment advice.

Should you just build for the sake of it? When it comes to investing in rental properties, we all want to make money but the question is: Is building a block of flats on a 20×30 plot profitable?. There are several ways to determine this. In this short article we are going to examine one way of determining whether you are getting a good return on your investment. This is called Capitalization Rate or Cap Rate. Let’s use an example of a block of flats in Chalala, Lusaka. Grab a pen and paper.

STEP 1. Calculate your Projected Annual Rental Income (ARI)

Determine Monthly Rent (R):

  • Research comparable rentals in the area to set a competitive market rate. Be realistic.
  • Consider factors like size, amenities (e.g., parking, appliances), and property condition.
  • Rent in Chalala 2 by 2 bedroom house R = 5,500 x 2 = 11,000 per month

Calculate Annual Income (ARI):

  • Multiply monthly rent by 12 months.
  • Account for potential vacancy periods (e.g., between tenants). 
  • ARI= 11,000*12= K132,000

STEP 2. Determine Annual Operating Expenses (AOE)

Add up all the annual operating expenses you expect for example:

  • Mortgage Payments: Include principal and interest.
  • Property Taxes: Give to Caesar what belongs to Caesar. Caesar is Zambia Revenue Authority, Ministry of Lands etc.
  • Insurance: Many people in Zambia don’t take this seriously but please insure your house.
  • Utilities: (If you pay any)
  • Maintenance and Repairs: (Estimate for routine and unexpected costs)
  • Property Management Fees: (If applicable)
  • Vacancy Costs: (Estimate potential lost income during vacant periods)
  • Total Annual Operating Expenses AOE= K90,000 (just an example factoring in all the above, K7,500/month )

STEP 3. Calculate Net Operating Income (NOI)

Formula: NOI = ARI – AOE

NOI = Annual Rental Income – Annual Operating Expenses

= 132,000 – 90,000

Net Operating Income -NOI = K42,000

STEP 4. Calculate Return on Investment (ROI) 

Capitalization Rate (Cap Rate):

  • Focus: Property’s purchase/construction price. Let’s assume you bought the flats at K1,000,000
  • Formula: (NOI / Purchase Price) x 100
  • Our Cap Rate = 42,000/1,000,000= 4.2%

A Higher Cap Rate: Generally indicates higher potential return. However, it can also signal higher risk. Example: A higher cap rate might suggest a lower property value or higher vacancy rates. If our house in Chalala was 500,000 the cap rate would have been 8.4%.

Lower Cap Rate: May suggest a more stable and less risky investment, but with lower potential returns. Example: A lower cap rate could indicate a more desirable location or higher property value.

IMPORTANT: ANALYZE AND COMPARE

  • Compare your calculated ROI with other investment options.
  • Consider your risk tolerance and investment goals.
  • Accurate Estimates: Use realistic figures for all income and expenses.
  • Have a long-Term View: ROI can fluctuate over time. Consider long-term appreciation potential.
  • Market Conditions: Research local rental markets for trends and potential challenges. Sometimes the project can yield better results in a different town.
  • Professional Guidance: Consult with a real estate professional or financial advisor for personalized advice. Seek professional advice from a financial advisor or real estate investor. The above are just my opinion.

Even if your property does not yield good results after this calculation, there are still other ways you can gain a benefit. We will discuss this in another article. I hope this gave you a better understanding.

Post your comments below.

#buildinginzambia #buyinglandinzambia

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Seizing the Opportunity: Buying Foreclosed and Repossessed Properties in Zambia

In our inaugural issue of the Builders Blueprint, we talked about buying land from the councils as an affordable option available to everyone. The Zambian real estate market presents a unique opportunity for both local and international investors. Today, let’s talk about the acquisition of foreclosed and repossessed properties by banks and financial institutions. 

This often happens when someone borrows money to buy a property or borrows it for other purposes but puts the house as collateral. When they fail to pay back, the bank takes back the property. This leaves the bank with excess stock of properties. Banks are not in the real estate business, they are in the money business. 

There is a growing number of properties being foreclosed as evidenced in the local newspapers and bank websites. This offers a chance to acquire land and houses at potentially significant discounts. Let’s analyze this opportunity.

The Benefits of Buying Foreclosed Properties

  1. Affordability: Foreclosed and repossessed properties are often sold at a substantial discount compared to market rates. This is because the bank would rather get rid of the property and use the cash for other investments. They set a minimum sale value however, in some cases it might be possible to go lower if the conditions are in your favour.
  2. Investment Potential: As the Zambian economy continues to grow, real estate investments can yield significant returns. 
  3. Diverse Property Options: Foreclosed properties range from residential homes to commercial properties, offering a variety of investment opportunities. Sometimes foreclosed homes are in very good locations which can yield great returns when repurposed.
  4. Legit Business: the process of lending money or offering a mortgage by banks and financial institutions requires them to carry out background checks and check legitimacy of the property. Therefore, foreclosed properties are already vetted by the bank to be legitimate. This is half of our work done for us by others for free.

Potential Challenges

  1. Legal Complexity: Navigating the legal process of acquiring foreclosed property can become complex and time-consuming. It’s always advisable to consult with a local real estate lawyer to ensure a smooth transaction.
  2. Property Condition: Foreclosed properties may require significant repairs and renovations.The properties can range from new to very old. It’s important to exercise due diligence before making the bank an offer.
  3. Market Fluctuations: Real estate markets can be volatile, and economic factors can influence property values. Sometimes properties may be marked up due to market fluctuations or the bank attempting to recover their moneys.

The Diaspora Advantage

Zambians in the diaspora and foreign investors are uniquely positioned to capitalize on this opportunity. With a global perspective and access to international financial markets, they can leverage their knowledge and resources to identify lucrative deals. Additionally, diaspora investors can often secure financing from international institutions, providing them with a competitive edge.

Key Considerations for Potential Buyers

  • Thorough Due Diligence: Conduct a comprehensive property inspection to assess its condition and potential value.
  • Consult Local Experts: Seek advice from local real estate agents, lawyers, and property managers to navigate the intricacies of the Zambian market.
  • Secure Financing: Explore financing options from local and international lenders.
  • Consider Long-Term Plans: Determine your investment goals and whether you plan to rent, sell, or develop the property.

By carefully considering these factors and taking advantage of the opportunities presented by the foreclosed property market, individuals and investors can make sound real estate decisions in Zambia. WOULD YOU FEEL GUILTY BUYING A PROPERTY THAT WAS FORECLOSED?

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 Zambia Integrated Land Administration System (ZILAS)

 Zambia Integrated Land Administration System (ZILAS)

The Zambia Integrated Land Administration System (ZILAS) represents a significant advancement in the country’s land management infrastructure. Launched in 2023/2024, ZILAS aims at streamlining land-related transactions and improving service delivery, ZILAS has introduced a number of innovative features.

One of the key benefits of ZILAS is its online platform. This allows individuals and businesses to apply for land services, make payments, and track the progress of their applications without the need for physical visits. So even when you make a payment you receive an electronic receipt almost instantly. This not only saves time but also reduces the potential for corruption and delays.

Additionally, ZILAS incorporates advanced data management capabilities, enabling the Ministry of Lands and Natural Resources to maintain a comprehensive and accurate record of land ownership and transactions. This has improved the transparency and efficiency of the land administration process in Zambia. Well, thats what the ministry says.

While ZILAS has demonstrated its potential, it has also faced some challenges during its implementation. One of the most significant issues has been system downtime, which has led to temporary disruptions in service delivery. However, the Ministry has been working diligently to address these technical problems and ensure the system’s reliability.

Another challenge has been the need for users to adapt to the new system. As with any technological change, there is a learning curve involved. However, the Ministry has provided training and support to help users navigate ZILAS effectively.

Despite these initial hurdles, the future of ZILAS looks promising. As the system matures and its capabilities expand, it has the potential to revolutionize the way land is managed and utilized in Zambia.

By streamlining processes, reducing corruption, and improving transparency, ZILAS can contribute to a more equitable and efficient land administration system. This, in turn, can foster economic growth and development.

As real estate investors and builders, we can play a crucial role in supporting the success of ZILAS. By ensuring that we comply with the system’s requirements and utilize its features effectively, we can help to maximize its benefits for ourselves and for the broader Zambian community.

Let me know if you have had experience with ZILAS or if you have questions about it.

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Buying Land from Councils in Zambia

Land for sale in Zambia
Land for sale in Zambia

Buying Land From Councils in Zambia

In my video about How to Make Money in Real Estate part 1 and part 2, I explained that one way is to buy a piece of land and subdivide it. One of the questions I often get is “where can I find genuine land?” Well, I would say the Councils (Local Authorities) because they are the custodians of state land and are the first step in the title deed acquisition process.

Councils often issue out adverts for plots for sale. These ads are often posted in the newspaper and the prices are usually pretty affordable especially when compared to buying from a private seller. Usually, there will be more residential plots available as compared to commercial plots or small holding plots.

The biggest turn off for people though is the rural nature of some districts and the supposedly unfair allocation of land. I once applied for a property in a town neighboring the capital city, Lusaka and after attending interviews, I was told I was not successful. A friend later told me his celebrity friend who never even attended the interviews was successful. It was quite disappointing.

However, this has not quenched my desire to acquire land through councils because once you are in, the entire process is predictable and straightforward (in theory). How long it will take though is another issue because councils sit on a quarterly basis to approve applications through their Planning and Lands Committee and their Full Council Committee meetings. Once your application misses a full council meeting it gets pushed to the next quarter.

Do you have experience buying land from the council? Do share your thoughts and tips.

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