Land Banking in Tanzania: A Long-Term Investment Strategy

Land Banking in Tanzania: A Long-Term Investment Strategy Introduction Land banking, the strategic acquisition of undeveloped land with the anticipation of value appreciation over time, has emerged as a highly attractive long-term investment strategy, particularly in rapidly urbanising countries like Tanzania. As Tanzania’s cities experience significant population growth and economic expansion, demand for land in and around key urban centres is steadily increasing. Tanzania’s urban population is projected to grow from 35% in 2023 to 50% by 2050, with Dar es Salaam alone growing at an annual rate of 5.6%, one of the highest in Africa. 1 This urbanisation is creating pressure on housing, commercial spaces, and infrastructure, fuelling the appreciation of land values.

Why Land Banking is Attractive in Tanzania High Urbanization Rates Tanzania is experiencing one of the fastest urbanisation rates in Africa, driven by population growth, economic expansion, and rural-to-urban migration. Dar es Salaam, Tanzania’s largest city, is a prime example, with a population growth rate of 5.6% annually, by 2030, the city’s population is expected to reach 10 million, making it a megacity and further driving demand for real estate, particularly in underdeveloped or peri-urban areas.2 Dodoma, Tanzania’s new administrative capital, is also experiencing rapid growth, bolstered by the government’s relocation efforts. This shift brings a steady influx of government employees, private sector professionals, and support services, expanding the city’s boundaries and driving up land prices in previously underutilised areas.

For land bankers, this rapid urbanisation presents an opportunity to acquire land in emerging neighbourhoods around Dar es Salaam and Dodoma, where demand will likely increase as the cities grow. Infrastructure Development A key factor driving land value appreciation in Tanzania is the government’s investment in large-scale infrastructure projects that enhance connectivity between urban centres and neighbouring regions. One of the flagship projects is the Standard Gauge Railway (SGR), a 1,219-kilometer railway line that, once completed, will connect Dar es Salaam with major inland cities, including Morogoro, Dodoma, and Mwanza. This project is expected to reduce transportation costs, boost trade, and stimulate economic activity along its route, driving up land demand in areas surrounding these transit hubs.

Another transformative project is the Bus Rapid Transit (BRT) system in Dar es Salaam. Currently, in its second phase of expansion, the BRT is designed to ease traffic congestion and improve urban mobility. Since the completion of the BRT’s first phase in 2016, property values near BRT routes have increased by as much as 15-20%, reflecting the premium that improved access to public transport brings to real estate. 3 Investors who acquire land near future BRT routes can anticipate higher demand from developers seeking transitoriented locations, further enhancing the value of their holdings. Government Initiatives and Regional Development Plans The Tanzanian government has laid out an ambitious development agenda articulated in the National Five-Year Development Plan (2021/22 – 2025/26), emphasising urban expansion, economic diversification, and infrastructure improvement.

As part of this plan, the government focuses on creating new economic zones, such as Export Processing 1 The Transformation of Cities in Tanzania: An overview 2 Tanzania Urbanization Laboratory 3 Evaluating the impacts of the Dar es Salaam Bus Rapid Transit System

Zones (EPZs) and Special Economic Zones (SEZs), to attract foreign investment and promote industrial growth. These zones create clusters of economic activity, increasing the demand for nearby land for commercial, industrial, and residential use. Additionally, the relocation of the government administration to Dodoma has brought a surge of development, with the government incentivising real estate projects to accommodate the growing population. Land banking around Dodoma’s outer areas, such as Nala and Chamwino, allows investors to benefit from land appreciation as infrastructure and services expand to support the city’s growth. The government’s longterm vision of creating a well-planned administrative capital makes Dodoma one of Tanzania's most promising areas for land banking.

Growing Middle Class and Housing Demand Tanzania’s growing middle class is another driver of land value appreciation, particularly in urban and peri-urban areas. With more Tanzanians joining the middle-income bracket each year, there is increasing demand for affordable housing, especially in areas that offer proximity to city centres yet remain more affordable than prime urban locations. Dar es Salaam alone has an estimated annual demand for 200,000 new housing units, while supply remains limited, creating a clear gap in the market that land banking can address. Peri-urban areas around Dar es Salaam, such as Kigamboni and Mbagala, have seen land prices rise by 10-15% per year as residential developments expand outward.4 These areas attract developers and buyers seeking affordable housing options within commuting distance of the city centre.

Investors banking land in these growth corridors are wellpositioned to capitalise on this demand as developers seek to acquire land to meet the housing needs of Tanzania’s middle class. Low Maintenance Costs Undeveloped land requires minimal maintenance compared to developed properties, making it a more passive investment. Land does not require regular upkeep, utilities, or tenant management, significantly reducing investors' holding costs. For example, holding undeveloped land in urban areas with high property management expenses allows investors to avoid costs associated with repairs, renovations, and tenant turnover. Moreover, Tanzania’s relatively low property taxes further contribute to keeping maintenance costs low, allowing investors to hold onto land for extended periods without incurring significant ongoing expenses.

This low-maintenance aspect of land banking makes it an ideal choice for investors seeking a “buy-and-hold” strategy without the complexities of property management. Risks of Land Banking in Tanzania Regulatory and Land Ownership Challenges Navigating Tanzania’s regulatory landscape is a significant challenge for land banking investors, especially given the country’s unique land tenure system. Under Tanzanian law, the government holds all land, and citizens or investors are granted the right to lease land for up to 99 years rather than owning it outright i.e. freehold. While this system provides a level of security, the leasehold structure can create complications, particularly for foreign investors who may face additional regulatory requirements and limitations.

Furthermore, acquiring land involves multiple steps, including obtaining derivative title from the Tanzania Investment Centre (TIC) for non-citizens, verifying land titles, and complying with local zoning regulations. These processes can be time-consuming and complex, with potential delays due to bureaucratic hurdles. Additionally, the risk of policy changes, such as amendments to land tenure laws or changes in zoning regulations, can impact the longterm viability of a land banking investment. For example, recent government initiatives to 4 Modelling Expansion and Densification in Peri-urban Areas: The Case of Goba Ward, Dar es Salaam, Tanzania.

curb land speculation could impose higher taxes on undeveloped land, affecting the profitability of land banking. Dependency on Infrastructure Project Completion The value of many land banking investments in Tanzania is closely tied to planned infrastructure projects. While these projects are expected to drive significant land appreciation in their surrounding areas, any delays, modifications, or cancellations can substantially impact the anticipated returns for land banking investors. For instance, the Bagamoyo Port project, originally expected to transform the area into a major trade and logistics hub, has faced numerous delays and setbacks due to funding and regulatory challenges. These delays have left investors in the surrounding areas uncertain about the future value of their holdings.

In Dodoma, the government’s relocation efforts have boosted land demand, but the full economic impact hinges on the timely expansion of necessary infrastructure to support the growing population. Investors banking on future growth driven by such projects must be prepared for the possibility that they may not materialise as planned or may take longer than expected, potentially impacting land value appreciation. Conclusion In conclusion, land banking in Tanzania presents a compelling opportunity for investors, provided they approach it with careful planning, strategic location selection, and a longterm perspective. Tanzania’s rapid urbanisation, with cities like Dar es Salaam growing at a high pace, drives demand for land in critical areas.

Infrastructure projects such as the Standard Gauge Railway (SGR) and the Bus Rapid Transit (BRT) system further enhance land values in connected regions. However, successful land banking requires navigating Tanzania’s unique regulatory environment and understanding the dependencies on project completion. For investors who recognise Tanzania’s growth potential and the strategic role of land banking, this market offers substantial returns and a chance to be part of the country’s dynamic development, contributing to emerging areas' urban expansion and economic transformation. Disclaimer The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory, or interference of any legislation, laws, or policies of any country including Tanzania.

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