Source: Fund mulls mortgage-linked housing scheme – herald
Martin Kadzere
THE Public Service Pension Fund (PSPF) is set to launch a new mortgage-linked housing scheme to help civil servants acquire homes, its chief investment officer, Dr Farai Gaba, has said.
The initiative is aimed at addressing the longstanding issue of inadequate formal, long-term housing finance.
This comes as the fund has been strategically investing retirement savings in property to create long-term and stable income.
The approach is designed to generate cash flows that are indexed to inflation or foreign currency, directly aligning with the fund’s future pension obligations.
The PSPF was established to provide for the payment of pensions, gratuities and other benefits to State workers upon termination of their service through retirement, discharge, resignation or death.
Dr Gaba said the scheme would be a collaboration between the PSPF and various local banks.
The fund is utilising 80 hectares of its land in Harare and Bulawayo for large-scale housing developments.
In an interview during the launch of Midlands Park, a low-cost mixed-use complex providing both residential housing and community facilities in Zvishavane on Tuesday last week, Dr Gaba said a dedicated 45 percent of the land would be set aside for civil servants, who would be able to access bank-issued mortgages to purchase the properties.
As part of the Midlands Park project, officially commissioned by President Mnangagwa last week, the fund is also making a major move into the education sector, with multiple projects aimed at addressing student accommodation challenges in the country and ensuring a steady stream of rental income.
By providing serviced land and planned infrastructure, the PSPF is reducing the risk for banks, which in turn makes it easier for them to offer affordable housing loans to civil servants.
Dr Gaba said the model was designed to create a clear path to home ownership, allowing its members to build equity through regulated, market-based mortgage financing.
He emphasised that, while the programme was focused on affordability for its members, it also prioritised the fund’s long-term growth and sustainability.
“Mortgage terms, including pricing and repayment periods, are being developed with selected financial institutions . . . , making the loans accessible to members, while also protecting the pension assets,” Dr Gaba said.
This would address the urgent housing needs while ensuring the future financial security of their pension savings.
“Mortgage structures are, therefore, being carefully modelled to align with members’ income profiles, while also preserving PSPF’s fiduciary responsibility to protect and grow pension assets,” he said.
“Detailed parameters, including pricing models, repayment tenures and underwriting standards are being developed with financial institutions to balance member accessibility with prudent fund growth.
“This approach ensures that PSPF fulfils its dual role: enhancing housing ownership opportunities today while safeguarding pension security for tomorrow.”
The fund is making significant progress in the education sector, with projects in Kwekwe, Bulawayo and Chinhoyi designed to provide student accommodation and generate stable rental flows.
In Harare, the PSPF is developing the Madokero Creek and Westlands residential properties in the northern suburbs.
The middle-income residential projects will pilot a unique rent-to-own scheme, providing a new pathway for civil servants to achieve home ownership, Dr Gaba said.
Looking into the future, plans are underway for a mixed-use urban renewal project at the Samora Machel Precinct in the Harare central business district, with leases linked to the United States dollar to protect against currency depreciation.
The project has not yet commenced.
The fund also plans to implement dedicated housing for provincial civil servants in Bindura and Lupane.
Recently, it acquired the Monomotapa Hotel, a key asset expected to generate a steady flow of foreign currency.
The move into hospitality, along with its other real estate investments, is a deliberate strategy to diversify its assets and ensure the long-term sustainability of its pension obligations.
Dr Gaba said the PSPF sought to protect its members’ savings from inflation and currency devaluation by strategically investing retirement savings.
This strategy generates cash flows indexed to inflation or foreign currency, which directly aligns with the fund’s future pension obligations.
The strategy helps to preserve the value of the fund.
The fund’s investments in tangible, income-generating assets are intended to strengthen its financial position while also supporting the national economy, which in turn helps to ensure a steady flow of contributions.
The PSPF sees its role as a “patient capital” catalyst for national development.
In the short term, this means channelling funds into key productive areas such as energy and housing to boost capital formation, stimulate economic demand, create jobs and strengthen domestic financial markets.
In the long term, the fund’s primary goal is to protect and grow its members’ retirement savings.
Through asset-liability matching, investment diversification, and building resilience with inflation-linked and forex-exposed assets, the PSPF ensures the long-term security of its members’ pensions.
This dual approach allows the fund to support national development without compromising its core mission.
Dr Gaba noted the fund’s property portfolio was delivering stronger returns compared to those of traditional investments.
Residential properties are generating net yields of between 6 percent and 9 percent.
Student housing is proving to be even more lucrative, providing stable yields of 8 to 10 percent.
Additionally, investments in the hospitality sector are showing an internal rate of return of 12 to 18 percent, backed by foreign currency.
The fund is also seeing significant gains from development projects, with gross margins ranging from 15 to 25 percent.
The numbers show that the fund’s focus on real estate is yielding high returns, benefitting its members’ pensions.
“These returns significantly outperform negative real money market returns and volatile equities, giving the fund inflation-hedged stability,” said Dr Gaba. “Importantly, the drivers of performance are non-traditional investments, housing tied to essential demand, forex-earning hospitality assets and embedded development margins.
“PSPF has demonstrated that creativity in structuring, from mortgage-linked models to renewable energy projects, increases both returns and sustainability, allowing the fund to remain resilient even in volatile markets.”
In the energy sector, the fund has invested in the Great Zimbabwe mini hydro project in Masvingo, a 5-megawatt renewable energy plant that is now feeding into the national power grid.
In agriculture, it is developing a commercial hub in Marondera, a farmer-centric facility designed to streamline agricultural markets and logistics.
Furthermore, the fund is backing various value-addition projects, including milling, citrus processing and cold-chain facilities, to enhance the value of agricultural products and create new revenue streams.
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