Source: Property firms to slow down on projects | The Herald September 27, 2019
Enacy Mapakame Business Reporter
The prevailing volatile economic environment will make it difficult for property firms to embark on major property development projects, one of the industry’s eminent players has said.
Overall, the real estate sector is expected to remain largely subdued on high costs and weak demand.
Zimbabwe is battling high inflation levels driven by a run-away foreign exchange rate, erratic utility services supply and low capacity utilization.
These have created problems for local businesses although the Government has, however, made extensive efforts to address the crippling economic problems to bring back stability and confidence.
This year alone, reforms such as floating the exchange rate, scrapping the multi-currency system and introduction of local currency were implemented as part of reforms to restore confidence in the local currency.
However, these initiatives have inadvertently come with their own problems.
Speaking to journalists in Harare yesterday, Zimre Property Industries managing director Edson Muvingi said if not addressed immediately, the obtaining economic challenges will make it difficult to embark on major property developments as these will be costly and unsustainable.
The scrapping of the US dollar for instance, presented major challenges for projects that had been pegged in US dollars.
“The economic volatility and the banning of the US dollar created a lot of problems. We do not see significant projects in the next two years because of risk,” he said.
Among the major challenges the property sector has faced recently are high voids as companies close, downsize operations or seek cheaper options. There has also been a spate of migration from central business district offices to office parks that are less congested as compared to CBD offices.
“Companies are incapacitated,” said Mr Muvingi. Meanwhile, ZPI returned to the black with $116 million profit for the half year to June 30, 2019, after loss of $0,2 million in the same period last year.
According to ZPI, the currency reforms introduced during the half year resulted in investment property values increasing substantially in local currency.
As a result, there was a fair value adjustment of $121,8 million that gave rise to the group’s profit jump.
The recently completed Sawanga Shopping Mall in Victoria Falls contributed significantly to rental income. The US$13 million Sawanga Mall is expected to be officially opened by end of next month.
Mr Muvingi said the shopping mall’s performance had exceeded expectations, in the few months after it opened its doors to tenants. Although some tenants are yet to open their doors to the market, the shopping mall’s anchor tenant, Pick n Pay which occupies over 2000 square metres is already in place.
The mall is 95 percent let and houses big brands like Bata, NMBZ, Ethiopian Airways, Nedbank, FBC Bank, Liquid Telecom and Puma among others.