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The National Building Society (NBS) has made a keenly-awaited entry into a mortgage market that is characterised by stringent qualifying requirements, high interest rates and loan amounts so small as to be inadequate for some borrowers to build a complete home.

The tenors applicable for all mortgages at most lenders was to a maximum of 10 years. This short repayment period, coupled with high instalments made this avenue impossible for the ordinary home seeker. Other requirements were forbidding — one had to be formally employed and earning a certain level of salary. One building society dominates the market. Before the NBS, the country’s fifth building society came on stream on Wednesday last week, that dominant institution offered the highest sums of money to qualifying people and the best conditions. A person earning $1,300 monthly could access a housing loan of around $23,000, payable over 25 years.

The high salary threshold, the requirement that one had to be formally employed, high instalments and the generally short tenors placed mortgage finance well beyond the reach of the common worker.

However, the first impression we get from the NBS is that it will transform the market, making housing accessible to the majority and enabling them to borrow substantial sums of money enough to build a decent family home.

One important point to highlight in this regard is that the NBS will levy an annual interest rate of 9,5 percent for first-time home buyers. CABS charges 12 percent interest while CBZ Building Society charges 16 percent per annum. There has been some criticism that even though the NBS rate is the lowest on the market it remains too high in US$ terms. Critics argue that internationally mortgage rates are below four percent per year. The criticism is valid but we recognise that economies function differently and their efficiencies differ, hence the difference in rates. Our economy is not that efficient yet as it is labouring under sanctions.  Thus 9,5 percent interest per year is not too bad as a starting point. As time goes on bank authorities may decide to reduce it as the economy recovers and grows.

At a maximum repayment period is 25 years the NBS mortgage should cover more people including those approaching retirement but were unable to access housing loans over the past 16 years when such finance dried up. The longer period of repaying the loan is good as it helps reduce the quantum of the monthly instalments.

The lowly paid did not qualify for loans at all the four old building societies and a number of commercial banks that are offering housing finance.

One commercial bank, for example, demands, in addition to other conditions that apply sector-wide, that an applicant must earn a net monthly salary of at least $2,000. Only a few in this country earn that much.

But with the NBS geared to serve even civil servants whose salaries average $500 monthly, we envisage more home seekers benefiting from it. NBS managing director, Ken Chitando, told our sister paper the Sunday News at the weekend that after capping the repayment rate at 40 percent of one’s salary, a government employee on $500 monthly salary is eligible to getting as much as $60,000 mortgage and comfortably pay $200 per month for 25 years. At this rate, one who is paid $1,000 monthly can access as much as $120,000, pay $400 installment monthly over the same period.

This indeed should help deliver housing to more Zimbabweans who were priced out by stringent requirements of old. Chitando said they have a target of delivering 10,000 low-cost houses by 2018. This is a big target which will make a difference if it is met. We are optimistic indeed because NBS is operating on a specific mandate from the government. It will help the country achieve the Zim-Asset target of making available 300,000 homes by 2018. Other building societies should contribute to the Zim-Asset target as well, as will other financial institutions and other funding mechanisms.

Be that as it may, we want to warn of the dangers of corruption and delinquent lending that, in the past, have conspired to derail previous well-meaning government initiatives. We demand that since NBS is wholly owned by the National Social Security Authority, which thrives on public funds, the building society must operate in a transparent manner to benefit the public.

Yes, the NBS is a people’s bank but it must be run professionally, offering loans only to those who qualify and have the capacity to repay.

Conditions should be more flexible than what is obtaining on the market, but not too flexible to then affect the building society’s viability and resulting in its collapse.

In that connection, we demand greater oversight from the responsible minister through relevant structures to ensure that the NBS not only meets its goal of delivering housing to the masses but also operate as a business. After the bank failures of the past few years, the government has given the RBZ greater authority to monitor the banking sector. This should preserve the overall health of the financial services industry of which the NBS is a new player.