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Apr 10, 2013

The roundtrip transaction cost is high in Tanzania


How high are realtors’ and lawyers’ fees in Tanzania? What about other property purchase costs?

Transaction Costs

Who Pays?
Notary Fee 3% buyer
Stamp Duty 1% buyer
Registration Fee 0.25% buyer
Real Estate Agent’s Fee 5% - 10% buyer
Valuation Fee

0.10%

seller
     
Costs paid by buyer 9.25% - 19.25%
Costs paid by seller 0.01%
ROUNDTRIP TRANSACTION COSTS 9.26% - 19.26%
See Footnotes
Source: Global Property Guide

How difficult is the property purchase process in Tanzania?

The state owns all land in Tanzania. Therefore, there is no private ownership allowed for both citizens and non-citizens.

Nevertheless, the Government grants rights of occupancy of land and derivative rights. A right of occupancy is valid for 5-99 years, renewable. A derivative right, on the other hand, can be held for 5-98 years. For a foreigner to obtain a right of occupancy, s/he is required to be granted first a Certificate of Incentives by the Tanzania Investment Centre (TIC).

There is also the option of obtaining sub-leases on land, which has been granted to the private sector through a right of occupancy.

Foreigners can only occupy land for investment purposes. There are several ways to be permitted occupancy on land: through obtaining derivative rights from the TIC, application to the Commissioner for Lands, sub-leases, licenses from the Government, and purchasing from holders of rights of occupancy.

Rights of occupancy are transferable, on the condition that it is to be transferred to a foreigner, to be used for investment purposes, with permission from the TIC.

If the foreign investor opts to purchase from a holder of a right of occupancy, a lawyer’s services is needed for the process. The lawyer drafts a Sale Agreement and the seller provides the necessary documents that confirm s/he has a right of occupancy on the property in case and it is clear of any encumbrance.

The notarized Agreement is taken to the Land Office, where the buyer pays for the necessary taxes and fees to have his/her name recorded at the Land Registry. The lawyer also prepares a Transfer Deed, which is submitted to the Municipal Land Office with the Sale Agreement. A Certificate of Occupancy is then sent to the buyer.



Footnotes to Transaction Costs Table


The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Notary Fee
Notary fees are approximately 3% of the property value. Notary fee is negotiable, but it is regulated and it cannot go higher than 10% of the property value.

Stamp Duty
Stamp duty is levied at 1% of the property value.

Registration Fee
Registration fee is around 0.25% of the property value.

Valuation Fee
Valuation fee is around 0.10% of the property value. The official valuation fee formula is: (Property Value – 200,000) * (1.25/1,000) + 550 + valuation approval fee of 0.01% of property value.





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