Bernard Mpofu | www.newsday.co.zw | 19 November 2012
Zimbabwe is planning to re-introduce paid-up permanent Shares (PUPS) as Treasury seeks to stimulate mortgage financing, Finance minister Tendai Biti has said.
Presenting the 2013 National Budget last week, Biti said the PUPS would enable building societies to raise long-term funding for periods of up to two years.
PUPS were designed to mobilise private sector funds for housing by enhancing building societies' competitiveness in attracting deposits.
The conditions were that at the end of each financial year, each building society had to make up a quarter (25%) of the mobilised funds available for low-income housing.
He said the government would soon amend legislation to allow banking institutions to offer mortgage finance.
"In order to inculcate the culture of savings, Treasury is amending Statutory Instrument 308 of 1986 in order to make it more responsive to our dollarised environment with a view to further attracting mortgage finance," said Biti.
"Discussions are currently underway with all players in order to address the question of interest and tenure of the mortgage bonds."
He added that the changes seek to exempt banks offering mortgage finance from paying income tax with effect from 2013.
At the moment, exemptions are provided to building societies from paying income tax.
The current stock of mortgage finance available is based on 10-year tenures at a weighted average rate of interest of 15% with traditional building societies CABS and CBZ Building Society (formerly Beverley Building Society) more active on the market.
Mortgage lending became redundant more than 10 years ago at the start of a decade-long economic recession.
At peak, savings which form the backbone of mortgage financing, contributed nearly 8% to the gross domestic product when building societies offered 25-year mortgages.
Statistics show that the bulk of bank deposits are currently transient in nature.