High default rate cripples property development
PROPERTY developers are feeling the heat due to a rise in payment defaults with a number of clients struggling to settle agreed housing stands payment terms, an official has said. Gweru-based land and property developer, Tinashe Manzungu, who runs Zimbuild Properties, confirmed there has been a high default rate by individuals purchasing stands due to the prevailing liquidity crunch in the economy.
Manzungu said the liquidity crunch, which has been exacerbated by company closures and retrenchments, has contributed to the high default rate which stands at over 35 percent in Gweru.
He said his company was now offering stands to groups from individual companies where the corporates guarantee their employees in stand purchases.
“We’ve seen a steady increase of defaulters by people purchasing stands and they now stand at 35 percent. As a result we’ve had people who come and demand their refunds when they fail to pay their premiums, which creates problems for us.
“These are mainly people who’ve been retrenched or whose companies have closed,” said Manzungu.
“To go around this challenge we’ve since engaged companies and organisations so that their employees form groups to purchase stands and the companies then guarantee these stands so that we reduce the default rate.
“The advantage of this is that the premiums are very low averaging $50 per month for high density stands, which is affordable as compared to about $150 for individuals.”
The company has also entered into a partnership with local financial institution, CBZ for insurance cover in the event that the stand owner dies without paying his/her full premiums.
The default rate, which has characterised the land market, has also replicated itself in rentals in the Midlands capital. Recently, Real Estate giant Trevor Dollar announced that the default rate has reached 60 percent, forcing property owners to revise downwards rentals by up to 40 percent.
Trevor Dollar Real Estate director Victor Wasara said some of the tenants have defaulted rentals for up to four months. He said they have devised plans to recover the monies.