The traditional set up of property in Botswana is central to the argument that Batswana are applying the wrong set of rules to the property game.
It appears that the rules presently used are in stark contrast to how an adept player understands the game to be played. In an earlier interview with The Telegraph, personal finance expert Nelson Letshwene articulated the way in which Batswana relate to property.
“The adult population in Botswana still subscribes to the three home system of village home, cattle post and town home. A lot of Batswana would spend money first developing at the village┬ábefore they can consider a house in town. They would normally use personal loans for these since banks don’t finance mortgages in many villages,” he said. “This therefore means it would take at least five to seven years before they can qualify for another loan.”
Letshwene brings to the open the fact that many Batswana do not consider property as an investment but rather as something that they must own simply to put a roof over their heads. This could be motivated by the reality that many of them are tied to the unceasing rental chain. A conclusion derived from this is this basis informs a game plan that works against benefitting from property in real monetary terms.
At a property seminar last week, Sethebe Manake, founder and chief executive officer of Vanatage Properties, said that a mindset change is necessary to enable Batswana to benefit from property. Manake added that such is not the case because of the ill-informed perception on property. She stressed that the question of “how much do I qualify for” is a bad place to start because a loan should not determine what an investor can invest in.
According to Manake, the best approach to real estate is to understand its nature, which is being aware that it needs a long term perspective, a high capital input and a proactive and strategic management. “An investment case is built by rental, if the rental of the property does not cover your loan repayment, it is not an investment,” she said. She advised that when approaching a bank for financing investors must negotiate terms of the loan favourable to themselves, given that a bank approves funding by looking at how much risk it can take.
Property investment is not a subject that many Batswana have been adequately exposed to; the low mortgage rate recorded in the 2015 Monetary Policy statement indicates that their participation in the property game is shallow. Given that property investment requires a significant amount of capital, the level of financing is therefore a measure of participation.