Implications of landed and tied-up capital on urban development: the unfinished and unoccupied buildings of Dar es Salaam in Tanzania

Abstract

Urban growth and development take place on landed property. Production of landed property involves various land development processes. Well-functioning land and property markets are a key determinant of the process, quality and quantity of produced landed properties. With or without government intervention, the markets are supposed to ensure that investments in building do not turn out to be “white elephants” in terms of prolonged tied-up capital. Tied-up capital indicates existence of high opportunity costs, resource allocative inefficiency, ineffective investment appraisal, and distorted factor markets. Developers who invest in undeveloped land, unfinished buildings, and finished-but-unoccupied buildings are caught in a vicious cycle of causing and resulting from distorted land and other factor markets. Reasons for the developers’ behaviour are economic, social, cultural and political. Such apparent irrational behaviour of land development is prevalent in both Dar es Salaam and other urban centres in the country. Deliberate political measures, at policy level, and economic initiatives, at financing and marketing levels, are necessary to be instituted in order to prevent further tying up of capital in the form of undeveloped land, unfinished buildings, and finished-but-unoccupied buildings. Findings and arguments of this paper are based on fieldwork studies that the authors conducted in one residential neighbourhood of Dar es Salaam city, and are typical of the city and the rest of urban centres of the country. The fieldwork involved base-map updating, household interviews, and self-administered questionnaires to property owners. These findings have to be read in the context of the specific political economy of the country, which had from 1967 to 1985 experimented with anti-capitalistic socioeconomic policies and programmes.