IMPLEMENTATION OF JOINT VENTURE PROJECTS

NATIONAL HOUSING CORPORATION

IMPLEMENTATION OF JOINT
VENTURE PROJECTS

SEPTEMBER 2022

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1.0 INTRODUCTION
1.1 
National Housing Corporation (NHC) has been
implementing joint development and ownership of
properties with the private and public sector. Such projects
were implemented through the Corporation’s Joint Venture
Policy of 1993 and its various amendments of 1998, 2006,
and 2012. The policy has further been revised in 2022 with
objectives of improving performance of the joint venture
projects portfolio.

1.2 NHC’s joint venture developments falls into three major

categories:
1.2.1. Projects developed on NHC’s advertised plots that
are earmarked for joint venture projects.
1.2.2. Projects developed on plots requested by partners
but subject to the Corporation development plan
for such plots; and
1.2.3. Projects developed on partners’ plots located in
strategic areas.

2.0 JOINT VENTURE PROJECTS

IMPLEMENTATION PROCEDURES

The following steps are to be followed during initiation and

implementation of Joint Venture Projects;
i.  NHC will advertise the list of plots that it intends to develop
on Joint Venture basis indicating location of the plot, size
and the proposed use.
ii. The prospective partners will submit proposals to invest
in the advertised plots on Joint Venture basis with NHC,

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 IMPLEMENTATION OF JOINT VENTURE PROJECTS

expressing the type of property to be developed, the

scope of the proposed project, costs estimates, financing
arrangements and financial viability of the proposed
project.
Alternatively, a prospective partner can submit an
iii. 
unsolicited proposal for development of a specific plot,
which has more potential in terms of generation of more
quality units and revenues to the Corporation than its
current state and use and the Corporation will decide
based on its development plan of the particular plot.
iv. The submitted proposal will include concept design of the
proposed project and project feasibility report entailing the
technical feasibility; financial viability; mode of financing;
name(s) of the developer; names of shareholders (if any);
and proposed tenure of the project.
v.  NHC will undertake due diligence of the prospective
partners to establish their legal status, technical proficiency,
financial capability, and any other relevant information
that is related with their ability to undertake the proposed
project successfully.
vi. NHC will review all submitted documents and a decision
will be made based on NHC’s Joint Venture Policy.

3.0 JOINT VENTURE ARRANGEMENTS

According to NHC’s Joint Venture Policy, there are four main

types of joint venture arrangements:

3.1 Land as Equity Contribution - LEC

Under this joint venture arrangement, NHC will contribute
only land and the Partner will contribute all financing
required for the implementation of the project to the

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completion. This type of joint venture is divided into two

groups:

3.1.1. Investment which Focuses on Ownership of

the Project
This type of joint venture aims at giving the Partner 40%
ownership of the project wish cash flow benefits for the
first 15 years upon completion of construction, as detailed
below:

Upon completion of the project in accordance to the

requirements of the Joint Venture Agreement, NHC will
benefit from 25% of revenue or space of the project and
Partner will benefit from 75% of the same for a period of 10
years. After 10 years, NHC will get additional 25% shares
to benefit from 50% of revenue or space and Partner will
benefit from 50% of the same. After additional 5 years (15
years since project completion), NHC will get additional
10% to reach 60% of revenue or space of the project and
Partner will remain with 40%. The shareholding of 60% for
NHC and 40% for Partner will be the final and permanent
shareholding of the project.

START AFTER 10 YEARS AFTER 15 YEARS

Action Shares Action Shares
NHC 25% Add 25% 50% Add 10% 60%
PARTNER 75% Less 25% 50% Less 10% 40%

3.1.2. Investment which Focuses on Cash Flow
This type of joint venture aims at giving the Partner the
cash flow benefits for a period of 25 years and ownership
of 25% of the project, as detailed below.

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Upon completion of the project in accordance to the

requirements of the Joint Venture Agreement, NHC will
benefit from 25% of revenue or space of the project and
Partner will benefit from 75% of the same for a period of 10
years. After 10 years, NHC will get additional 25% shares
to benefit from 50% of revenue or space and Partner will
remain with 50% of the same. After additional 15 years (25
years since project completion), NHC will get additional
25% thus benefiting from 75% of revenue or space of the
project and Partner will remain with 25%. The shareholding
of 75% for NHC and 25% for Partner will be the final and
permanent shareholding of the particular project.

START AFTER 10 YEARS AFTER 15 YEARS

Action Shares Action Shares
NHC 25% Add 25% 50% Add 25% 75%
PARTNER 75% Less 25% 50% Less 25% 25%

The minimum selection criteria of projects under this
arrangement is the value of the proposed Partner’s
investment in the project must be at least four times the
market value of NHC’s land that is being invested on.
(Other terms and conditions applies).

3.2 Land and Finance as Equity Contribution – LFEC

Under this joint venture arrangement, NHC will contribute

land and finance and the Partner will contribute remaining
financing required for the implementation of the project
and parties will agree on the shareholding structure.
Project implementation and ownership structure under
this category shall be through a Special Purpose Vehicle

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(SPV) in the form of a limited liability company whose

shareholding structure shall be determined at the inception
of the project based on the amount of equity contributed
by each partner.

The minimum criteria to be met are:

(a)  Total project value must be greater than or equal
to TZS 50 billion;
(b) IRR of minimum of 12%; and
(c) Payback period of not more than 12 years.

3.3 Revenue Sharing Model

Under this joint venture arrangement, Parties (NHC

and Partner) will implement the project for the purpose
of building, selling and sharing revenues generated
from selling of the project. NHC will contribute land only
and Partner will contribute all financing required for
implementeation of the project to its completion. Upon
completion of construction, the whole project will be sold
and revenue generated will be shared based on pre agreed
percentages. The minimum revenue share of NHC shall
be a minimum of twice the market value of the land (value
obtained at the beginning of the project).

The minimum selection criteria for selecting projects under

this model include:-
(a)  NHC revenue share must be minimum of twice the
value of land;
(b) Return on Investment of at least 15%; and
(c) IRR of minimum of 12%.

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3.4 Long-term Lease Model - LLM

Under this joint venture arrangement, NHC will lease a

plot on a long-term basis, and the partner will develop
and operate the property for up to a maximum of 30 years
(depending on the size and nature of the investment) and
thereafter return the property back to NHC.

The minimum criteria for selecting projects under this

model include -
(a) Tenure of at least 10 years and at most 30 years;
(b)  Leasehold to be twice as long as estimated
payback period thus payback period to be between
5 and 15 years;
(c)  The developed project has to be for commercial
use and not for private use;
(d)  Value of the proposed investment in the land must
be at least four times the market value of NHC’s
land and;
(e)  NHC to get 25% of revenue or space of the project
during the first half of the leasehold tenure and
50% for the remaining leasehold.

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4.0 JOINT VENTURE PROJECTS SELECTION

CRITERIA
Joint Venture Arrangements
Minimum Land as Equity Land & Revenue Long-Term
selection Contribution Finance Sharing Model Lease
criteria as Equity (RSM)
Contribution
A properly filled A properly filled A properly filled A properly filled
Due Diligence due diligence due diligence due diligence due diligence
Form form form form form
Submitted Submitted Submitted Submitted
proof of fund proof of fund proof of fund proof of fund
to finance to finance to finance to finance the
the project the project the project project (business
Partner’s
(business cash (business cash (business cash cash flow,
Financial
flow, savings flow, savings flow, savings savings & bank
Capacity
& bank facility & bank facility & bank facility facility approval
approval approval approval specifically for
specifically for specifically for specifically for the project)
the project) the project) the project)
Four times the TZS 50 Billion Value that Four times the
value of NHC will produce value of NHC
Minimum
land revenue share land
Investment in
to NHC that is
the Project
twice the value
of land
• NHC: Land • NHC: Land • NHC: Land • NHC: Land
and Finance • Partner:
Share • Partner: Finance • Partner:
Contribution Finance • Partner: Finance
Finance
(a) N
 HC: 60% • Formation N/A • NHC: 100%
P
 artner: of a SPV
40% whose
shareholding
(b) NHC: 75% structure is
according
Shareholding
(c) P
 artner: to equity
Structure
25% contribution
of each
partner.
Minimum
NHC’s share
is 25%

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Refer section • D
 ividends • N HC: Refer section
3.1.1 and according to Minimum 3.4 (e) of this
3.1.2 of this shareholding of twice the document
Revenues document structure in value of land.
Share the SPV • Partner: The
remaining
portion of
revenues.
N/A • + NPV N/A N/A

Project • IRR ≥ 12%

Performance
Indicators • Payback ≤
12 years

Based on the Based on the Based on the Based on the

Joint Venture Joint Venture Joint Venture Joint Venture
Project Agreement, but Agreement, Agreement, but Agreement, but
Implementation implementation but implementation implementation
Period period not to implementation period not to period not to
exceed 5 years period not to exceed 5 years exceed 5 years
exceed 5 years
Reputation Reputation Reputation Reputation
of the partner of the partner of the partner of the partner
(company/ (company / (company / (company /
management/ management / management / management /
Other factors shareholders) shareholders) shareholders) shareholders)
and New skills and New skills and New skills and New skills
and technology and technology and technology and technology
to be brought to be brought to be brought by to be brought by
by the partner by the partner the partner the partner

5.0 OTHER TERMS AND CONDITIONS

5.1 NHC’s land shall not be used as a collateral for loan facility
to be used to implement the project.

5.2 NHC will only enter into Joint Venture Agreements with
registered companies or institutions.

5.3 Before NHC and the partner enter into the final contract
documentation regulating their relationship in relation to
joint ventures, the following preliminary documentation will
be given consideration to protect the parties commercial
interests during the negotiation period:

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(a) Confidentiality Agreement (NDA);

(b) Undertaking of Due Diligence; and
(c) Development Bond.

TERMS AND CONDITIONS APPLIES

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