Property financing in Gaborone crowded, risky – FSC
Lewanika Timothy | Thursday July 10, 2025 11:16
In its latest review, the FSC noted that commercial real estate (CRE) credit in the country shrank slightly over the past year, falling from P6.1 billion in February 2024 to P5.8 billion in February 2025, making up 6.7 percent of total loans issued by local banks. Whilst the sector’s non-performing loans (NPL) remain low at 1.4 percent as of December 2024—the council says its underlying risks lie in the high geographic concentration of lending. “There are, however, outstanding concerns about concentration (location) risk, given that most loans finance properties in or around Gaborone,” the FSC cautioned.
This warning echoes growing market concerns about Gaborone’s saturated property market. An article by BusinessMonitor last year highlighted a growing oversupply of properties—especially in the retail and commercial segments which has led to softening rental yields and stagnant property values in the city. A continued lending focused on the Gaborone property market could expose banks and developers to heightened risks, particularly if economic conditions worsen or if demand weakens further. Last year a property market update by Riberry, cited in the Bank of Botswana’s (BoB) household indebtedness report, noted a softening in the local property market during the first quarter of last year. The residential market, in particular, experienced increased vacancy rates with supply outpacing demand, overturning the trend seen throughout 2023. “According to the latest (2024 Q1) Riberry Report, the residential rental market showed signs of deterioration in the first quarter of 2024, compared to the fourth quarter of 2023,” the BoB said, citing Riberry.
“This is evident from the rising number of properties available for rent and declining house prices,” the report noted then. The report continued: “There is an oversupply of upper-end properties, leading to a possible decrease in the rental prices of these houses.” Despite the modest decline in CRE credit volumes, the FSC warned that banks’ heavy exposure to Gaborone leaves the financial sector vulnerable to price corrections in the city’s property market. “The current low NPL ratio shouldn't obscure the concentration risks associated with geographic overexposure,” the FSC noted, adding that even isolated shocks in the Gaborone property market could ripple through the financial system.