In 2003, the percentage of owner occupied housing units (including both cities/towns and urban villages) was 44.51 percent. The owner occupation rate for just cities and towns was 20.4 percent, whereas the rate for urban villages was significantly higher at 66.3 percent, indicating that most people in cities live in rental properties. In rural areas, the owner occupied rate was even higher at 80.2 percent (Central Statistics Office 2003). 

Like many other African countries, Botswana has a complicated three-tiered land tenure system. Land in Botswana is divided into three categories: freehold land, state land and tribal land. Freehold land gives perpetual ownership and as a result, can be easily used as collateral for a mortgage. State land is granted to individuals with a Fixed Period State Grant (FPSG), which is essentially a 99 year lease. This lease can be easily extended for a small fee and is generally accepted as collateral for a mortgage loan, although not by all commercial banks. Finally, tribal land is issued as a grant under customary law, which can be inherited and transferred. The customary law grant can be converted into a common law lease, which is granted for 99 years. Banks generally do not accept tribal land as collateral for mortgages, as the land does not belong to the individual, only what is built on the land. 

At the end of 2013, the total amount of mortgage loans outstanding was $1.03 billion, or 6.64 percent of GDP, upwards from 2.29 percent in 2003. In addition, the proportion of mortgage loans in commercial banks’ portfolios has increased from around 20 percent in 2003 to 28.3 percent in 2013 (Bank of Botswana 2013). Mortgages are provided both by commercial banks and the Botswana Building Society (BBS), which is a quasi-governmental organization. 

Most low and lower-middle income groups do not qualify for traditional mortgages by commercial banks due to the strict credit requirements, specifically the type of land title required. Though commercial banks have a debt-to-income (DtI) ratio of 40 to 45 percent and a maximum Loan-to-Value (LTV) requirement of 90%, they often require a freehold title on the property in order to accept that property as collateral for a mortgage (Berge and Jing). Furthermore, despite the relatively high debt-to-income ratio, affordability is a major issue since the average salary in Botswana is too low for the majority of households to pay for a complete home with a commercial mortgage. 

The Botswana Building Society requires a 25 percent debt-to-income ratio and 100 percent LTV (Berge and Jing). The mortgages offered by the BBS are generally smaller than those of commercial banks and are meant to finance incremental building. Many people in Botswana build their houses incrementally by taking out a number of small loans over time. Lower income or rural applicants on tribal land are forced to take out personal loans with higher interest rates, which increases the cost of borrowing. 

Moreover, the BBS offers partially subsidized interest rates of 10.8 percentage (2013) over a maximum repayment period of 25 years (Botswana Building Society), whereas commercial banks base their interest rates off of the prime lending rate over a shorter time span of 15-25 years. 

Similar to the commercial banks, the BBS will only accept land that is transferable as property. However, BBS accepts properties on tribal land as collateral when potential borrowers convert their plots to common law leases. Given the subsidized rate, smaller loan sizes and more lenient lending conditions, BBS reaches a lower income group than commercial banks.   

On the funding side, commercial banks rely exclusively on retail deposits while the BBS has a hybrid funding mix of retail deposits and government funding.