Housing and Real Estate: Is There a Future for Mortgage Industry in Africa?

Rural urban migration offers an investment opportunity for the mortgage industry and financial institutions to develop a more effective way of giving clients access to owning an accommodation facility. Currently, over 40 per cent of sub-Saharan Africa population are residing in cities where there are growing housing challenges, thus, an opportunity for investment and also public-private partnerships (PPP) to curb the situation.

The problem in sub-Saharan Africa has long been a good credit background of clients which prevent financial institutions the chance to provide mortgage or loan services for property acquisition to the people. However, the reality is also that, over 80% of the general population in sub-Saharan Africa cannot raise physical cash to purchase a formal pre-constructed house. According to reports from Centre for Affordable Housing Finance in Africa, the price for owning a formal house in many countries in Africa is (at least) more than five times the income of an average working African and in many cases about ten – thirty times the average income. With this situation, it makes it almost impossible for many people to have access to formal houses. Mortgage services are only provided for just a handful of the population. Currently in Ghana, only about 15 per cent of persons working as staff in financial institutions and others occupying high positions in public offices are accessible to mortgage services. The rest of the population are either building on their own, via self-accumulated funds or renting – which majority are. This issue cuts across West Africa.

Renting, on the other side, keeps getting expensive and inconvenient. In an interview with Christiana (surname omitted for anonymity), a 55-year-old Ghanaian citizen who has been living in rented rooms over the past 30 years, she explains how there are no formal systems to regulate the price of rooms rented – in relation to the availability of facilities in the house. She paints the picture that, house owners (landlords) are basically taking advantage of the housing situation in the country to get more money from tenants while causing inconveniences. She furthered to explain how difficult it is to get financial assistance from a local bank to undertake a housing project. ‘Even with a good credit with your financial institution, it is likely that the bank will request for a lot of documents and guarantors which may be difficult to produce. More to it, the terms of the loans are always scary such that market women like me are afraid to go for,” she explained.

Reports from Ghana, Nigeria, Uganda, and other countries in the region also depicts that land acquisition alone could be a struggle for the few percentage of citizens who are able to receive financial support or have the financial liberty to build a house. Lands in these countries are largely not formally registered – the frequency of land disputes and litigations around lands in cities and towns are simply overwhelming. This is where there is a strong need for PPP in resolving housing crisis in cities – at least. Lands must be registered and easily acquired without fear of litigation, additionally, financial institutions must work closely to provide mortgage services to more of the population either via a secured long term loan service for public servants.

Moving on, for average traders who may have unstable credit scores and most likely do not qualify for mortgage services, it will be essential to develop financial schemes which may suit them and provide them the opportunity to pose formal housing. Additionally, a systemized land ownership system needs to be adopted such that people will not have to depend on informally acquired lands for a building. State owned lands could be a good approach if there is a PPP to provide affordable housing units for the average person. Such a system has had a history in Ghana where the political environment in the country had an effect on the success of the system. In that regards, a strong PPP which is resilient to the sub-Saharan political environment is what is required to curb this issue. Lest most African will go through life without having a house or living in a comfortable house. Our cities will be over populated and we will have slum settlements adjacent real estates. In Ghana, local reports estimate that (just) about 8 per cent of residents can afford to own a house from their income while about 60 per cent requires financial assistance in the same regard, and almost 30 per cent are not eligible for support and thus, incapable of owning a house.

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