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Addressing*the*Challenges*of*Housing*
Finance*in*Africa
Kecia*Rust
reallStakeholder*group*meeting
14*April*2016
2
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Housing*in*Malawi*(Integrated*Household*Panel*Survey*2013):
• 41%*households*live*in*traditional*dwellings
• 26%*in*semiBpermanent*housing• 33%*in*permanent*dwellings*(51%*in*urban*areas)
• 46%*of*urban*households*rent• Most*housing*built*by*owners,*paid*for*in*cash*and*with*savings
The*macroIeconomic*
context*is*not*favourable
• High*interest*rates:*32%• High*inflation:*23.4%• Few*developers• Limited*infrastructure• No*national*ID*system• Very*low*lending*to*real*estate*activities:*1.1%*of*GDP*in*2014
• 16.1%*of*Malawians*have*a*bank*account
Housing*pressures*are*increasing
• Almost*half*of*the*population*is*under*14• Very*rural,*with*a*high*urbanisation rate:*3.8%
• Moderate*unemployment:*7.6%• Very*low*affordability:*61.64%*live*on*less*than*$1,25/day
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The*Housing*Finance*in*Africa*2015*Yearbook*
can*be*downloaded*from*
http://www.housingfinanceafrica.org/documen
t/2015IhousingIfinanceIinIafricaIyearbook/
5
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Most*countries*offer*mortgages*at*rates*above*10%,*and*for*less*than*20*years,*highlighting*very*real*macroBeconomic*issues*that*challenge*housing*affordability.**In*Malawi,*one*might*as*well*buy*a*house*with*a*credit*card.
0,00
5,00
10,00
15,00
20,00
25,00
30,00
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Malawi
Uganda
Sierra3Leone
Nigeria
Gambia
Mozambique
Comoros
Tanzania
Zambia
South3Sudan
DRC
Rwanda
Kenya
Burundi
Cote3d'3Ivoire
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Cameroon
Benin
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Seychelles
Zimbabwe
Eritrea
Madagascar
Ethiopia
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Senegal
Mali
Namibia
Lesotho
South3Africa
Djibouti
Libya
Togo
Chad
Mauritius
Niger3
Somalia
Tunisia
Liberia
Ghana
Algeria
Morocco
Egypt
Mortgage3interest3rate3(%)3and3term
3(years)
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Mortgage3 Interest3Rate3(%)3 Mortgage3Term3(years)#
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African*mortgage*markets*are*tiny*(and*data*is*limited).Lower*interest*rates*seem*to*correlate*with*larger*mortgage*markets.
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8
The*Middle*Class*Growth*Story The*FDI*Story
Global* Insights* from*the*Financial* Times
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DeveloperBbuilt*housing*targets*the*higher*end,*and*happens*rarely*at*scale.**But*even*a*$20*000*house*is*unaffordable* for*the*majority*– and*these*are*only*available*in*limited*projects.*Most*housing*is*built*by*the*owner,*incrementally,*stepBbyBstep.**
G a OQ2 : MU O Q ZPQZOQcU T OM MO U U ZQ $ MZZaM e
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50
100
150
200
250
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$20 000'
$40 000'
$60 000'
$80 000'
$100 000'
$120 000'
$140 000'
$160 000'
$180 000'
$200 000'
Angola
Seychelles
Madagascar
Comoros
Somalia
Eritrea
Zambia
Gam
bia
Libya
DRC
Ethiop
ia
Rwanda
South'Sudan
Algeria
Mauritius
Djibou
ti
Sierra'Leone
South'Africa
Tunisia
Burund
i
Ghana
Senegal
Tanzania
Central'A
frican'…
Nam
ibia
Zimbabw
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Kenya
Cote'd''Ivoire
Nigeria
Benin
Liberia
Lesotho
Morocco
Mala
wi
Ugand
a
Niger'
Burkina'Faso
Egypt
Togo
Mali
Guinea'Bissau
Botswana
Cameroo
n
Mozam
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Size'of'that'h
ouse'(m
2)
Price
'of'the'cheapest,'newly'built'house'by'a'fo
rmal'developer
Price'of'the'cheapest,'newly'built'house' by'a'formal'developer
Price'of'the'cheapest,'newly'built'house'by'a'formal'developer'in'2015'(US$)
Price'of'the'cheapest'newly'built'house,'by'a'formal'developer'in'2014'(US$)
Price'of'the'cheapest'newly'built'house,'by'a'formal'developer'in'2013'(US$)
Price'of'the'cheapest'newly'built'house,'by'a'formal'developer'in'2012'(US$)
Price'of'the'cheapest'newly'built'house,'by'a'formal'developer'in'2011'(US$)'
What'is'the'size'of'this'house'(in'm2)'in'2015?
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$"
$5 000%
$10 000%
$15 000%
$20 000%
$25 000%
$30 000%
$35 000%
$40 000%
$"
$5 000%
$10 000%
$15 000%
$20 000%
$25 000%
$30 000%
$35 000%
$40 000%
Mauritius
Seychelles
Botswana
Swaziland
Tunisia
Nam
ibia
Gabon
South%Africa
Angola
Algeria
Morocco
Djibou
tiCape%Verde
Nigeria
Cote%d'Ivoire
Zimbabw
eEquatorial%G
uinea
Egypt
Libya
Senegal
Lesotho
Sudan
Sao%Tome%and%Principe
Mauritania
Zambia
Cameroo
nCo
moros
Ghana
Kenya
Sierra%Leone
Togo
Gam
bia
Benin
Ugand
aGuinea"Bissau
Burkina%Faso
Mozam
biqu
eMali
DRC
South%Sudan
Liberia
Rwanda
Tanzania
Burund
iGuinea
Malaw
iNiger
Chad
Ethiop
iaSomalia
Central%A
frican%Repub
licMadagascar
Eritrea
Average%annual%household% income%versus%housing% affordability
Average,% annual%HH%Income%(urban,%2014)Average,% annual%HH%Income%(rural,%2014)Average% Annual%Income%required% to%afford%the%cheapest%newly%built%house%built%by%a%private%developer%(2015)
$65 925 $200%000 $78%567
The*gap*between*what*“affordable”*housing*would*cost*to*finance,*and*what*the*average*household*can*afford*to*pay,*is*simply*too*large.**In*most*countries,*even*$25*000*is*too*much*for*the*average*incomeBearner.
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Some*governments*are*championing*the*potential*of*“Megacities”*in*an*attempt*to*get*scale*to*resolve*the*affordability*challenge.**This*is*not*yet*working*– most*housing*in*these*new*cities*are*for*higher*income*earners.
In*2015,*the*cheapest*house*being*built*by*a*private*developer*in*Angola*was*US$200*000.**At*current*lending*rates,*only*2,2%*of*the*urban*population* can*afford*this.*Average*household*income*in*urban*areas*is*only*9%*of*what*is*needed* to*afford*this*house.**
G a OQ2C-GIDD (CanbackGlobal Income Distribution Database www.cgidd.com). Data accessed in August 2015
Angola
126Z M QOUM U Z R TQ MRR PMNU U e OTM QZSQ2M RMO R T a Q UOQ$ T a QT P UZO Q$ MZP QZPUZS Q
There*is*a*disconnect*between* the*price*of*formal,*developerBbuilt*housing*and*the*affordability*of*the*population.*The*vast*majority*of*the*population*across*the*continent*live*in*houses*they*built*themselves,*with*various*degrees*of*success*and*quality.*Can*
developers*&*investors*shift*their*emphasis*to*meet*the*needs*of*the*majority?
The*cheapest*newly*built*house*built*by*a*private*developer*in*Kenya,*2015,*was*US$17*000.**Even*this*is*only*affordable*to*about*10%*of*the*urban*population.* *The*income*required*to*buy*this*house*
is*double*the*average*annual*household* income*in*urban*areas.
3000 2500 2000 1500 1000 500 0 500 1000
<$800
$800)$1*600
$1*600)$2*400
$2*400)$3*600
$3*600)$5*000
$5*000)$8*000
$8*000)$14*000
$14*000)$25*000
$25*000)$50*000
>*$50*000
Thousands
Average*Annual*HH income,* urban*2014
Average*income*needed*for*the*cheapest*newly*built*house*by*a*formal*developer,* 2015
$*4*140
$*8*821
Rural Urban.
G a OQ2C-GIDD (CanbackGlobal Income Distribution Database www.cgidd.com). Data accessed in August 2015
10%
Kenya
13
2500 2000 1500 1000 500 0 500
<$800
$800($1)600
$1)600($2)400
$2)400($3)600
$3)600($5)000
$5)000($8)000
$8)000($14)000
$14)000($25)000
$25)000($50)000
>)$50)000
Thousands
UrbanRural
$)2)103
$)14)666
Average)HH income,) 2014Average)income)needed)for)the)cheapest)newly)built)house)by)a)formal)developer,) 2015)
6Z M QOUM U Z R TQ MRR PMNU U e OTM QZSQ2M RMO R T a Q UOQ$ T a QT P UZO Q$ MZP QZPUZS Q
In*2015,*the*cheapest*house*being*built*by*a*private*developer*in*Malawi*was*US$14*100.**At*current*lending*rates*(32%*over*15*years)*,*only*1,1%*of*the*urban*population*can*afford*this.*Average*household*income*in*urban*areas*is*only*9%*of*what*is*needed*to*afford*this*house.**
G a OQ2C-GIDD (CanbackGlobal Income Distribution Database www.cgidd.com). Data accessed in August 2015
Malawi
14
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15
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6RR PMNU U e R M )($(((T a QcU T TQ SMSQ UU U QP MO 6R UOM• A fM NU aQ2 )( • LM NUM2 . • BUSQ UM2 -- • : TU UM2 • LU NMNcQ2-( • TMZM2 )) • HMZfMZUM2 &,
16
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17
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$310% $929% $1 549% $2 323%$3 330%
$5 034%
$8 518%
$15 101%
$29 040%
$38 720%
$,
$50 000 000%
$100 000 000%
$150 000 000%
$200 000 000%
$250 000 000%
$,
$5 000%
$10 000%
$15 000%
$20 000%
$25 000%
$30 000%
$35 000%
$40 000%
$45 000%
$400% $1 200% $2 000% $3 000% $4 300% $6 500% $11 000% $19 500% $37 500% $50 000%
Potential)Boo
ksize
)(US$)
Potential)Lo
an)Size)(U
S$)
Annual)Household)income)(US$)
Potential%Booksize%(15%year%term%at%32%%interest%rate) Potential%Loan%amount%(15%year%term%at%32%%interest%rate)
1.1%%of%the%urban%household%population%can%afford%the%cheapest newly%built%house%which%equates%to%6%888%loans%5%%of%households in%this%
bracket% represents% 32%427%unrealised%laons%
1. Reduce*the*cost*of*housing.2. Deconstruct*the*housing*delivery*process*to*accommodate*smaller*
loans,*and*build*housing*incrementally,*but*at*scale.3. Resolve*macroBeconomic*issues
18)& QPaOQ TQ O R T a UZS
The*rise*of*ABTs,*Lafarge’s*earth*brick,*and*then*investment*in*cement*manufacturing*are*all*about*finding*new*affordable*niches.**
G a OQ2 : MU O Q ZPQZOQcU T OM MO U U ZQ $ MZZaM e
Cost*of*a*50kg*bag*of*cement*(US$)
$0,00$
$5,00$
$10,00$
$15,00$
$20,00$
$25,00$
$30,00$
DRC
South$Sudan
Burund
i
Eritrea
Central$A
frican$Repub
lic
Somalia
Rwanda
Zimbabw
e
Djibou
ti
Nigeria
Ugand
a
Malaw
i
Niger$
Burkina$Faso
Libya
Sierra$Leone
Cote$d'$Ivoire
Guinea$Bissau
Liberia
Comoros
Nam
ibia
Ghana
Mali
Kenya
Seychelles
Zambia
Morocco
Tanzania
Angola
Madagascar
Gam
bia
Mauritius
Egypt
Lesotho
Togo
Benin
Algeria
Mozam
biqu
e
Ethiop
ia
South$Africa
Senegal
Tunisia
Botswana
Swaziland
Cameroo
n
Price$of$a$50kg$bag$of$cement$(US$) September,$ 2015November,$2014August,$2013September,$ 2012
19
& 9QO Z aO TQ PQ UbQ e OQ
Incremental*real*estate:
• Land• Core*house• Major*additions
Project*or*individual*approach:
• US$2000*– $10*000*per*loan• Up*to*5*years*tenor• Unsecured*or*partially*secured
20& FQ bQ MO U aQ
When*registration*costs*more*than*10%*of*the*property,*or*takes*more*than*2*months,*can*a*lowBincome*homeowner*feel*its*worth*it?**Even*in*South*Africa,*informal*transactions*are*common.**The*time*it*takes*to*register*property*is*a*
serious*disincentive*to*investment.
G a OQ2K P7MZW 9 UZS7a UZQ ZPUOM $ () ()- ccc&P UZSNa UZQ & S PM M Qd Q UO QSU Q UZS% Q e
0,00
5,00
10,00
15,00
20,00
25,00
0
50
100
150
200
250
300
Cost+of+registering+a+com
mercial+property+(%+of+property+value)
Num
ber+o
f+days+to+register+a+com
mercial+property
Number+of+days,+and+cost,+to+register+a+commercial+property:+2015+vs.+2012
Days+2015 Days+2012 Cost+(%+of+property+value)+2015 Cost+(%+of+property+value)+2012
21& FQ bQ MO U aQ
Still,*the*time*and*/*or*cost*is*coming*down*in*many*countries:*Time:*Rwanda,*Burundi,*Morocco,*Lesotho,*Cote*d’Ivoire,*Guinea*Bissau,*
Sierra*Leone,*Senegal.*Up*in*NamibiaCost:*Rwanda,*Malawi,*Angola,*Mozambique,*Niger,*Togo,*DRC,*Cote*
d’Ivoire,*Comores,*Sierra*Leone,*Senegal,*Nigeria.**Up*in*Zambia,*Namibia
G a OQ2K P7MZW 9 UZS7a UZQ ZPUOM $ () ()- ccc&P UZSNa UZQ & S PM M Qd Q UO QSU Q UZS% Q e
0,00
5,00
10,00
15,00
20,00
25,00
0
50
100
150
200
250
300
Cost+of+registering+a+com
mercial+property+(%+of+property+value)
Num
ber+o
f+days+to+register+a+com
mercial+property
Number+of+days,+and+cost,+to+register+a+commercial+property:+2015+vs.+2012
Days+2015 Days+2012 Cost+(%+of+property+value)+2015 Cost+(%+of+property+value)+2012
22
5
2007*Funding*(KES*Bn)
Customers'*Deposits
100%
2008*Funding*(KES*Bn) 2009*Funding*(KES*Bn)
2010*Funding*(KES*Bn) 2011*YTD*Funding (KES*Bn)
Long%Term%Capital%Markets'%Funding
26%
Short%Term%Bank%Loans4%
Customers'%Deposits70%
Customers'*Deposits96%
Short*Term*Bank*Loans
4%
Customers'*Deposits64%
Short*Term*Bank*Loans7%
Long*Term*Capital*Markets'*Funding
29%
Customers'*Deposits88%
Short*Term*Bank*Loans12%
Short&Term&Bank&Loans&2%Long&Term&Bank&Loans& 3%
Customers'&Deposits&66%
cUZS Qd Q UQZOQ MZP UZbQ TU UOM U ZHousing Finance Kenya’s fundingmix
2012$YTD$Funding$(KES$Bn)$
Source:*Presentation*by*Frank*Ireriat*the*AUHF*Conference:*http://www.auhf.co.za/conference/mobilisingIcapitalIforIhousingIfinance/
23
cUZS Qd Q UQZOQ MZP UZbQ TU UOM U Z
New*funds*see*promise*in*housing*microfinance*
products*and*approaches:*big*challenge*is*the*
development*of*sound*
capital*structures*–space*for*DFIs*to*offer*advisory*services
MicroBuild Fund:*$50m*fund*established*by*Habitat*for*Humanity*International,*providing*debt*capital*and*technical*assistance*to*MFIs*to*grow*HMF
CLIFF (Community*Led*Infrastructure*Finance*Facility):*established*by*Homeless*International,*in*multiple*countries*in*Africa
!
Investor)/)Financier) Type)of)financier))
FUNDERS)OF)KUYASA)FUND,)SOUTH)AFRICA)Ubutyebi)Trust)) Public!benefit!organisation!operating!in!the!Nelson!Mandela!Bay!
municipality!with!the!intent!of!enabling!affordable!finance!for!housing!!!
Kovacs)Investment)) !Local!investment!company!!
Cadiz)Life)Limited,)South)Africa))
Local!investment!fund!!!
NHFC)) Government!owned!development!finance!institution!!
South)African)Municipal)Workers)Union))
Municipal!workers!union!pension!fund!!
Rural)Housing)Loan)Fund))
Government!owned!development!finance!institution!!
South)African)Micro)Finance)Apex)Fund))
A!government!organisation!established!in!2006!and!tasked!with!wholesale!funding!for!MFIs.!!
Dutch)International)Guarantee)for)Housing))
In!cooperation!with!Dutch!housing!corporations!and!municipalities,!DIGH!loans!are!used!to!fund!social!housing!projects!across!the!world.!!
Oikocredit)) One!of!the!largest!funders!of!microfinance!worldwide!with!wide!ranging!investors!from!USA,!Canada,!UK!and!both!individual!and!institutional.!!
FUNDERS)OF)NACHU,)KENYA)
Rooftops)Canada)) International!development!programme!of!Canada’s!cooperative!and!social!housing!sector,!which!works!with!Canadian!and!international!partners!to!improve!housing!conditions!
NBBL)) Cooperative!housing!Federation!of!Norway!representing!57!cooperative!housing!associations!and!9300!affiliated!housing!cooperatives.!!!
Homeless)International/Cliff)
UK!based!charity!!
Swedish)Cooperative)) Swedish!Cooperative!Centre!established!bythe!Swedish!Cooperative!movement!to!equip!poor!people!with!the!ability!to!fight!poverty.!
Cooperative)Bank)of)Kenya))
Commercial!bank.!NACHU!has!borrowed!from!it!using!a!guarantee!from!Rooftops!Canada.!!
Homeless*Internationalrebrands*as*REALL*(Real*Equity*for*All)
24
Original*
house*–
built*
around*
1995
Three*
backyard*
rooms*
with*waterI
borne*
sewerage:*
rental*
income
Container*in*
the*front*yard*
for*spaza shop*
– small*
business*with*
cash*flow*for*
credit
Building*materials*
for*the*next*project
GAPS*in*what*we*know:*Quantify*this
25
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EndBuser*finance*hugely*dependent*on*macroBeconomic*health:*impact*on*loan*term,*size,*and*
cost:*Malawi,*Mozambique,*Nigeria,*Rwanda,*etcMost*housing*paid*with*cash*&*savings:*only*the*
very*wealthy*afford*formality:*the*GambiaAbsence*of*nonBmortgage*(housing*micro)*finance*
systems*can*also*perpetuate*slums
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High*cost*of*land*&*zoning*pushes*people*out*to*the*periphery:*Kigali*&*Luanda*…*or*onto*hazardous*land:*Dakar.**
Municipal*underBinvestment*and*failure*to*provide*infrastructure*leads*to*higher*housing*prices*/*Poor*road*networks*increases*the*cost*of*cement,*leads*to*housing*constructed*with*informal*materials:*Malawi,*South*Sudan,*DRC*/*New*city*“islands”*with*private*services:*Tatu City*in*Nairobi
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“Obsessive*
attention*to*
detail”
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Use*of*technology*creates*a*unique*opportunity*to*document*and*quantify*the*value*chain*”in*obsessive*detail”.**reall’s spreadacross*Africa*offers*a*very*useful*basis*for*comparison.
27
Future*plans:
• More*case*studies
• Building*material*supply*study
• REIT*study
• Rental*study
• Housing*investor*landscape
• Doing*Housing*Business*Indicators
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Subsidies*available*for*NGOs*– covers*tuition.
Very*useful*to*be*strategic*about*structuring a*delegation*from*a*country.
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www.auhf.co.za
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Thank*you!Kecia*Rust
+2783*785*4964
https://www.facebook.com/HousingFinanceAfrica?ref=hl
Twitter*@keciarustTwitter*@AUHF_Housing
The*Housing*Finance*in*Africa*2015*Yearbook*can*be*downloaded*from*
http://www.housingfinanceafrica.org/document/2015IhousingIfinanceIinIafricaI
yearbook/
