Business News of 2014-04-03

Report: Gov't struggles to provide affordable housing

Even though successive governments from Kufuor’s administration till date have tried to address the country’s housing deficit, a significant impact is yet to be felt by home seekers around the major urban centres in the country.

Although most of the affordable housing projects initiated by governments have usually ended up in limbo, new governments, in what looks like a bid to show their commitment to the housing deficit, ‘cut sod’ for the commencement of new projects while the older projects kicked off by previous governments are brought to a standstill.

Recently, government tendered the stalled Borteyman Housing Project in the Greater Accra Region to the Social Security and National Insurance Trust (SSNIT) for completion.

The project, which was started in 2006, is one of several affordable housing projects, consisting of more than 4,700 housing units, initiated by the Kufuor government to curtail the housing deficit, but was halted along the lines due to lack of funding.

But before the Mahama-led government could hand over the Borteyman project to SSNIT for completion last week, it had announced in late 2013 that it would build 9,120 units of affordable housing after securing a $400 million loan from Barclays Credit Suisse while the 4,700 unit project started by Kufuor still lay frozen.

What’s more, the Mills-led government had two years earlier in 2011 cut sod for the commencement of the 30,000 unit STX housing project for security services also at the neglect of the 4,700 unit initiated by Kufuor.

The project, however, collapsed as a result of a turf war between the Korean and Ghanaian partners of the company. In all of this, it is important to note that all the housing projects initiated by the three governments till date were meant for civil and public servants and not the general public.

Currently, the country's housing shortfall, which is estimated at 1.7 million units, largely in affordable homes, is expected by government to grow to 2 million by 2020. This means the country requires a minimum annual delivery of about 170,000 units for the next 10 years to cancel the deficit.

The Minister of Water Resources Works and Housing, Alhaji Collins Dauda in September 2013 said government alone cannot reduce the housing deficit the country is facing. Alhaji Dauda, therefore, announced government’s plan to attract private investors to provide affordable houses to Ghanaians.

“Government has put in place the following incentives in order to attract investors interested in affordable housing into the industry tax exemption on building materials, plant, machinery, equipment and other supplies solely for the housing project; and five-year tax holiday, among others,” the Minister said. The Ghana Real Estate Developers Association (GREDA), an umbrella organisation representing private developers, thinks not much has been done about government’s submission to favour local developers.

GREDA has time and again complained about the lack of government support. It maintains that government has more often awarded its contracts to foreign developers at the disadvantage of local ones.

GREDA’s Executive Director, Emmanuel Asamoah said “as it is, local developers are struggling to find their own financing, land and equipment. You cannot tell them they should provide affordable housing while not helping them to produce it. The government could provide land and infrastructure, which would boost efforts to produce more affordable housing for the masses.”

Real estate experts have also: said one reason why the housing demand remains unmet is the land; acquisition issue. According to them, land is usually acquired by | negotiating with community leaders and the titling process is dogged by inefficiency.

Most of the international developers doing business in Ghana have largely focused on high-end deals putting the majority within the low- and middle-income-earning brackets with no choice than to rent. Monthly rentals of a decent one-bedroom self-contained apartment or a one-bedroom self-contained apartment with a sitting room around Accra usually cost the average client about 40 to 50% of their monthly wages.

Rent advance is another worrying issue for most clients. Home owners, more often than not, demand rent advances of up to 36 i months - a situation which further chokes the already suffocating client. “I earn GH¢150 a month and spend GH¢70 on rent alone,” grieved an internet cafe attendant.

The Executive Director of Ghana Homes Loans, Ellis Atekpe, said that given the significant housing deficit of an estimated 1.7 million units, huge opportunities exist for the private sector in the lower income segments.

“We need large-scale developers who can achieve economies of scale by delivering housing units in large numbers. What the government needs to do is make sure the process of land acquisition is smooth, ensure availability of utility services at sites, and ensure the environment is conducive for business. The private sector has to lead the charge,” Atekpe said.

To achieve a lasting solution to the housing deficit, therefore, government must work at supporting local developers to provide afford- able houses to meet the financial capacity of majority of the average middle-income earners in the country.

Source: Business Finder
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