Business News of 2014-08-07

Developers asked to build low-cost homes

Ghana’s current housing market slump should be seen as an opportunity by developers to start producing low-cost housing because that market is still viable, HFC Bank’s General Manager of Mortgage and Consumer Loans, Charles Bonsu, has said.

“I don’t think that any real estate company will be folding up anytime soon. This is an opportunity for developers to come down-market and start serving the lower end by building properties that are more affordable,” he said.

Speaking at the fifth HFC-Multi TV Habitat Fair last weekend in Accra, Mr. Bonsu stated that the biggest market is the lower end and developers should reduce their costs so they can build and sell at a lower price.

“The middle and high ends of the market, with prices above GH¢100,000, are very challenging; but when you come to the low end, where we have a lot of public sector employees, it is still okay. They can sell because that market hasn’t changed much. Even though there is an increase in prices it is not as high as those in the middle and high ends of the market. We still have houses that are selling at GH¢45,000, GH¢60,000 and GH¢70,000.”

Most houses constructed in Ghana are beyond the affordability level of the majority of the population, including many people in the growing middle class, he said. “So it tells you that more than 70 percent of the population need some affordable options to be able to own homes. Developers should instead come down-market.”

But according to the acting Executive Secretary of the Ghana Real Estate Developers Association (GREDA), Sammy Amegayibor, most developers are unable to provide affordable housing because of several infrastructural challenges.

“If you buy a house where you don’t have paved roads, electricity and water, then you don’t have a full house and most of these houses sold at these prices don’t have the full complement of infrastructure,” he said.

A recent study by UN-Habitat reported that Ghana’s housing need is expected to hit 5.7 million rooms by 2020. As much as 90 percent of the country’s housing stock is self-built, while an estimated 53 percent of households in Accra occupy a single room.

A parliamentary debate in July 2013 estimated the current housing deficit in Ghana to be 1.6 million houses. The annual demand of about 100,000 units is not being met, with only about 40,000 housing units currently being delivered per annum.

“If the trend with the exchange rate continues and prices of materials are flying off the roof, then we may not fold up but reduce our production. Even now, some of us are not producing as we did because of the uncertainty of pricing,” Mr. Amegayibor said.

“The ratio of foreign and local input into producing a house stands at 70 to 30 percent. Unless we are able to work around the clock to invest in our local industries to produce materials for us locally, then we will continue like this.”

The three-day fair in Accra brought real estate developers, housing industry executives, financial institutions and home buyers to the National Theatre to exhibit their products and assess the industry. It had the theme “Plan, Execute, Regulate”.

Klaus von Backustien, Chief Operating Officer of MultiTV, said: “The call for value-adding professionalism and proper enforcement of policies for property acquisition from the housing fraternity has never being greater. It is a fact that through proper education and enforcement of the laws, individuals, organisations and society as a whole can sustainably achieve the ultimate goal.”

Minister for Water Resources, Works and Housing, Alhaji Collins Dauda, said a glance at the real estate business shows the lack of appropriate internal control mechanisms, policies, training and audit systems among other weaknesses.

“Thus apart from the need to regulate real estate agency services to streamline the activities of the sector, there is the greater national concern that an unregulated real estate sector will serve as a disincentive for potential investments.”

He added that a real estate agency law will be passed to regulate the sector’s agency activities as well as commercial transactions including sale, purchase, rental and leasing of real estate.

“The bill provides a detailed trail of record keeping that will help keep track of transactions and persons involved in the transactions. The bill also prohibits cash payments for real estate transactions, which will go a long way to strengthen the anti-corruption initiatives in the country and curb money laundering and other financial malpractices in the sector.”

He added that in the bill, a real estate authority has been proposed to regulate the sector. The authority will have powers to suspend, revoke or refuse to renew the licence of recalcitrant players.

Source: B&FT
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