Develop local mortgages – Appolonia CEO

Home financing firms including banks have been urged to develop products suitable for the local markets instead of replicating the mortgage modules from developed economies.

Anthony Okyere, Chief Executive Officer of of Appolonia Development Company Limited-- one of Africa’s largest urban developers, has called on mortgage firms and banks to study local markets and realise that African countries are unique, and mortgage firms must provide suitable products to consumers instead of doing what is done in Europe and America.

“We must start thinking about developing an African mortgage. We need to see mortgages different from how Europeans see them, and then develop products that best suit us,” he told the B&FT in an interview.

Citing the example of how the telecom companies have been able to reach the masses with their services, he wants banks and home financiers enabled to reach the masses with their products and services.

According to him, the telcos via scratch-cards are able to reach every single individual in the country with their services, whereas in Europe or America telcos just debit the accounts of customers monthly.

“The telcos understood the market, and with their scratch-cards and pre-paid services and products they have found a way to reach the mass market; so why can’t the banks and the mortgage firms also devise an African mortgage based on the way we live?”

In Ghana, available data indicates that the mortgage to GDP ratio stands at a paltry 0.5percent, whereas in the UK the ratio stands at 88 percent and that of the US is 77 percent. Also, in Ghana mortgage loan penetration stands at 3 only percent.

Over the past decade there has been a 55.5percent increment in the demand for housing, which has now put the housing backlog at about 1.7million.

Government’s ongoing projects are expected to provide only 10,000 housing units in the next two years. But with more than 80 percent of Ghanaians unable to afford homes or qualify for a mortgage, most real estate developers focus on the high end of the market -- putting a majority of the populace in a situation where they have to rent homes.

This informal sector, which forms the majority of the population, is what Mr. Okyere is challenging home financiers to go after because they have the money -- but those monies hardly find their way through the banks and thus are not structured.

“We shouldn’t just copy the European model of looking at salary and what kind of house you can afford with that salary. How about other means of income? Why is nobody taking a look at that? The guy at Kantamanto or the mason building homes has more money than the salary worker, but they are not even recognised and deemed bankable,” he noted.

He also urged Ghanaians to start embracing the system whereby homes can be acquired with a mortgage.

“Culturally, we do not perceive having a 15 or 20-year mortgage for our homes. It is hard for the Ghanaian to wrap their head around that concept.”

He said the biggest challenge facing mortgage firms is the culture of the people, whereby they do not want to have debt hanging around their necks.

“Even when the mortgage firm will be making its money spread over two decades, the Ghanaian doesn’t want that to hang on his neck; so many people prefer to pay off quickly, and even pay a penalty for paying earlier,” he said.