High interest rates slowing down construction companies

An estate developer, Mr Frank Aboagye Danyansah has said many real estate developers in Ghana are being forced out of business and are cutting down jobs because of high interest rates and prohibitive bank charges.

He said with lending rates soaring to about 35 per cent on personal loans and sometimes over 40 per cent charged on loans for businesses, some building contractors conveniently source loans outside Ghana with cheaper rates and flexible terms.

Mr Danyansah, who is the Chief Executive Officer of Danywise Estates and Construction, told the Ghana News Agency that industry players were hard hit with exorbitant interest rates, taxes, and rising cost of building materials.

He said sourcing bank loans outside the country could be as low as 2.5 per cent annually as compared to about 40 per cent charged by the local banks, explaining that the former was “expensive and unfriendly for businesses.”

With steady population growth and an increasing rate of urbanisation, Ghana’s housing shortage has been exacerbated by limited public resources and limited private sector involvement in the affordable housing development system.

“The biggest problem of housing in Ghana is its cost and the government has to find ways of reducing the cost of building materials, mainly through the use of more indigenous materials,” he said.

“It is also essential that the construction industry itself be made more efficient, if this succeeds we will be able to build houses for workers across the country.”

Mr Danyansah said the current 1.7 million-unit housing deficit, which was estimated to grow to two million by 2018 demanded adequate steps to be taken to support the real estate industry and address the over growing demand.

He noted that in spite of severe problems, including the 10 per cent tax confronting the construction industry, their houses cost less than government affordable housing project put up by State Housing Corporation and Social Security and National Insurance Trust (SSNIT).

He explained that while SSNIT and State Housing Corporation charged about $85,000 for a two-bed room, the same house was priced at $45,000 by private estate developers.

He expressed regret that many Ghanaians within the income (salary) bracket of below GH?5, 000 a month could not mortgage to buy a house because they were highly priced.

According to the 2015 National Housing Policy, affordable house is defined as the ability of a household to spend up to 30 per cent of its gross annual income on rent or purchase price on housing, where the rent or purchase price includes applicable taxes and insurances and utilities.

It stated that: “When the annual carrying cost of a home exceeds 30 percent of household income, then it is considered unaffordable for that household.”

Mr Danyansah noted said instead of the government sourcing funds to complete the 4,900 affordable houses started by the previous administration, it went ahead to cut the sod for the start of another 5,000 units to be built within four years.

However, he said, both projects had been stalled for lack of funds.

He said: “Assuming the governments were to continue all these affordable houses abandoned, so many people will be employed across the country and not just in an area.

“We are at the latter part of the second year...the government has failed Ghanaians in the housing sector."