‘Long-term mortgages will relieve home-financing’

Developing mortgages that are long-term in nature is one of the measures government can adopt to close the yawning housing deficit, a real-estate expert, Harry Quartey, has said.

The current housing deficit is estimated at 1.7 million units, with an annual growth of 70,000 units. Approximately 50 percent of Ghanaians are said to live in sub-standard housing structures.

In an interview with the B&FT, Mr. Quartey said there is need for the financial institutions -- and maybe with some support from the government -- to develop mortgage products that are long-term in nature.

“We are still at a point where most potential home-buyers are not able to access mortgages because their incomes will not allow them to access short-term mortgages. When you have a 15-year mortgage as opposed to a 40-year one, it means your repayment for the 15 years will be much higher than if you were allowed a longer mortgage whereby your repayments may be lower. The lower repayment would qualify a lot of ordinary workers to access these mortgages,” he said.

Mr. Quartey, also the Chief Executive Officer of Emerald Properties, a real-estate developer, said the traditional financial sector is not in sync with the real estate sector.

“The typical financing structure in this country does not support the real-estate market. In order for the real-estate developer to be able to deliver units at affordable prices, the banks must be willing to give reasonably-priced and long-term loans.

“These two things which the sector lacks make it very difficult for developers, because by the time you add your financing cost, the price of the property will be so much.”

Meanwhile, the financing concerns of the real-estate sector are expected to be eased when the Securities and Exchange Commission (SEC) concludes its planned review of unit and mutual trust fund regulations to include new rules that allow fund managers to invest more than 10 percent of their funds in the real-estate sector.

Deputy Director-General of SEC Alexander Williams, speaking at a function last month, said the initiative points to the commitment of SEC to partner real-estate developers to meet their objective of providing housing units with long-term funds -- while at the same time developing the capital market.

“SEC is changing the current laws of the securities industry. Under the unit trust funds and mutual funds regulations, collective schemes cannot hold more than 10 percent of the value of funds under management in the real-estate sector. When the law is amended, there will be no ceiling as to how much a fund manager can use to promote the real-estate business,” he said.