Private vendors dominate mortgage market

Home buyers are turning more to individual sellers than real estate companies, and industry players suspect this to be the result of delivery delays as well as poor quality of work by developers.

Major mortgage provider Ghana Home Loans said for the fourth year running it has done more business with private vendors than real estate developers, in spite of the more rigorous process it takes private vendors through.

Kojo Addo-Kufour, Chief Operating Officer of Ghana Home Loans, told a room-full of developers at a seminar in Accra they may have to pay more attention to the quality of their work, the delivery time as well as step-up their marketing campaigns.

“Some people think that -- and I don’t think there is any evidence at all to back it -- when they buy from a private vendor the element of surprise is much lower, because what you see is what you get. We’ve seen this for the fourth year running. It is a demand-driven thing; people just want properties they see; it is not like they have to wait for you to build. It is there, they check it out, and when they write the cheque they know they are moving in the next day. So if I have to hazard a guess, I would say it is delivery time and quality,” he said.

“It didn’t use to be like this. In the years 2006, 2007, 2008, and even 2009, developers were a more substantial part of our disbursement portfolio than private transactions. If you knew the stress we put private transactions through you would appreciate what this means, because chances are we will say ‘no’.

We don’t know who the vendor is, we don’t like the location; we are not sure about the title. So for them to go through and emerge as number-one, it shows the significance of that segment,” Addo-Kufour said.

One of the developers felt, however, that the trend may not be a worrying one since a “secondary market” seems to be emerging, wherein home-owners sell and move on to bigger homes when their families expand.

In response, Kojo Addo-Kufuor said: “It is the case that people buy maybe a one-bedroom house and when they have a family they sell and move on. I am not sure at this stage that is what we are seeing. We are not quite there yet. What we are seeing here is a case of somebody decides they want to buy a house; they can either go to a developer or buy from their landlord or someone who has an uncompleted house down the road; and they choose to buy it over that of the developer. The observation here is that people feel more comfortable, from the evidence, buying that one than joining a developer’s queue and waiting for the house to be delivered”.

Sammy Amegayibor, an official of the Ghana Real Estate Developers Association (GREDA) told the developers that, “We have to do our homework well. So many of our potential clients have questions about our products and if we don’t change they will continue to purchase from the private vendor”.

One developer, he said, sold a three-bedroom house to a client who later became aggrieved over poor quality of work and reported the matter to GREDA.

“The total number of defects we found on the house was 110. If you sold only a three-bedroom house, not a block of flats, and there are 110 defects, it tells you that we are not doing enough,” he said.

Research by Habitat for Humanity, a not-for-profit home builder, indicates that Ghana does between 40,000 to 45000 housing units per year, out of which only three percent is provided by established real estate developers.

The real estate industry has, however, seen a lot of growth in recent years, and the prospects for the industry, according to Ghana Home Loans, is great.