Creating a housing mortgage finance business sector

The announcement by the Minister of Finance to create GH¢1 billion Housing Mortgage Fund was great news to would-be home owners. However, as stated in the 16th November 2018 article the devil is in the details (i.e. the implementation plan).

In the absence of any guideline notes or policy document this article offers ideas for consideration and likely benefits we could derive from establishing such a Fund.

The Housing Mortgage Fund is definitely going to change how we finance housing development in the country. Though mortgage products are not new in Ghana, using a government backed scheme to finance housing development could be challenging. First most people are not familiar with the concept and therefore would need to be educated.

The greatest concern of housing professionals and real estate practitioners is also how the funds will be disbursed. Housing initiatives in our country have generally favoured very few people within our society. Hence we need to get Housing Mortgage Fund implementation right this time round if we are really serious about getting a lot of people over the poverty threshold.

What would be useful immediately is for the Ministry of Works & Housing and Ministry of Finance to publish the draft details of the Government policy and implementation plan on the Fund for scrutiny.

This will provide a basis for wider consultation within a limited period and an opportunity for people to offer ideas to improve the scheme. However, in the absence of such opportunity it is recommended the Fund Managers considers creating two funding strands i.e. Housing Development Fund (HDF) and Estates Infrastructure Fund (EIF).

The HDF will fund the development cost of building the houses either for sale or rent, whereas the EIF will fund site preparation and services such as roads, electricity and water supply. House prices could be significantly reduced through this approach and make it affordable to low income earners. The capital investment could then be recoup through the payment of property taxes by the residents or home owners.

For the Fund to reach its intended beneficiaries the Government should also encourage the establishment of non-profit Independent Housing Companies (IHC). Organisations such as the Ghana National Association of Teachers (GNAT), Ghana Private Road Transport Union (GPRTU), Nursing & Midwifery Association, Senior Staff Associations and other Trade Associations could easily setup IHCs or limited by guarantee housing subsidiary companies to access the funds. Since members of these organisations are all employed and have regular income, they offer an established channel for financing housing development to benefit them.

In addition to the above the implementation of the Housing Mortgage Fund will lead to the development of a number of new businesses. The associate businesses to be created in the mortgage market will include Mortgage Brokers, Real Estate Agents, Lettings Agent, Home Insurance Brokers and Financial Advisors, to mention but a few.

These businesses should not be allowed to operate in a vacuum. The Government should set up a licensing authority to licence and regulate all these new businesses.

Overnight a number of job opportunities will be created for the unemployed youth within our society. Therefore it is not enough to setup a Housing Mortgage Fund but we should consider the potential business ecosystem that would spring up from this initiative.

Unfortunately there are too many unlicensed business operating in Ghana who are also not paying taxes. Licensing can be used as an approach to include all these businesses into the main stream.

The successful implementation of the Housing Mortgage Fund should have a mechanism to recoup Government initial investment. This can be done through the payment of property taxes, brokers licensing and job creation for the unemployed.

In conclusion it is recommended a Housing Businesses Task force Group to be setup to conduct an impact assessment of the Housing Mortgage Fund and make recommendation to guide the development of associated businesses.