Cote d’Ivoire | 9 Jan 2013
Putting roofs over heads is a key legislative tenet for Côte d’Ivoire’s government, but to make this happen, there is a need to strengthen financing options for homebuyers and real estate developers, particularly at the low-end of the market. Given the dearth of housing and rapid urbanisation in the country, where there is an estimated need for 400,000 units, one of the government’s priorities has been to encourage housing projects.
Housing loans represented just 0.7% of total loans in the first nine months of 2012. Moreover, less than 1% of real estate projects in Côte d’Ivoire receive financing from the banking sector, according to the Housing Bank of Côte d’Ivoire (Banque de l’Habitat de Côte d’Ivoire, BHCI), and even when loans are available, rates are often prohibitively high for both developers and prospective homeowners, with 13.6% average interest on housing loans in August 2012.
Within the framework of its 2012-15 National Development Plan (PND), the government aims for the construction of 10,000-30,000 housing units per year over the next three years and to increase annual output to 40,000-50,000 units by 2015. To achieve this goal, the authorities realise they must implement a number of measures to support the real estate sector.
To replace state-owned real estate developers liquidated in the 1980s, the government set up three national funds under the aegis of the Autonomous Sinking Fund (Caisse Autonome d’Amortissement): the Housing Support Fund (Fonds de Soutien à l’Habitat, FSH), the Urban Land Account (Compte des Terrains Urbains) and the Housing Mobilisation Account (Compte de Mobilisation pour l’Habitat, CDMH).
The CDMH confers fiscal advantages on qualified buyers and on developers for certain social housing projects, including exemption from value-added tax (18%) and service taxes on construction materials (18%) and housing loans at a subsidised rate of 9.09%. Additionally, buyers are exempt from paying any interest on loans received from banks beyond the threshold of 9.5%, as the CDMH pays the difference.
For developers, the conditions to qualify are rigid, and as a result, many smaller players are excluded, as urban projects must contain a minimum of 100 units. With a lack of sufficient CDMH-certified housing projects, many qualified buyers – who are already faced with a shortage of supply on the market – cannot benefit from this scheme. As such, Mamadou Sanogo, the minister of construction, housing, sanitation and urban planning, declared that the government is considering how to “revitalise” these financing tools.
The government has, however, made progress in improving access to credit for home-purchasers in a scheme designed to guarantee loans through the National Housing Collateral Fund (Fonds National de Garantie de Logement), which derives its funding from the CDMH and the FSH. This programme has been designed to improve buyer solvency by avoiding the use of the buyer’s own resources for collateral to secure a loan.
The authorities have also been active on other fronts. In 2009 the government became the major shareholder of the BHCI and began re-capitalising the institution. The government is also considering a partnership with Shelter Afrique, a pan-African real estate financier.
Steps are also being taken at the regional level. The Central Bank of West African States (La Banque Centrale des Etats de l’Afrique de l’Ouest, BCEAO) has lengthened the residual duration of long-term loans admissible to its portfolio from 10 to 20 years. The BCEAO took this step to bolster long-term financing in the region, and has announced plans to create credit information bureaus and to modernise guarantee registries.
Although these various initiatives promise to facilitate the financing of Côte d’Ivoire’s real estate sector, tangible progress is dependent upon a number of other factors, including improved fiscal regulations, enforcing monetary policy transmission and addressing challenges in access to land titles and construction permits.