Operatives in Durban declaration, seek non-mortgage housing finance systems

The group has committed itself to the mobilisation of capital resources, long term and in local currencies, debt and equity, with the appropriate risk underpins and supportive frameworks to encourage the participation of a diverse range of investors across the range of housing solutions, and to enable developers to grow their capacity to operate at scale.

REELING from the stain of negative report in which African mortgage markets had been painted by global institutions, as a major impediment in the march to address visible and rapidly growing demand for housing; continent’s mortgage operators and experts recently met in Durban, South Africa to enhance the flow of finance for the troubled sector by calling on the countries to assist in promoting non-mortgage housing finance systems.

In the ‘Durban Declaration’, members of the African Union for Housing Finance (AUHF) agreed that governments can pave way for a robust system through the active and regulatory promotion of developmental credit, effective and appropriate credit regulatory systems, and the establishment of land use management systems that provide for and facilitate incremental housing delivery approaches.

By international comparisons, African mortgage markets are tiny. While South Africa and Namibia have relatively high mortgage debt to GDP ratios for the continent (22.04 per cent and 18.21 per cent, respectively, in 2013), few others including Nigeria have ratios above 5 per cent. This compares with mortgage debt to GDP ratios of over 40 per cent in North America and over 80 per cent in certain European countries.

The World Bank estimates that if only the top 3 per cent of Africa’s population were to access mortgages, the continent’s mortgage debt to GDP ratio could rise to 18 per cent  (12 per cent, excluding South Africa). This activity could contribute as much as US$300 billion to GDP across the continent.

The declaration was a fall out of AUHF 31st Conference and Annual General Meeting, hosted by the Banking Association South Africa that attracted 95 delegates from 65 organisations in the public and private sectors across 19 countries. Nigeria delegation included Mrs. Rose A Okwechime (Abbey Mortgage Bank Plc, Gen PMO Reis rtd (First World Communities), Mr. Adetunji Abudu (New Prudential Building Society), Prof. Charles Inyagete (Nigeria Mortgage Refinance Company) and Mr. Adekuhle Babayemi (African Housing Professionals Consortium).

They noted, “Housing affordability is a fundamental challenge that cannot be overlooked. With the majority of housing demand across Africa being expressed by first time home seekers without equity, and with low incomes, only a fraction of households can afford the housing currently being delivered by the private sector. Investment in innovative, low cost technologies and technical support to the housing sector can enable a new standard of affordability to meet the needs of our majority.
“Further, incremental construction approaches can spread the costs of housing over a series of more manageable steps. We need to acknowledge the housing affordability reality with more realistic land use planning frameworks and delivery bylaws, and with innovative financial products that understand and respond directly to the capacities of the market.”

AUHF further urged governments to address the following: ONE: Transparent land management systems: the investment of capital in housing markets depends on legal frameworks that confirm and support ownership or tenancy rights, and allow property to be used as collateral for access to credit. Sound planning frameworks that promote the growth of sustainable human settlements are a critical part of the enabling environment on which investment depends.

Governments across Africa should streamline and prioritise their land legal frameworks, establishing and improving appropriate and sustainable titling systems, ensuring security of tenure, and clarifying and upholding rights of occupation and use, all in favour of effective housing markets.

TWO: Investment in infrastructure and serviced land for housing: a key constraint facing housing developers in the delivery of housing at scale is access to serviced land for housing. Government can facilitate increased construction by making land available through its regulatory and other levers, and investing in bulk infrastructure to support this. As cities develop, the establishment of effective rating and collections systems can also build municipal capacity to further meet the need on an ongoing basis, while also establishing critical contracts for local citizenship.

THREE: Attention to the housing impact of macro-economic and monetary policy: the growth of the housing sector in Africa demands greater financial innovation that increases the capital available, whether for lenders, developers, or households themselves. Our capital markets are shallow and secondary markets are ineffective. A critical issue for attention by policy makers is the creation of an environment conducive to long term funding and increased investment. The role of the central bank and monetary policy is fundamental in this regard. Key areas for policy attention include interest rates, inflation, tax policy, currency risk, capital requirements .

FOUR: Consistent national housing policy and regulatory framework. The long-term nature of housing investments makes the current situation of policy uncertainty critically important. Unpredictable regulatory changes, complex legal frameworks and volatile local currencies all limited investment timeframes and challenge exit strategies, encouraging investors to look elsewhere, or up market, where the capacity to absorb costs is greater. Government policy can have a significant impact on investor interest and market participation, simply by being reliable and timely. At the same time, good policy can improve the reach of good investment – extending the benefits of investor interest to a wider array of people, and critically, down-market.

On their part, they commitment themselves to the development of appropriate housing and housing finance products that are affordable to our populations, that respond appropriately to the reality of informality, and that contribute effectively towards adequate housing for all, across the nations.

They also agreed in the mobilisation of capital resources, long term and in local currencies, debt and equity, with the appropriate risk underpins and supportive frameworks to encourage the participation of a diverse range of investors across the range of housing solutions, and to enable developers to grow their capacity to operate at scale.