Benin is a small country in the West African Economic and Monetary Union (WAEMU). For years, agriculture has been the main driver of the economy through cotton exports, which account for over 40 percent of export revenues. Over the past three years, GDP growth has been driven by an increase in agricultural production and in activities at the Port of Cotonou, resulting from modernisation works undertaken under the Millennium Challenge Account Programme. The World Bank’s 2017 Doing Business Report ranked for the second consecutive year Benin among the top 10 reformers in the world, with an overall
ranking 155th out of 189 economies on the ‘Ease of doing business’ global index.
Benin has a growing housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit.
The lowest recorded interest rate on a mortgage in Benin is 8.47 percent, as of September 2016, and requires at least a 30 percent down payment. There are currently an estimated 539 mortgages in the country, with the average mortgage size being US$ 8 394. The cheapest newly built house by a developer recorded by CAHF is US$ 14 941, which is for a 40 square metre unit. Cement prices are lower than the continental average, at US$ 6.30 for a 50-kilogram bag.
With an urbanisation rate of 3.62 percent, demand for affordable housing will remain strong, both for rental and purchase. Housing microfinance will play an important role in increasing the supply of housing, and efforts to increase access should be undertaken. Lending rates in Benin are among the highest in UEMOA, and difficulty accessing title constrains the the housing market; banks have the option of accessing refinancing through Caisse Régionale de Refinancement Hypothécaire de l’UEMOA since 2012. With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in Benin can afford.
Find out more information on the housing finance sector of Benin, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Affordability
- Housing Supply
- Property Markets
- Housing Policy and Regulations
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2017 edition, which has up-to-date profiles for 54 African countries.Download yearbook
Over the past three years, GDP growth has been driven by an increase in agricultural production and in activities at the Port of Cotonou, resulting from modernisation works undertaken under the Millennium Challenge Account Programme. The World Bank’s 2017 Doing Business Report ranked for the second consecutive year Benin among the top 10 reformers in the world, with an overall ranking 155th out of 189 economies on the ‘Ease of doing business’ global index.
Economic growth has slowed down over the past three years, with a decrease from 6.5 in 2014 to 5.2 percent in 2015, and 4.0 percent in 2016 according to estimates, mainly due to slowdown in economic activity in Nigeria. Projected GDP growth for 2017 is 5.4 percent probably due to a record cotton production of 347 000 tons, the country’s main cash crop. A recent study by the World Bank showed that poverty has decreased between 2006 and 2015, from 61 percent to 49.5 percent, when considering a US$1.9 a day poverty line. However, data from the 2015 household poverty monitoring survey (EMICOV) suggests that poverty incidence has increased from 36.4 in 2011 to 40.1 percent in 2015. Inflation dropped from 0.4 percent in 2015 to -0.8 percent in 2016. Benin’s public finance is under stress due to changes in trade policy in Nigeria, which significantly reduced re-exportation taxes on rice and several imported products (including second hand cars) transiting in Benin. The situation worsened due to the continued decrease in international oil prices which consequently caused a depreciation of the Nigerian currency.
According to the 2013 general Census, Benin’s population has reached 10.5 million. This figure increased to 10.9 million in 2015, according to the World Bank World Development Indicators. The urban population reached 43 percent of the total population in 2013 and grows at a steady 3.6 percent a year.
The newly elected President’s promise to develop a new housing program took shape, with the preparation of a CFA Francs 347 billion (US$ 633 million) housing program covering 16 cities and towns, with the goal of delivering 20 000 housing units by 2021. Also, in line with its Africa Housing Strategy, the World Bank Group launched the preparation of a regional project to expand access to long-term housing finance in the West African Economic and Monetary Union, including for underserved households, through a partnership with the Regional Refinancing Facility and the West African Development bank (BOAD). This represents a major development in the housing finance sector in the country and the region.
Access to Finance
The country’s financial sector is concentrated in commercial banks; other sectors are still in their infancy. At the end of 2016, there were 16 banks (including three bank branches – CBAO Groupe Attijariwafa Bank, Societe Nigerienne de Bank – SONIBANK, and Coris Bank International) with about 205 branches and 277 ATM machines, with a total of 1 056 113 bank accounts for about 11 million inhabitants[i]. In 2015, loans disbursed were estimated at CFA Francs 1 176 billion (US$2.13 billion), a slight increase from its 2015 level. Access to credit as measured by credit to the economy remained at around 25 percent of GDP in 2016, as in 2015 compared to 24 percent in 2012[ii]. Lending rates remain moderate, but are among the highest in the region, averaging 8.5 percent in 2013[iii]. Digital finance is making its way in the financial landscape with the support of the United Nations Capital Development Fund (UNCDF)’s Mobile Money for the Poor program covering Benin and three other African countries. Between 2014 and 2015, the number of electronic money users increased by more than 150 percent. Despite the creation in 2010 of the Regional Mortgage Refinancing Fund (Caisse Régionale de Refinancement Hypothécaire – CRRH), lack of long-term financing remains the main reason for the low provision of long-term credit. Ambitious reforms were adopted in 2016 by the Central Bank (the BCEAO) to strengthen bank supervision (transition to Basel 2 and 3, consolidated supervision, tightening of single exposure limit); in order to strengthen liquidity requirements and incentivize banks to seek long-term funding.
Housing finance has been growing over the past decade, driven mainly by banks with donors showing some interest. Most housing loans are provided in two forms to individuals with regular employment who use their salaries as collateral: medium-term construction material loans, and group lending. The medium-term construction material loans are granted to individuals at an interest rate of 10.5 percent to 11 percent, and a repayment term from three to five years. The group lending products are usually granted to private organisations or to parastatals to distribute to their employees, where the organisation is responsible for repayment of the loans. Products such as ‘consumption loans’ (with a two-year maximum term) or ‘equipment loans’ up to CFA Francs 5 million (US$ 9 119) on average (with a five-year maximum term), are often used as housing finance, and often for home improvements.
In December 2016, the Regional Mortgage Refinance Fund called Caisse Régionale de Refinancement Hypothécaire (CRRH) WAEMU (which was created in 2010 to facilitate the mobilisation of long term resources for member banks) leveraged an additional CFA Francs 20.5 billion (US$ 37.4 million), through its sixth bond. This increased the resources mobilised by the Fund to CFA Francs 107.5 (US$ 196.02 million) since its creation. The CRRH has refinanced so far 33 banks out of the 54 shareholder banks in the eight countries of the WAEMU economic region. In February 2017, the CRHH signed an agreement with the International Finance Corporation (IFC) and the West African Development Bank (BOAD), positioning IFC as the second main institutional shareholder of the CRRH. The agreement brought 1.25 billion CFA francs (US$ 3 million) additional resources to the CRRH. Likewise, the World Bank is currently preparing a new US$ 155 million project to support the availability of long term resources at the CRRH for partner commercial and investment banks willing to offer housing finance. The implementation of this project will have significant impact on the housing finance landscape in the WAEMU region.
Some banks have designed specific housing finance products, such as the housing savings plan of Ecobank Benin, which provides access to relatively lower interest rate housing loans for savers. Ecobank and other commercial banks are also developing creative partnerships with local construction material wholesalers or retailers to offer housing finance products. In 2015, the Ecobank partnered with a construction material retail firm (Batimat) to offer up to CFA Francs 10 million loans in construction materials. In return the firm offers a 20 percent rebate on materials purchased in its shops.
In 2012, Bank of Africa Benin launched in partnership with the Benin Housing Bank the ‘housing loan’, a new product specifically targeted to those looking for long-term housing finance. The term of this loan can go up to 20 years, with an interest rate as low as 6.5 percent and is secured by a first order mortgage on the house for which the loan is requested.
The first of its kind in the country, Benin Housing Bank (BHB) was founded in 2004 by a public private partnership between the government and private stakeholders, including the Bank of Africa, to provide solutions to the demand for housing finance in the country. The BHB is capitalised at CFA Francs 5 billion (US$ 9.12 million) with the Bank of Africa Group as the main shareholder at 77 percent. It is expected to provide 50 percent of its loans to affordable housing projects, although this is not always achieved. BHB is indeed reportedly the most important originator of housing loans in Benin. At December 2014, the total outstanding loan by the BHB was CFA Francs 22.9 billion[i] (US$41.76million).
Lending rates offered by banks in Benin are among the highest in the WAEMU region. In 2013 the average interest rate was around 8.5 percent, down from 2012. This confirms the downward tendency noticed in recent years, (as low as 6.5 percent for long-term loans) as the macroeconomic and political environment remain stable and competition increases in the banking sector.
A study by the Central Bank (BCEAO) in 2014 estimated that the average term of housing loans were around 86 months at an interest rate of 8.47 percent a year, and an average loan size of CFA Francs five million (US$ 9 119).
The savings culture of the Beninese has driven the growth of microfinance, making it a significant player in the country’s financial system. As of March 2017, there are 64 registered microfinance institutions networks. A sampling of 14 microfinance institutions representing 90 percent of these networks showed that they had 467 service points, and were serving 1.824 million clients. The Fédération des Caisses d’Epargne et de Crédit Agricole Mutuel (FECECAM) is the biggest network, gathering more than 80 percent of clients. The penetration rate of microfinance reached in Benin is high, at more than 85 percent. At end of March 2017, the total deposit of the sampled 14 microfinance networks was CFA Francs 100.1 billion (US$ 154.45 million), with a total outstanding debt of CFA francs 110.5 billion (US$ 201.5 million) [ii].
Affordability is a serious issue since incomes are relatively low compared to housing unit prices. The cheapest properties cost about CFA Francs 8.9 million (US$ 16 231)[i] for houses built under the Government Affordable Housing Program, or 18 times the per capita gross national income estimated at US$860 in 2015. However, in 2016, a new actor entered the housing construction market, and is driving prices down. Global Service Immo, a private firm is now offering to construct basic one bedroom units for as low as CFA Francs 2 160 000 (US$ 3 939) for those who already own a piece of land. It is expected that this new trend will continue in the future, all things being equal.
Unfortunately, and in absence of adequate public policy, affordability of housing is exacerbated by rapid escalations in land prices, especially in newly urbanised areas. Speculation also drives prices up, with more intermediaries positioning themselves between property owners and buyers. Increasing land prices have driven lower and middle income people to move further from the inner city to where they can afford land.
Thanks to the increase in the supply of cement, especially since the NOCIBE, a new cement plant started operating, the price of this construction material has dropped by almost 25 percent, from CFA Francs 90 000 (US$164.14) only five years ago to now CFA Francs 68 000 (US$124.02). In other words, the 50kg bag of cement cost today only CFA Francs 3 400 or US$6.20. However, the price of other construction materials has not changed much. A standard sheet of corrugated iron costs today US$5.40.
A minimum plot size for residential property in urban areas is 250m2. Owning a property requires a minimum of CFA Francs 8.9 million[ii] (US$ 16 231) for a one-bedroom housing unit in the government’s ‘10 000 Affordable Housing Units’ programme. The programme planned to deliver some 2 100 housing units by 2012.
Despite the absence of reliable information on the solvable demand for housing in Benin, it is obvious that housing supply is way below the demand. The Ministry of Living Environment and Sustainable Development estimates the overall housing demand at about 320 000 unit between 2010 and 2020. There are four major contributors to meet the demand for housing and increase the housing stock in the country – households through self-construction, government agencies, public private partnerships and private developers.
While the information on self-construction does not exist, the presence of formal developers is very limited. Major formal housing supplies were spearheaded over the past years by the Government’s 10 000 Affordable Housing Units Programme, which was planned over the whole country. The first phase of the programme was supposed to deliver 2 100 units between 2008 and 2011, with the support of the Benin Housing Bank (BHB) and the Atlantique Bank, as well as a few selected private developers. However, a recent evaluation by the Ministry of Living Environment and Sustainable Development showed that, after eight years of implementation, of the 2 100 units planned for the first phase, only 893 were completed, while 650 were never completed. Of those completed, 419 were sold to date.
Learning from the failure of the previous program, the Government launched in 2017 a new 20 000 housing unit program over the period 2017-2021 for a total of CFA Francs 347 billion (US$ 633 million). The new program covers 16 cities and towns all over the country, with the city of Abomey-Calavi hosting 11 500 of about 60 percent of the program. The Government has already signed a partnership with Polimeks, a Turkish company, to deliver the housing units by the set deadline. The new program will deliver exclusively F4 (three-bedroom units) in a combination of standalone units and apartment complexes, costing between CFA francs 15.7 million (US$ 28 630) for the apartment units and CFA francs 19.2 million (US$ 35 020) for standalone housing units. The program is specifically targeted to middle income households, for example civil servants. Future home owners on the program can pay back their properties over 17 years through mortgages to be negotiated with commercial banks and insurance companies which are part of a complex partnership to be set up. The overall management of the program is entrusted to the newly created Living Environment Agency (Agence du Cadre de Vie) and a new joint-stock company.
Other actors of the housing supply chain in Benin include the Executing Agency of Public Interest Works in Benin (Agence de Gestion des Travaux d’Intérêt Public, or AGETIP-Benin) with its high standing development “Villa de l’Atlantique” program, a 120 housing unit development costing between CFA Francs 76 million and 126 million (or US$138 610 to US$229 790). AGETIP is also active in the production and the sale of new empty plots in the cities of Cotonou and Abomey-Calavi, costing between CFA Francs 2 000 (US$3.65) and CFA Francs 20 000 (US$36.50) a square meter[i]. Global Service Immo is also a private company specialising in the production and sale of empty plots. In just a few years, Global Service Immo became number one in this area, and started small and affordable development costing as low as CFA francs 2 160 000 (US$ 3 939) for those who already own a piece of land.
In December 2015, the then Prime Minister of Benin launched a new development of 132 housing units especially for the Benin diaspora, the Green Park City. The project was planned over 12 hectares and received the support of Orabank. The 132 units will be completed by end 2017. The project is still underway. With the Green Park City development, Chinese companies are entering the Benin housing market.
In Benin, property markets are dominated by the trade of empty plots between individuals and businesses. However, most lands belong to individuals who can trade them as they will. Trade of land has taken place until recently in a context where there is no deeds registry, nor a cadastre. Land titling is thus a major challenge, despite the numerous efforts deployed by the Government over the past years to improve land security. However, the new Government, under the leadership of the National Agency for Domains and Land (ANDF) undertook strong actions towards creating a national cadastre, and strengthening the deeds registry. But for now, the quality of land administration is rated at 5.5 on a 0-30 scale by the 2017 Doing Business Report according to which Benin ranks 173rd out of 189 countries on the ‘registering a property’ indicator. It currently takes an average of 120 days and four procedures, and costs 11.5 percent of the property value to register a property in Benin.
Trade of built housing units is very limited, with only a few high-end units (built in preparation for the Community of Sahelo-Saharan States [CEN-SAD] summit in 2008) on the market. A few private actors are positioning themselves in the property market landscape, with their specialty being the brokering of empty plots (exclusively between private owners) and a few houses: Global Services Immo, Immo-Benin, Benin-Immo, Dommus Immo, West Coast Property, are a few examples of those actors which advertise both plots to sell or rent on their regularly updated websites. While Benin-Immo operates mostly in Cotonou and its surroundings, Global Service Immo covers the whole country with its activities. Global Service Immo is gaining recognition for selling only secured properties. West Coast Property which has an international span is specialised in the trade of high-end luxury apartments and houses in and around Cotonou.
The sale of the first units made available through the government’s ‘10 000 affordable housing units’ programme started in 2012. Since then, only 419 out of the 893 completed units were sold, some through leasing. The main problem remains affordability, even for civil servants who find it very difficult to afford the required down-payment.
Even though the Benin culture pushes for home ownership, the rental segment is still dominant in the property market, with prices increasing, especially in urban areas where the demand for housing is very high. Rental housing prices are also driven up by land speculation. Over the past years for example, land prices have gone up by more 50 percent.
Housing Policy and Regulations
Benin has a number of policies and regulations in place to support land development and housing. Among the most important are: (i) the 2005 National Housing Policy which led to the creation of the Benin Housing Bank ; (ii) the 2002 National Land Use Planning Policy with the objectives of promoting land use planning and the rational management of resources, as well as strengthening basic infrastructure at the local level; (iii) the 2013 Land Code; and most recently (iv) the 2016 Spatial Planning Framework Law aiming at better organising spatial planning which may open up opportunities for new developments in the coming years. The 2013 Land Code, along with it implementing Decrees represent a significant development of the regulatory environment in Benin. The 2013 Land Code reorganised the land property rights and puts an end to the legal dualism inherited from the colonial era, creating a unified land tenure system. The Act also created two major agencies in the institutional architecture of land administration: The National Agency for Domain and Land (Agence nationale du domaine et du foncier – ANDF), and the Land Compensation Fund (Fonds de dédommagement foncier) under the Ministry of Finance. Likewise, Communes (local governments) were empowered on land administration with the enactment of decentralised organisation for land administration, among which the Commune’s Land Administration Commissions and the Communal Domain and Land Bureaus (Bureau communal du domaine et du foncier – BCDF). As of July 2017, 14 out of 77 BCDF were created. This will help Communes to fully exercise their prerogatives in land administration as devolved by decentralisation laws. Among areas covered by the above-mentioned decrees are the shared property rights on high rise buildings, modalities for the division and reunion of property rights, arrangements for exercising the right of first refusal and leasing of preempted or expropriated buildings. The ANDF is specifically endeavoured with the mission of developing a transparent, accessible and up-to-date national land management information system. Those are important for the protection of property rights in the Republic of Benin.
The 2016 Government continued along the same line of strengthening the regulatory and policy framework through a number of measures aiming at (i) encouraging the formalisation of property transactions; (ii) facilitate asset transfers; (iii) revitalise the property market; (iv) facilitate access to bank credits; (v) develop the Benin mortgage market; (vi) eliminate the undervaluation of properties. Likewise, a first revision was introduced to the 2013 Land Code in May 2017 to clarify some of its provisions and ease its implementation. One of the most important changes pertains to the replacement of the Certificate of land ownership by the Title deed, which is more align with the OHADA Treaty.
Housing Sector Opportunities
People in Benin take pride in owning their house. The demand for housing is therefore very high. The Government estimated the demand for housing at about 320 000 units for the period 2010-2020. There is also a strong commitment by the government to invest in the housing sector, as illustrated by the launch of the ’10 000 affordable housing units’ programme in 2008. Likewise, the legal and institutional framework to secure property rights is being strengthened, especially since the voting in 2013 of a new land code which was revised in May 2017, but also the creation of several entities to enforce implementation of the legal framework. All this should soon be complemented by the enactment of a new land policy note by the government. The policy aims to help secure access to land and land ownership, facilitate the access of public authorities to land, improve management by the state and decentralised communities of their respective jurisdictions, and regulate land transactions and land transfers. Land policy reform in Benin is strongly supported by the World Bank Group through technical assistance. Roads and other infrastructure is also improving fast while access to basic services is also being enhanced. However, the landscape of private developers is still to be filled, as most of the delays encountered with the government programme are due to the lack of professional private developers interested in the affordable housing segment of the market. Likewise, provision of houses for those with highest revenue is largely done by only a few developers. The new Government has also clearly expressed its intention of increasing the housing supply, with a new programme targeting the delivery of 20 000 housing units by 2021, especially in provincial capitals and a few urban agglomerations. All these leave a lot of room for new developers to position themselves and seize the opportunities offered by the Benin formal housing market which remains mostly untapped.
The signing of a new Millennium Challenge Account programme for Benin for US$403 million in early September 2015 for five years, holds promises for the improvement of energy infrastructure, which has been so far, a big constraint to develop business in the country.
Finally, the announced World Bank-funded WAEMU Affordable Housing Finance Project represents an important opportunity for the housing sector in Benin, as it will ease access to housing finance to poorer households. Developers can therefore take advantage of the opening up of new markets in the country.