Housing Finance in Cote d’Ivoire

Introduction

The Republic of Côte d’Ivoire is in West Africa and bordered by Liberia, Guinea, Mali, Burkina Faso, Ghana and the Atlantic Ocean. The country has a population of 22.7 million, and is the world’s largest cocoa producer. The economy grew strongly for the fourth year in 2015 with booming agriculture, a better business climate and returning foreign investors. According to the African Development Bank economic growth was estimated at 8.8 percent in 2015 and projected to continue in 2016 at 8.3 per cent despite international uncertainty. The government intends to continue with its efforts after the success of 2012-2015 National Development Plan (PND) to make Cote d’Ivoire an emerging country by 2020 and see growth as more inclusive.

As a result of the government efforts in improving business climate, political and social reconciliation, Cote d’Ivoire is witnessing a huge direct foreign investment; from European Union countries, China, Morocco  and the traditional partner, France , with new firms setting up and old ones that have fled the country returning.  Abidjan is the main beneficiary of foreign investment for lack of adequate infrastructures in other urban centres.

Côte d’Ivoire remains the largest economy in the West African Economic and Monetary Union (WAEMU/UEMOA) and accounted for 35 percent of the region’s total GDP in 2015. The rate of urbanisation is among the highest of the union. According to the National Censure of 2014, 49.7 percent of the population live in towns and cities including 19.4 percent in Abidjan where most economic activity is. The government expects to change this situation with three ongoing projects; investment to double electricity by 2020, an urban plan for the districts within Abidjan, and upgrading the road between Bamako and San Pedro.

Access to Finance

Cote d’Ivoire represents the largest financial market of the UEMOA countries, with 35.3 percent of the union GDP and 33.3 percent of the union banking assets. According to the Central Bank of the union (BCEAO), the country’s financial industry has sustained double digit growth since emerging from the national political crisis, with aggregate assets of CFA Francs 600.6 billion (US$11 126 095 752) in November 2014.  To date there are 27 banks, 31 insurance companies, 80 microfinance structures (MFIs) and two financial institutions.   In spite of its weight in the UEMOA region, access to finance is limited and majority of the banks activities are concentrated in Abidjan and bank lending remained low at 18 percent of GDP in November 2014. According to World Bank financial inclusion data / Global Findex only 34 % of adults 15 and above have bank accounts, nine percent have savings and two percent have borrowed from formal financial institutions.

In 2016, there were 41 MFIs listed on Mix Market, with US$195 million worth of loans dispersed to 110 000 borrowers, 276 million deposits and 635 000 depositors. UNACOOPEC-CI, the savings and credit co-operative network of Côte d’Ivoire, remains the largest MFI with 448 740 depositors, US$179.4 million deposits, 53 293 borrowers and US$65.7 million in loans dispersed in 2012. They offer a product called ‘Prêt Habitat’ which enables borrowers to buy land, build or to purchase a house. The MFI also has a product called ‘Coopec Diaspora’ targeted at Ivoirians in the diasporas.  Clients pay a 10 percent deposit and then make arrangements to pay either directly in instalments, or over 15 years via a co-operating bank. UNACOOPEC-CI has entered into a partnership arrangement with The Central Real Estate Company, which builds the houses that the Coopec Diaspora clients then buy on specification.

Broadly, four institutions are involved in the financing of housing.  These are the Caisse Autonome d’Amortissement, which later became the National Investment Bank, BNI; the Support Fund for Housing (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 Compte de Mobilisation pour l’Habitat was created to give financial assistance and tax incentives to stimulate the delivery of affordable housing for low income buyers.

Access to housing finance remains a challenge in Cote d’Ivoire. Commercial banks including the Housing Bank created in 1994 with a mission to finance social housing and real estate activities; in spite of the huge liquidity at their disposal, they cannot take the risk of financing mass produced houses for any category of the population because the banks’ resources are short term.

In order to facilitate access to housing finance, and especially to translate president Alhasane Ouattara’s programme of constructing 60 000 houses between 2010 and 2015 into reality, the government has come up with a series of initiatives.  Among these are the negotiation of favourable conditions with commercial banks to decrease interest rates on housing loans to 5.5 percent as opposed to 9.5 to 12 percent formerly; extending the reimbursement up to 25 years; effective application of the Social Fund for Housing, (Fonds de soutien de l’habitat, FSH) and the creation of a mutualist guarantee fund for prospective homeowners (Fond de cautionnement mutuel pour tous les demandeurs de lodgements sociaux).

Access to financing is not only a challenge in Cote d’Ivoire but a real challenge for all UEMOA states. In order to address this, a regional mortgage institution, the Caisse Regional de Refinancement Hypothecaire-UEMOA (CRRH-UEMOA), was created in July 2010, with headquarters in Lomé, Togo.  The mission of the new institution is to promote easy access to long-term financing for its member banks to enable them to finance housing loans. The initial capital of the CRRH-UEMOA is CFA Francs 3 426 million (US$5.8million), 60 percent of which belongs to financial institutions of the region, 15 percent to Shelter Afrique and 25 percent to the Banque Ouest Africaine de Developpement,BOAD. It is expected that CRRH activities will reinforce the capacity of commercial banks, unleash construction activities and foster housing development. The institution as expected is generating investments, and employment opportunities as currently illustrated by the number of members’ banks (46 shareholders), and has been successful in the regional stock exchange and the projects financed.

Providing decent, affordable housing has become a key legislative component of the government of Côte d’Ivoire, especially the need to strengthen the financing options for homebuyers and real estate developers. The government has prioritised housing development through supporting housing projects. The government also provides a mortgage insurance product for mortgage loans provided through banks.

The World Bank’s 2016 Doing Business Report ranks Côte d’Ivoire in 180^th place out of 189 countries in terms of dealings with construction with 23 procedures, and 347 days making it one of the highest in the region. Cote d’Ivoire has however improved its score in registration of property from 120 positions in 2015 to 109 in 2016 by digitizing its land registry system and lowering the property registration tax. The cost of registration at 7.5 percent of property value has really been improved and currently among the lowest in the region but the registration cost however is still above by the world standard (4.2%).

Housing Affordability

In 2016 access to adequate and affordable houses remains a challenge in Ivory Coast in spite of the economic growth and the different initiatives to promote affordable houses. As a matter of fact at the end of 2015 out of 60 000 houses promised in 2010 by President Alhassane Ouattara to be delivered between 2011 and 2015 only 3 000 were delivered. Rapid urbanisation, low minimum salary, and the inequalities in social infrastructures have accelerated urban poverty and slums in the cities especially in Abidjan where 19.4 percent of the population live, according to the 2014 censure.  Abidjan also housed majority of the country’s economic activities and bidonvilles due to the influx of immigrants from the rural zones in quest of opportunities in Abidjan.

In spite of the economic growth and the different housing programme, affordable houses is a challenge to an average Ivoirian who earns less than 60 000fcfa (US$101) a month the minimum salary since 2013. The minimum salary concerns only those people working for the government and the formal private sector and they barely represent 18 percent of the labour force. The majority of the population works in the agricultural sector and the informal sector.  They live in shanty houses in the popular streets such as Kumasi where there are little or no urban infrastructures. Rents in the slums are speculative and range between 35 000fcfa to 50 000 fcfa (US$60 to 85) for a room.  Rents in the popular residential zone (Cocody) where the majority of expatriates live range between 1 200 000fcfa to 1 500 000fcfa (US$2 049 to 2 561) for a villa to 3 500 000fcfa (US$5 975) for a very luxurious villa.

To boost affordability the government has initiated a series of programme since 2010 including the promotion of mortgage activities and a diversified housing development programme among which are the modulated homes of 5 000 000cfa (US$8 536)(LEM, Logements a equipement modere) i.e only the structure is built and the home owner provide the rest. The government’s goal is to provide adequate houses for all categories of the population that is the low, middle and high income Ivoirians.

According to the ministry in charge of housing, there is a deficit of 400 000 houses in the country including 200 000 for Abidjan. To bridge the gap and satisfy the need of the nation, housing is among the priority of the government’s agenda. An International forum was organised in June 2016, “Le Forum International du lodgement social, economic et standing, Filoses” to promote knowledge sharing on housing and housing finance and share experience of those countries who have accomplished success in the sector. The Ivoirian minister in charge of housing who acknowledged the fact that the policies to promote affordable houses are not satisfactory and as such the country needs the contribution of the different stakeholders to come up with feasible solutions to the deficit and meet the new goal of producing 250 000 houses between now and 2020.

Housing Supply

Majority of houses in Cote d’Ivoire are self-built but the government through its economic development policies contributed a lot into housing development between 1970 and 1980 especially in the former capital city, Abidjan.  SOGEPHIA and SICOGI are the two public companies in charge of housing development and property management. Between the two companies 24 254 housing units were constructed in Youpoghon, 10 770 in Cocody and 6 938 in Port Bouet during those years.  The houses are individual villas, duplexes and one to two storey buildings with apartments and studio built with adequate construction material and in well planned urban communities with amenities. SOGEPHIA and SICOGI produced housing in relatively mass scale but other actors in the market include the informal enterprises that produce the majority of the stock of houses in the country. As from 1995 the government stopped subsidizing housing and this has contributed to an acute deficit in housing even before the civil war. Currently the government is focusing on investing in mass produced affordable houses through different mechanism to bridge the gap between supply and demand as a result of which a lot of shanty houses commonly called (bidonville) has erupted in the cities especially Abidjan, even Cocody – one of the prime property area is not spared from Bidonville.

Côte d’Ivoire housing deficit in 2015 was estimated to be over 600 000 units, with the need being most prevalent in cities. The government estimates the annual housing deficit in the country to be 400 000, and in Abidjan alone to be 200 000. Housing supply in the capital is less than 3 000 a year and most people are renters (75 percent of the population of Abidjan were renters in 2014). Rents for a studio i.e. a minimum unit, range from CFA 100 000 to 150 000 (US$171-256) in a middle income zone. The housing deficit is a source of rent speculation and other consumers’ complaints. To protect the population, the ministry in charge of housing (Le Ministère de la Construction, du lodgement, de l’assainissement et de l’urbanisme) introduced in 2015 a code of urban properties, (Le code du foncier urbain) to regulate rents and minimise rental guarantees and other rental miscellaneous funds.

Construction of decent affordable homes was among the electoral promises of President Alhassane Ouattara in 2010. The president was re-elected in 2015 and housing is still one of the priorities of the new government. The former government did not meet the goal of 60 000 houses programmed in spite of considerable efforts due to a number of factors among which are difficulties in acquiring land all over the country and especially in Abidjan, the difficulties in mobilising funds for compensating the traditional owners and elaborating the feasibility studies.  Other reasons are the underestimation of the cost of the cheapest housing unit (5million fcfa) US$8 536 and the slow pace of execution of contracts by local developers.

The current government recognises the limit of the country’s housing policy as illustrated by the gap between supply and demand for homes in spite of considerable efforts. To this end the minister in charge of housing has proposed a tax on the importation of construction material such as cement and clinker. He also proposed a housing tax on salary to constitute a special fund which will serve as a guarantee for banks. According to the minister in charge of housing, no commercial banks will fund a housing project without having long term deposit, as such the tax will constitute a special fund that will serve as guarantee and encourage commercial banks to participate actively in funding housing developers.

Property Markets

The residential property market data is difficult to come by but the different surveys carried out by the ministry responsible for housing indicates a range of CFA 100 000 to 150 000 (US$171-256) for a “studio” in Abidjan that is the average rent for the middle income population. There is a huge gap between rents depending on the geographical situation of the property. According to a 2015 report by real estate consultancy Frank Knight, rents range for a good villa at Coccody and zone 4, a prime location between 1.2 million fcfa and 1.5 million fcfa (US$2 049 to 2 560) and can go as high as 3.5 million fcfa (US$5 975)  a month.   Knight Frank goes on to report that demand for retail space is very high with prime rental rates of US$32 per square metre per month in Abidjan. According to local market information rents are very speculative in the low income areas, on the average prices range between 30 000fcfa to 50 000 fcfa (US$51 to 85) for a room in a multi room building in popular zones.

For prices of property, only government data is available and ranges between 5million fcfa for the cheapest, 5-10 million fcfa (US$8 536-17 072) for economic, 10-15 million fcfa (US$17 072-25 608) for average middle class, 20-25 million fcfa (US$34 144-42 680) for middle class and over 25millionfcfa (US$42 680) for the upper class.  Ivory Coast has really improved its rank in doing business as far as registration of property is concerned from 120 in 2015 to 109 in 2016 as a result of major reforms introduced by the government and the cost of registration has reduced to 7.5 percent which is still very high by international standard.  The registration process of 30 days though unaffordable to the majority of the population, is among the lowest in the region.

The different government economic development programmes, the country’s housing programme for 250 000 affordable houses between 2016 and 2020, the improvement in the doing business environment and the returning of the headquarters of African Development Bank to Abidjan with a staff of over 500, are all already boosting the property market and growth is expected to continue.

Housing Policy and Regulations

Before 1998 and according to customary law, women in Côte d’Ivoire were not allowed to own land nor inherit it.  Law No. 98-75, the rural land law, permits women to own land; however, this tends to be less so in rural areas where men are still the main beneficiaries of land. Although government agencies are responsible for land registration a law (N°2013-481) was passed in July 2013 called Arrêté de Consession Definitive (Adc), as the sole document for urban land registration. According to the housing minister, this law is to facilitate the process of land acquisition and protect the right to property.

Still, the most recent municipal land regulation and building code was drawn up in 1996. The minimum house size that can be built in Abidjan is 100m² and the maximum height is four storeys; however, in some municipalities this can be more.

Côte d’Ivoire has improved the strength of its legal rights through amendments in 2012 to the OHADA Uniform Act on Secured Transactions, which broaden the range of assets that can be used as collateral (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Laws relating to housing include:

Law 62-253/31-7-62: Invest full authority in the ministry of housing for the development of the country’s urban planning.

Law 2003-208 / 7-7-203: Modified law 62-253/31-7-62 and transfer the authority from the central government to local authorities.

Law 98-750  /23-12-98: Transfer customary land rights to private property rights regulated by the state

Law (N°2013-481) was passed in July 2013:Arrêté de Consession Definitive (Adc). The sole document for urban land registration. Facilitate the process of land acquisition and protect the right to property.

Housing Sector Opportunities

Côte d’Ivoire has come through a difficult period due to the post electoral conflict which has threatened national unity and undermined urban infrastructure including housing. The country’s progress since the election in 2011 and the recent election of 2015, however, has been impressive: with a stabilising governance framework, opportunities for investors are promising. The economic recovery that began in 2012 was confirmed by 8.8 percent growth rate of the GDP in 2015 and expected to remain robust in 2016(8.6%) and 2017 (8.3%).  Many projects are in the pipeline and others are being implemented, among which are investment to double electricity output by 2020, an urban plan for Abidjan district, and the infrastructure project aimed to increase access to, and improve the quality of, urban infrastructure facilities and services in Abidjan, Bouake and other selected cities.

Cote d’Ivoire’s peaceful election of 2015, the ambitious National Development Plan, the reform in property registration, various government development programmes and the efforts of the government in improving business environments are indicators of opportunities for the housing finance and housing development sectors.

The different economic and social reforms of Cote d’Ivoire have a positive effect in the business climate the results of which can be measured by the position of the country in the World Bank’s 2015 and 2016 Doing Business Report.

Although the government’s efforts in ameliorating the business environment and sourcing foreign investment to develop urban infrastructure and housing is paying off as illustrated by the number of stakeholders involved and the improvement of the rank of Cote d’Ivoire in doing business since 2015, still there is a need to innovate housing finance to bridge the gap between demand and supply of adequate and affordable houses.