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 23.3 million, and is the world’s largest cocoa producer. The economy grew strongly for the fifth straight year in 2016 due to a better business climate, public and private investments, and a robust consumption. According to the African Development Bank, economic growth was at 8.4 percent in 2016 in spite of a slow decline in agricultural output and projected to slow down to 7.3 in 2017 as agricultural exports decline.

The government is implementing a new National Development Plan, (Plan National de Developpement 2016-2020, PND) which focus on diversifying production by capitalising on comparative advantages in the agricultural sector. The new plan estimated at FCFA 30 trillion (US$ 60 billion), 62 percent of which will be financed by the private sector through public-private partnerships and 38 percent by national   and international public resources. The new development plan has been fully supported by Cote d’Ivoire development partners which committed US$ 15 billion in financial support at the May 2016 advisory meeting in Paris.

As a result of the government efforts in improving the business climate, political and social reconciliation, Cote d’Ivoire is still attracting foreign investors from European Union countries, China, Morocco and the traditional partner, France. Major political reforms are being implemented; a new constitution adopted, a vice president appointed, and a senate has been created. Elections were held as planned, with legislative elections, a new national assembly and a new government. Alhassan Ouattara, the outgoing president was re-elected.

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 2016. The rate of urbanisation at 51.4 percent in 2016 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. The ongoing projects implementation has been rated moderately satisfactory by the World Bank.

In spite of the economic growth, the government’s efforts, and an increase in expenditure in favour of the poor, though significant still does not meet the strong social demand for better condition of living of the people.

 

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$1.01 billion) in November 2014.  To date there are 28 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 percent of adults 15 and above have bank accounts, nine percent have savings and two percent have borrowed from formal financial institutions.  In 2017, there were 41 MFIs listed on Mix Market, with US$186 million worth of loans dispersed to 62 000 borrowers, 121 million deposits and 199 000 depositors. Data for UNACOOPEC-CI, one of the popular microfinance institution of Cote d’Ivoire, was not included.

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.

The president’s programme of constructing 60 000 houses between 2010 and 2015 has not been materialised in spite of the numerous initiatives and incentives among which 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).

According to the former Minister of housing, M. Gnamien Konan only 4 223 units were produced out of 60 000 programmed in spite of the government’s efforts to facilitate access to housing ownership. As a result the Le Ministère de la Construction, du lodgement, de l’assainissement et de l’urbanisme (Ministry responsible for housing) has invited all the stakeholders of the housing programme to contribute to providing solutions to change the status quote. The government has since adopted new measures to satisfy consumers, Housing developers and financial institutions. Among the new measures are the revision of the interest rates and the prices of the houses. The cheapest house is now 12.5 million (US$ 21 078) as opposed to 5.5 million (US$ 9 275) the initial price. Some people are still sceptical about the government programme to the extent of demanding the reimbursement of their deposits.

The government still continues with the efforts of providing decent and affordable housing which has become a very sensitive issue and a key legislative component of the current government, especially the need to strengthen the financing options for homebuyers and real estate developers. The government has introduced new incentives in 2017 by Ordonnance N° 2017 – 279 du 10 mai 2017 to encourage real estate developers; reduction of 50 percent of taxes on profit for those developers that dedicate 60 percent of their production to very low income groups (social housing). The government has fixed the prices of houses in the governmental programme as follow: FCFA 23 million (US$ 38 785) per unit for economic houses and FCFA 12.5 million (US$ 21 078) for social houses. The government is also encouraging institutions and corporations to participate in housing development for their employees.

Housing Affordability

In 2017 access to adequate and affordable houses remains a challenge in Côte d’Ivoire in spite of the economic growth and the different initiatives to promote affordable houses. At the end of 2016 out of 60 000 houses promised in 2010 by President Alhassane Ouattara to be delivered between 2011 and 2015 only 4 223 units were constructed. 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, access to affordable housing is a challenge to an average Ivoirian who earns less than FCFA 60 000 (US$101) a month which has been the minimum salary since 2013. The minimum salary relates to those people working for the government and the formal private sector which barely represents 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 popular streets are very speculative and range between FCFA 35 000 to FCFA 75 000 (US$60 to US$85) for a room.  Rents are rising in the residential zones especially the popular areas such as Cocody and Bietry-Marcory where the majority of expatriates live. According to Frank Knight 2017 report, a four bedroom executive apartment is about US$ 3 700 per month.

To boost affordability the government has initiated a series of programmes since 2010 including the promotion of mortgage activities and a diversified housing development programme among which are the modulated homes of FCFA 5 000 000 (US$8 432)(LEM, Logements a equipement modere) i.e only the structure is built and the home owner provides 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.

Some of the solutions proposed by the developers is for the government to pay the expenses of public utilities such as installation of water, sewage, electricity, and secondary routes construction and also enforce the interest rate of 5.5 percent decreed by the government but in reality not practised by banks.

Affordability remains a challenge in spite of the different programmes and policies put in place to make housing accessible to all. The reality is that some of the policies are difficult to implement due to the gap between demand and supply and the speculation of land prices.

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 construction is going on in the cities all over the country and especially in Abidjan.

Côte d’Ivoire housing deficit in 2016 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 FCFA 125 000 to FCFA 200 000 (US$210 – US$337) in a middle income zone. The housing deficit is a source of rent speculation and other consumers’ complaints. To protect the population, 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 his 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 at FCFA 5 million (US$8 532) and the slow pace of execution of contracts by local developers. The prices have been revised to FCFA 12.5 million (US$21 078) for the cheapest and FCFA 23 million (US$38 785) for the moderate.

The 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. All the measures introduced in 2016 by the former Minister in charge of housing such as the  tax on the importation of construction material, cement and clinker, a housing tax on salary to constitute a special fund which will serve as a guarantee for banks have not been fully implemented. The country is also promoting aggressive economic diplomacy to encourage countries such as Morocco which is recognised for its expertise in housing mass production, to participate in the housing development programme; the first delivery estimated at 117 out of 745 houses is expected by the end of 2017. Other countries such as Turkey is constructing 50 000 units, the Turkish company, IKDAM has announced the disbursement of EUR 12 million to start with.

Property Markets

According to a 2017 report by real estate consultancy Knight Frank, rents are going up especially in Abidjan; the average price for a four bedroom executive villa at Coccody and zone 4 which is in a prime location is US$3 700 per month. Knight Frank goes on to report that demand for retail space and offices is also going up. Response to demand can be seen by new office and retail developments such as Green Buro in Coccody and Renaissance plaza project in Plateau.  No significant new supply is planned to come onto market until 2018, placing further upward pressure on rents. Rental prices range from CFA 125 000 to 200 000 (US$210 – US$337) for a “studio” in Abidjan targeted at the middle income population. There is a huge gap between rents depending on the geographical location of the property. According to local market information rents are very speculative in the low income areas, and the average prices range between FCFA 45 000 to FCFA 55 000 (US$75 to US$93) for a room in a multi room building in popular zones. For houses built under the government programme, prices range between FCFA 12.5million (US$ 21 078) to and FCFA 23 million (US$ 38 785). These are fixed prices.

Côte d’Ivoire has really improved its rank in doing business as far as registration of property is concerned from 120 in 2015 to 113 in 2017 as a result of major reforms introduced by the government. The cost of registration has reduced to 7.6 percent which is still very high by international standards.  The registration process of 30 days though unaffordable to the majority of the population, is among the lowest in the region. Cote d’Ivoire has started digitising its land registry system and lowering the property registration tax. The World Bank’s 2017 Doing Business Report ranks Côte d’Ivoire in 182^nd place out of 190 countries in terms of dealings with construction permits with 23 procedures, and 347 days making it one of the highest 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.

Although the legal rights have been improved, the government and the citizens of Cote d’Ivoire recognise the limit of the country’s housing policy as illustrated by the gap between supply and demand for affordable and decent homes. In 2016-2017 some new regulations; (Ordnnance N° 2017 – 279/ 10- May 2017) were enacted and efforts are being made to enforce the different rules and regulations. It is expected that the improvement of housing policies will contribute to bridging the gap between supply and demand for homes especially affordable houses.

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.

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.

Ordonnance N° 2017 – 279/ 10- May 2017:  Reduction of 50 percent of taxes on profit for those developers who dedicate 60 percent of their production to very low income group called social housing. Encourage real estate developers to invest in housing development for low income groups. Fix prices of houses built in the governmental programme:  FCFA 12.5million (US$ 21 078 ) for social housing and  FCFA 23 million fcfa (US$ 38 785) for economic.

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 economy is growing at a steady pace since 2012; growth rate of GDP in 2016 was 8.4 % and estimated at 7.3% in 2017 in spite of the slowdown of agricultural output and the trend in global prices for agricultural products. The general outlook of the economy remains good. 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 Doing Business Report to date.

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, there is still a need to innovate housing finance to bridge the gap between demand and supply of adequate and affordable houses.