Housing Finance in Congo, Democratic Republic of the

Macroeconomic Overview

The Democratic Republic of Congo (DRC) covers an area of 2 344 858km and includes a population of 97.879 million.[1] The country is surrounded by nine border countries and has immense natural resource reserves which support business and investment opportunities. Despite its resources, the DRC struggles with many socioeconomic problems like ongoing conflicts, mismanagement of resources, the Ebola epidemic and food insecurity. The overall coverage of basic public services – education, health, sanitation, and potable water – is limited.[2]

The DRC’s mineral wealth has allowed some real gross domestic product (GDP) growth, as the extractive sectors produce copious quantities of copper, cobalt and gold. A growing population in the DRC also drives economic growth through consumer spending. The economy has continued to grow, mainly driven by the recovery in mining production and the good performance of world copper and cobalt prices.[3] Growth of 4.7 percent is projected this year and 4.8 percent in 2020.[4] The national development plan, Plan National Stratégique de Développement 2017-2021, focuses on making the DRC an emerging market economy by 2030 and a developed country by 2050. The presidential and legislative elections took place on December 30, 2018 and Felix Antoine Tshisekedi was proclaimed winner with 38.5 percent of the vote.[5]

[1] The IMF (2019). Democratic Republic of the Congo – at a Glance. https://www.imf.org/en/Countries/COD (Accessed 13 August 2019). Pg. 1.

[2] The Central Intelligence Agency (2019). Congo, Democratic Republic of the. https://www.cia.gov/library/publications/the-world-factbook/geos/print_cg.html (Accessed 13 August 2019). Pg. 1.

[3] The World Bank in the DRC (2019). Democratic Republic of Congo – Overview. https://www.banquemondiale.org/fr/country/drc/overview (Accessed 13 August 2019). Pg. 1.

[4] Focuseconomics (2019). Economic Forecasts from the World’s Leading Economists: DR Congo Economic Outlook. https://www.focus-economics.com/countries/dr-congo (Accessed 13 August 2019). Pg. 1.

[5] The World Bank in the DRC (2019). Democratic Republic of Congo – Overview. Pg. 1.

Access to Finance

The Congolese financial system is expanding but remains fragile and operates primarily through the Congolese Central Bank (BCC). The financial sector comprises 17 licensed banks, a national insurance company (SONAS), the National Social Security Institute (INSS), one development bank, SOFIDE (Société Financière de Development), a savings fund (CADECO), 102 microfinance institutions and cooperatives, 72 money transfer institutions which are concentrated in Kinshasa, Kongo Central, North and South Kivu and the former Katanga provinces, three electronic money institutions, and 23 foreign exchange offices.[1]

The BCC developed a charter of compliance with international financial rules that has been accepted by virtually all banks operating in DRC. The stricter regulatory regime put in place after the global financial crisis increased bank compliance costs, however, and the resultant de-risking saw the bank lose two of its three remaining correspondent banks. It currently works with one correspondent bank, Citigroup.[2] All foreign banks accredited by the BCC are considered Congolese banks with foreign capital and fall under provisions and regulations covering the credit institutions’ activities in the DRC.

Bank financing is dominated by the collection of deposits, nearly 90 percent of which are denominated in U.S. dollars and held in demand accounts. Nearly 95 percent of loans are in dollars, and clients are mainly companies seeking working capital, primarily for daily operations and import/export activities. Statistics on non-performing loans do not seem reliable. According to the BCC’s regulatory framework many banks only record the balance due rather than the total amount of the non-performing loan.[3]

Transactions involving correspondence with associated foreign banks represent a significant part of the activities of DRC banks. Correspondent accounts represent more than 30 percent of bank assets and more than 95 percent of interbank market activity. The profitability of the banks is fragile and has deteriorated over the last year, reflecting high operating costs and exchange rates. Fees charged by banks are a major source of their revenues.[4]

Bank penetration is roughly 6 percent or approximately 3.9 million accounts, which places the country among the under-banked nations in the world. Based on its strategic plan, the BCC seeks to reach more than 20 million bank accounts by 2030. Banks are increasingly offering savings accounts that pay approximately 3 percent interest, but few Congolese hold savings in banks. According to the Banking Association of Congo, of an estimated 65 percent of the population that saves, only 4.7 percent do so through a bank.[5]

The rating agency Standard & Poor’s in August 2019 raised its outlook on the DRC to positive from stable.[6] There has been improvement of electronic transfer and financial inclusion systems, increasing from 3.7 percent in 2011 to over 26 percent in 2017.[7] In 2015 the government approved a Fund for Financial Inclusion scheme to refinance banks, microfinance institutions and cooperatives. Further, in early 2017 the International Finance Corporation signed a US$1 million agreement with FINCA, a local microfinance institution, to support expanding its digital financial services and access to credit for the low income population and small-scale entrepreneurs.[8]

[1] US Department of State. 2019 Investment Climate Statements: Congo, Democratic Republic of the. https://www.state.gov/reports/2019-investment-climate-statements/congo-democratic-republic-of-the/ (Accessed 31 August 2019). Pg. 1.

[2] US Department of State. 2019 Investment Climate Statements: Congo, Democratic Republic of the. 11 July 2019. Pg. 1.

[3]US Department of State. 2019 Investment Climate Statements: Congo, Democratic Republic of the. 11 July 2019. Pg. 1.

[4] Ibid.

[5] Ibid.

[6] Whitehouse, D. (2019). S&P may have jumped the gun by raising DRC outlook.

https://www.theafricareport.com/16302/sp-may-have-jumped-the-gun-by-raising-drc-outlook/ (Accessed 18 August 2019). Pg. 1.

[7] Forbes (2018). Mobile Drives Financial Inclusion in Africa, Growing 20% In Past Six Years. https://www.forbes.com/sites/tobyshapshak/2018/05/16/mobile-drives-financial-inclusion-in-africa-growing-20-in-past-six-years/#7fdf017f3129. (Accessed 04 October 2019). Pg. 1.

[8] FINCA DRC (2017). FINCA Fights Financial Exclusion with Banking Agents in DR Congo. https://www.finca.org/blogs/financial-exclusion-banking-agents-drc/ (Accessed 16 Aug 2019). Pg. 1.

Affordability

The country is still ranked 176^th on the UN Human Development index.[1] Low income earners struggle to access affordable and sustainable housing due to a lack of low-cost housing supply. Both the duration and the interest rates for housing loans are restrictive. While the interest rate is at an average of 24 percent (higher for microfinance institutions), an indirect consequence of the Central Bank’s high base interest rate, the maturity of most loans is set at a maximum of 60 months (5 years).[2] High lending rates by commercial banks make it hard for most Congolese to access financial services. The unemployment rate of 4.16 percent with around 70 percent of the population living on less than US$1.90[3] a day means that more than half of the population is excluded from access to housing finance.[4] Long-term capital is scarce, and most standard personal houses are financed through an instalment sale arrangement facilitated by the developer, and personal savings.

[1] United Nations Development Programme (2018). Congo, Democratic Republic of the, Human Development Indicators. http://hdr.undp.org/en/countries/profiles/COD (Accessed 18 August 2019) Pg. 1.

[2] Interviews with customer service representatives of the relevant banks and microfinance institutions. Among the commercial banks, only Bank of Africa offers a 15-year repayment option with an interest rate of 14 percent.

[3] The World Poverty Clock. 2018. Democratic Republic of the Congo’s role in Africa’s Poverty narrative. https://worldpoverty.io/blog/index.php?r=18. (Accessed 04 October 2019). Pg. 1.

[4] KPMG (2019). DRC Economic Snapshot H2, 2017. https://home.kpmg/content/dam/kpmg/za/pdf/2017/12/DRC-2017H2.pdf(Accessed 20 August 2019). Pg. 1.

[5] Galetti Corporate Real Estate (2019). Africa property focus: Democratic Republic of Congo. https://www.kfsa.co.za/blog/2015/05/africa-property-focus-democratic-republic-of-congo (Accessed 20 August 2019). Pg. 1.

[6] Expatisan (2019). Cost of living in Kinshasa, Democratic Republic of the Congo. https://www.expatistan.com/cost-of-living/kinshasa. (Accessed 20 August 2019). Pg. 1.

Housing Supply

Housing demand in the DRC outweighs housing supply, and the backlog is estimated at 3 945 555 houses countrywide.Kinshasa alone has a housing deficit estimated at 54.4 percent of the overall national deficit, i.e. an average of 143 092 houses to be built per year.[1]

Worth noting is that the DRC government does not have any housing support programme specifically targeted to support or subsidise low income households to access housing; therefore, the property market is solely left to the private sector. Urbanisation has increased from 9.9 percent in 1956 to over 42 percent in 2015, which reflects a relative surge in construction and housing supply. The country lacks a national housing development agency that can ensure that human settlement developments are sustainable, viable and appropriately located.

In rural areas, which make the most part (57.4 percent) of the country[2], the notion of property development is totally absent. Therefore, the limited number of developers are concentrated in urban areas, with very restricted access to finance. Because of this situation, housing supply is limited, and only accessible to the elite minority.

In the past five years, there has been a slight increase in housing supply and private housing development. However, most of the houses put on the market do not target low-income earners and are not affordable.[3]In 2011, for example, the central government launched a housing project named Cité Kin-Oasis, which accommodated the construction of 1 000 social houses in Kinshasa/Bandalungwa.This project has now been completed; however local communities have complained about the affordability and high price of the houses.

In Lubumbashi, a US$1.4 billion housing development called Luano City launched in 2010, is still under construction. Luano City is a mixed-used development project comprising two and three-bedroom houses, office park, and a retail space in the form of a shopping mall and industrial park.

Most housing development projects in the country are in the capital city of Kinshasa, including Cité du Fleuve, Cité de l’Espoir, Cité Belle Vie, Cité Moderne, etc. However, there are sporadic housing developments currently in the pipeline in other areas such as Fungurume, a mining district of the newly created province of Lualaba. Further, UN-Habitat[4]has been working mainly in North Kivu, Ituri, Bunia/Djugu, Mahagi and Masisi Territory, and the Equateur Province on several housing projects

[1]National Agency for the Promotion of Investments (2018). https://www.investindrc.cd/en/investment-guide/major-projects-awaiting-fundings

[2]Encyclopaedia Britannica (2018). Democratic Republic of the Congo Settlement Patterns. www.britannica.com/place/Democratic-Republic-of-the-Congo/Settlement-patterns(Accessed 16 Aug 2018).

[3]National Agency for the Promotion of Investments (2018). https://www.investindrc.cd/en/investment-guide/major-projects-awaiting-fundings

[4]UN Habitat (2018). Sustainable Housing Reconstruction in the Eastern Democratic Republic of Congo. https://unhabitat.org/books/sustainable-housing-reconstruction-in-the-eastern-democratic-republic-of-congo/(Accessed 16 August 2018).

Property Markets

The real estate market in the country is weak, especially for urban centres, such as Kinshasa, Lubumbashi, Kisangani, Goma, Kolwezi, Bukavu and Matadi. Sustained population growth over the last 30 years and the changing socioeconomic development landscape led to a rapid development of Congolese towns and a strong demand relative to supply. The sector features few property developers and a lack of institutions specialising in funding real estate projects. Access to decent dwellings or property is a challenge in DRC, despite the government trying to reduce the acute housing deficit, particularly among urban dwellers in Kinshasa and Lubumbashi. This is aggravated by the price of units, which are more than US$25 000, well above the affordability level for a working lower middle income household in Kinshasa.[1]

DRC has a housing deficit of approximately 4 million units, while the annual housing requirement is close to 250 000 units. Although the demand for affordable housing is evidently high, housing projects have been and are still skewed towards the needs of middle income and wealthy individuals, who constitute less than 10 percent of the population.[2]

Property prices are high and generally aimed at the high-end market. Prime yields of 15 percent can be realised in DRC’s retail market, with rents of US$35/m² a month. Industrial property yields 13 percent at US$8/m² a month, followed by offices that yield 12 percent at US$45 m² a month. The residential market yields 10 percent with rent of US$8 000 a month for a four-bedroom executive house. Beyond the limited, high-end market, however, a clash between statutory and customary land laws undermines property market developments and achieving legal title. Land administration systems are lacking. As a result, where land titling does exist, the price is high (US$800 to US$1 000 per hectare). In Kinshasa, land values are even higher – an estimated US$100 000 per hectare in well-serviced residential areas.[3]

 The Kinshasa office market is focused on the north of the city, with many of the most important buildings being along Boulevard du 30 Juin. Prime rents are around US$30/m² a month but can reach US$40/m² a month for good quality small spaces.[4]

The Kinshasa retail market has shown limited progress in recent years. Shoprite is the only major international retailer in Kinshasa, having a supermarket in a prime position in the Gombe district. Most other supermarkets are relatively small. Goods sold in supermarkets can be prohibitively expensive.[5]

Recent industrial property development has been in the eastern areas of the city of Kinshasa, between the port and the international airport. Prime rents for new-build industrial properties are approximately US$8/m² a month.[6]

In the overall Ease of Doing Business index in 2019, the DRC is ranked 184 out of a total of 190 economies. Dealing with construction permits requires 13 procedures in 2019, an increase from the 12 procedures required in 2018; it takes 122 days and costs approximately 15.8 percent of the property value. Globally, the DRC is ranked 165 in 2019 from 121 in 2018 out of 190 economies on the ease of dealing with construction permits, a negative change for the construction and housing sectors. The DRC is ranked 156 on property registration in 2019, down from 158 in 2018 and property registration can be completed in 38 days through eight steps.[7] Arecent initiative executed by a local firm, Congo Check focusing on the digitisation of land titles and titling procedures could improve the current land administration systems by increasing transparency.

The state policy is characterised by enormous institutional and regulatory deficiencies. Uncontrolled and non-compliant construction is undertaken without strict supervision from local land and housing departments.[8]

[1] Africa Property News (2019). DRC not an easy environment, but Real Estate opportunities abound. Pg.1.

[2] Ibid.

[3] Africa Property News (2019). Housing supply limited in Democratic Republic of Congo.http://www.africapropertynews.com/central-africa/3076-housing-supply-in-democratic-republic-of-congo.html (Accessed 20 August 2019) Pg. 1.

[4] Galetti Corporate Real Estate (2019). Africa property focus: Democratic Republic of Congo. https://www.kfsa.co.za/blog/2015/05/africa-property-focus-democratic-republic-of-congo (Accessed 20 August 2019). Pg. 1.

[5] Galetti Corporate Real Estate (2019). Africa property focus: Democratic Republic of Congo. Pg. 1.

[6] Ibid.

[7] World Bank Group (2019). Doing Business: Democratic Republic of the Congo. https://www.doingbusiness.org/content/dam/doingBusiness/country/c/congo-dem-rep/ZAR.pdf (Accessed 16 August 2019). Pg. 1.

[8] Pages Claires (2019). Real estate agencies in the Congo. http://www.pagesclaires.com/eng/Activities/Real-estate-agencies(Accessed 16 August 2019). Pg. 1.

Policy and Regulation

In the DRC, Act 11/020 of 15 September 2011 defines rules governing microfinance. This serves to facilitate mass banking and the establishment of a sound and inclusive financial system. The insurance legislation, Act No. 15/005 of 17 March 2015, was adopted to liberalise the insurance sector and attract private insurance companies. This legislation has allowed the creation of the Insurance Regulatory and Control Authority (ARCA – Autorité de Régulation et de Contrôle des Assurances).

Land Law No 73-021 of 20 July 1973 prescribes standards to regulate the purchasing, sale and leasing of land. Circular Note n°005/CAB/MIN/AFF FUNC/2013 of 12 June 2013 deals with land and property rights.[1] The Land Law No. 15/025 of 31 December 2015 on leasing and non-professional rents regulates the real estate sector and circumscribes the role of real estate agencies. Rental is regulated under a new policy that protects tenants from landlords who charge more than three months rental for a deposit.[2]

[1] Congo Invest Consulting (2019). Housing. http://www.congo-invest.com/v2/index.php/housing/ (Accessed 18 August 2019). Pg. 1.

[2] HG Legal Resources (2019). Investing in Real Estate in the DR Congo: Ownership, Rights and Usage of the Land. https://www.hg.org/legal-articles/investing-in-real-estate-in-the-dr-congo-ownership-rights-and-usage-of-the-land-37001 (Accessed 18 August 2019). Pg. 1.

Opportunities

Based on its natural resources, the DRC is still an ideal destination for business and investment opportunities. Under the new president Felix Tshisekedi, public finances improved somewhat in 2019 in the context of continuing low-budget management and improved domestic revenue mobilisation. The government has also initiated several sector reforms to strengthen governance in natural resource management and enhance the business climate. Almost all contracts signed by the government granting mining, oil and forestry licences are now publicly available. The DRC participates in the Extractive Industries Transparency Initiative (EITI) and publishes regular reports on natural resource revenues in this framework. Legislation on mining and hydrocarbons has been amended to allow the state to benefit more from these resources.[1]

To boost to the economy, the National Agency for the Promotion of Investments has presented a list of 27 major projects with pre-feasibility and feasibility studies awaiting funding.[2] Furthermore, additional progress has been made in facilitating and simplifying the process of setting up new companies and granting building permits through the creation of a special agency, Guichet Unique de Création d’Entreprises.[3]

New private equity companies and the initiatives by local banks and microfinance institutions, among them PEPELE Mobile (Trust Merchant Bank), FINCA Mobile, and ProCredit Cash Express, also serve to promote financial inclusion and provide housing finance opportunities.

In conclusion, the government must increase its efforts to systematise the competitive mechanisms involved in allocating mining, oil, and forestry contracts. More effort and investment is needed in the energy sector to improve the country’s energy supply deficit. Additionally, corruption is cited as a constraint to doing business in the DRC. Although efforts in recent years have gone a long way towards diminishing the problem, corruption remains a real issue across all facets of business in the DRC.[4]

[1] The World Bank Group (2019). Democratic Republic of Congo – Overview. https://www.banquemondiale.org/fr/country/drc/overview(Accessed 13 August 2019). Pg. 1.

[2] DR Congo National Agency for the Promotion of Investments (2019). Major Projects Awaiting Fundings. https://www.investindrc.cd/en/investment-guide/major-projects-awaiting-fundings (Accessed 13 August 2019). Pg. 1.

[3] Guichet Unique de Création d’Entreprise (2019). La procédure est désormais simple pour le requérant.

https://guichetunique.cd/?menu=contexte (Accessed 13 August 2019). Pg. 1.

[4] Africa Property News (2019). DRC not an easy environment, but Real Estate opportunities abound. Pg. 1.

 

Availability of Data on Housing Finance

In the Democratic Republic of the Congo, data related to housing such as housing finance, housing affordability, housing supply, the property market, and the regulatory framework are limited or simply do not exist. Therefore, data must often be obtained from international sources such as the United States Central Intelligence Agency), the IMF, UN Habitat, United Nations Development Programme, World Bank Group, and the African Development Bank Group. Most of those organisations provide information related mainly to housing supply, economic analysis and housing opportunities. Therefore, information gaps apply more to data on access to finance for housing, household housing affordability, and the housing regulatory framework.

Websites

Africa Property News http://www.africapropertynews.com/

Congo Invest Consulting http://www.congo-invest.com/

DR Congo National Agency for the Promotion of Investment https://www.investindrc.cd/

ÉLAN RDC http://elanrdc.squarespace.com/

Expatisan https://www.expatistan.com/

FINCA DRC https://www.finca.org/

Focuseconomics https://www.focus-economics.com/

Forbes https://www.forbes.com/

Galetti Corporate Real Estate https://www.kfsa.co.za/

HG Legal Resources https://www.hg.org/

UN Habitat https://unhabitat.org/

CIA https://www.cia.gov/library/publications/the-world-factbook/geos/print_cg.html

IMF https://www.imf.org/en/Countries/COD

UN Habitat https://unhabitat.org/books/sustainable-housing-reconstruction-in-the-eastern-democratic-republic-of-congo/

United Nations Development Programme http://hdr.undp.org/en/countries/profiles/COD

World Bank Group https://www.banquemondiale.org/fr/country/drc/overview

African Development Bank Group https://www.afdb.org/en/countries/central-africa/democratic-republic-congo