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Djibouti is a small country in the Horn of Africa bordering Ethiopia to the East and Eritrea to the South. Less than 0.04 percent of the land is arable, and approximately 78 percent of the country’s population lives in urban areas (mainly in Djibouti City). The country is strategically positioned along a major sea trade route, where the Red Sea meets the Gulf Aden, and is Ethiopia’s main import- export port. Due to this strategic position, the country’s key economic driver is transportation and logistics services.
Djibouti’s economic growth has been remarkable, recording more than 6.5 percent on average per year over 2014 to 2017. Projected growth in 2018 and 2019 is 6.9 percent, and this is attributed to growing investments in infrastructure, including ports and the electric railway linking Djibouti to Ethiopia.
Access to finance in Djibouti is a major challenge for big and micro, small and medium enterprises. The country has no active capital markets or fixed income markets and, for many years, the country did not have sovereign credit rating. Recent interventions through the World Bank and the International Development Association (IDA) are however availing FDI to the country for various development projects including women and youth entrepreneurship, expansion of key business services, and capacity building for entrepreneurship.
Djibouti’s population is predominantly concentrated in urban areas, but neither the private nor public sectors are able to meet the growing housing needs. Affordability for both rental and purchase units remains a challenge, and this is worsened by high unemployment and poverty rates. The government of Djibouti has however made affordable housing a major priority issue and called on local and international partners to support social housing projects. In 2011, within the Ministry of Housing, Urban Development and Environment, a State Secretary for Housing was set up to promote the housing sector and find lasting solutions to the housing deficit.
Djibouti presents a great opportunity for developers of low-cost housing, especially foreign investors who have sufficient capital to develop such houses. Considering that average rental and mortgage monthly repayment rates take up more than 50 percent of average salaries, new and existing developers will need to provide better terms. Perhaps such developers may consider partnering with the few commercial and Islamic banks such as Salaam Bank to finance mortgages under Islamic banking terms.
Importantly, the country’s economic growth has remained one of the highest in the region (above 6.5 percent for over five years) with very low inflation rates. The country has a stable political climate and enhanced security. The government has significantly reduced the cost of concrete inspections and the cost of starting a new housing business. With a stable currency pegged to the US dollar and no restrictions on repatriation of profits from the country, housing investors are presented with sizable opportunities in Djibouti.
Find out more information on the housing finance sector of Djibouti, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Supply
- Property Markets
- Policy and Regulation
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2018 edition, which has up-to-date profiles for 54 African countries.Download yearbook