Lesotho 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 Lesotho is 12 percent, as of September 2016, and requires at least a 12 percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 24 500, which is for a 72 square metre unit. Cement prices are lower than the continental average, at US$ 5.50 for a 50-kilogram bag.
With an urbanisation rate of 3.15 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. Maseru, the capital city of Lesotho, has seen significant expansion through incremental construction, while the Lesotho Housing and Land Development Corporation (LHLDC), a member of the African Union for Housing Finance (AUHF), is a parastatal tasked with increasing housing supply. 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 Lesotho can afford.
Find out more information on the housing finance sector of Lesotho, 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 2016 edition, which has up-to-date profiles for 51 African countries.Download yearbook
Lesotho is a mountainous landlocked country completely surrounded by the Republic of South Africa (RSA), with an estimated population of 2 100 000 in 2014 and national population growth rate of 1.2% per annum as stated in the African Economic Outlook of 2016. The country’s land surface is 30 355 square kilometers (km2). The rural areas have a population of 1 414 381 (73%) and urban areas with 510 000 (27%) population. The country is classified as one of the least developed countries globally, with a national population below poverty line estimated at 57.1% (61.2% and 39.6% for urban and rural areas respectively) for 2010 survey year.
The real GDP growth was estimated at 3.4% in 2015 and projected to decline to 2.6% in 2016. There was a significant increase in the GDP from 2014 (estimated at 1.98%) to 2015. During the 2014/2015 financial year, public spending was recorded at 63.1% of the country’s GDP due to a shift in growth from export driven to public spending, making Lesotho one of the highest ration globally in terms of public spending, hence an economic growth that is not inclusive leading to high poverty levels with GNI per capita estimated at US$1 350.
The depth of poverty in Lesotho is believed to be increasing drastically with very high inequality. It is estimated that about 61% of the population living in rural areas are considered poor while only 39% of the poor live in urban areas which denotes noticeable disparities of socioeconomic, in particular, income, wealth and living conditions. In April 2016, the country’s inflation rate was recorded at 7.9%. A shortage of labour market contributes significantly in the country’s poverty. The government employs more than 50 000 persons, tourism employs 53 000 people including indirect jobs supported by industry; mining employs about 3 000 persons (both directly and indirectly) despite being the fastest growing sector; manufacturing employed 48 000 in 2014; textile and garment industry employs about 36 000 mainly women. Unemployment rate, nonetheless remains very high, estimated at 28.1% in 2014. An average household income per month was LSL1 086.94 and about 90% of households who earned less that LSL3 000 had an income of LSL404 on average, hence do not qualify to access a loan from commercial banks. Additionally, households whose monthly income ranged between LSL3 000.00 and LSL6 000 had an average monthly income of LSL4 313.
The number of housing units available in the country is not documented, however the Lesotho Housing Profile (LHP) estimated a housing need of about 60 000 by 2025. Nonetheless, housing finance is mainly through mortgage with about 400 loans per annum to citizens earning more than US$900 a month. The criteria used to qualify for a loan poses a challenge, in particular to non-salaried people.
Access to Finance
Lesotho has relatively limited banking sector throughout the country, however, the number of branches has increased significantly from 44 in 2013 to 76 in 2016. This sector is regulated by the Central Bank of Lesotho (CBL) and dominated by commercial banks namely, Standard Lesotho Bank Limited (SLB), First National Bank (FNB), NedBank Lesotho and Lesotho Postbank (LPB).
SLB is present in all 10 districts with a total of 17 branches, 86 ATM network and 555 point-of-sale terminals spreading throughout the lowlands and highlands of Lesotho. Currently the bank has 263 381 active customers, including 195 705 debit holder and 10 059 credit card holders. SLB also has and offers home loans from LSL100 000 up to 10 million. Initially the bank required 20% deposit or more, but recently the deposits depend on a house or house plan valuation report. Proof of income such as a pay slip determines the amount one would qualify for. FNB Lesotho Limited has eight branches (in five districts), 63 ATMs, 485 point-of-sale terminals and 145 145 active clients. The bank offers home loans. NedBank Lesotho has nine branches with 20 ATMs network spread throughout its branch network and point-of-sale terminals.
LPB provides financial services predominantly to the under-served Basotho in the urban areas and previously un-served rural population. LPB has 42 branches spread throughout the country and ATMs. The bank does not have mortgage facilities however, it provides general purpose personal loans from LSL1 000 up to LSL150 000 with an interest rate of 21.5% annually over a period of one to five years. To qualify for such loans, the bank needs a salary confirmation payable into a client’s LPB account. A pay slip is used to assess amount one would qualify for.
In October 2011, the Lesotho government passed a Credit Reporting Bill, which will ultimately set up a credit bureau to be used by credit providers and the CBL. This Bill makes provision for the licensing of private credit bureau operators and technical bureau services, which will assist financial institutions in lending out money by establishing a credit information point on borrowers.
Compuscan, a credit bureau licensed by CBL commenced its operations in August 2014. The SADC Credit Information Sharing Project, initiated and supported by FinMark Trust, also commenced in July 2014. This saw the partnership among the Ministry of Finance as the policy maker and project custodian on the ground, CBL, the Credit Bureau and the Credit providers themselves working together to operationalise a credit information sharing environment in the country. The total number of accounts recorded on the Bureau as of 31st March, 2016 was 121 860, while the total number of natural persons recorded on the Bureau was 90 757.
Habitat for Humanity Lesotho signed a partnership agreement in February 2016 with Lesana Lesotho Limited, a subsidiary of Select Africa, and classified as a microfinance lending institution provides housing loans and general purpose credit, investment, insurance and financial advisory products in countries across Africa. New clients are given loans up to LSL100 000, and LSL125 000 to revolving clients for housing and housing related purposes. The loans are payable at 25% over a period of one to five years. The housing solutions services are specifically for low income earners in Lesotho who can provide proof of income (payslip) as one of the requirements.
There are 235 non-banking financial institutions (NBFIs), 51 active financial cooperatives, 11 insurance companies, four licensed asset managers, 30 licensed insurance brokers, 57 registered money lenders including one credit institution, 102 pension funds and six collective investment schemes (CIS), including two money market funds (MMFs). Three banks serve the formal sector, mostly salaried employees as well as medium and large corporate enterprises.
Access to finance is very low despite the significant rise in the number of bank branches and other services within the banks. An estimated 19% of Basotho were not financially served. This was attributed to the use of insurance as well as the formal and informal primary funeral insurance which accounted for 62% of adults. The adult population percentage that have bank accounts is estimated at 38% (14% in rural areas) and additional 23% have other means of formal financial service. Generally, the level of formal financial inclusion of adults Basotho is estimated at 61% and those served by informal financial services stand at 23%.
The gross national income of Lesotho is estimated at US$1 500 per capita income, hence the country being classified as a lower middle-income country. Population living below poverty line is estimated at 57.1% (61.2% and 39.6% for urban and rural areas respectively) while 34% is below extreme poverty line. The Lesotho National Housing Policy revealed that, about 70% of Basotho households earn less than M1 000 (about US$ 99) per month based on the Lesotho Housing Profile house cost to household expenditure ration of 4:1. This implies therefore, that, they do not meet the commercial banks’ requirements for a loan such as, a deposit and amount of loan repayment which is above their net salary.
A significant number of Basotho cannot afford to buy formally developed houses despite the 17% of Basotho earning a salary or a wage. In Lesotho, a salary determines the amount of loan one would qualify for, hence is beyond the low income earner’s reach. For someone to qualify for the Nedbank loan, for example, proof of income such as payslip, employment contract stating terms and conditions of employment and at least 10% deposit of the total loan amount is mandatory. Standard Lesotho Bank on the other hand, offers home loans from LSL100 000 up to LSL10 million. Initially the bank required 20% deposit or more, but recently the deposit required depends on a valuation report and proof of income which determines the amount of loan one would qualify for. The Postbank offers personal loans for general purposes only provided clients bank with Postbank. Salaries and wages determines the amount of loan.
Lesotho Housing and Land Development Corporation (LHLDC) provides rental for middle income at LSL5 000 (US$343.16) on average and LSL7 000 (US$480.42) for high income on average. Sigma Housing Estate caters for low income with rentals ranging from LSL1 800 (US$123) to LSL2 500 (US$171); LSL5 000 (US$343) to LSL10 000 (US$686) for middle income; LSL15 000 (US$1 029) and LSL25 000 (US$1 715) for high income categories. Their housing stock for sale caters for middle to high income only which ranges from LSL650 000 – LSL950 000 (US$44 610 – US$65 199) and LSL1.5 million – LSL3.5 million (US$102 947 – US$240 210) respectively. Informal housing that exists serves majority of low income earners. These are mostly single and double-roomed attached houses classified as Malaene in Lesotho. The rental costs range from LSL500 to LSL800 (US$34 – US$54) per month.
Basotho still rely on social networks and inheritance to own property, with a small percentage (23%) living in houses they financed through bank loans. Some build their homes themselves while about 23% live in homes they inherited.
The housing delivery systems are mainly through home ownership, employment tied housing rentals (especially for the civil service employees depending on the type of house, they pay a portion of their salaries as rent from LSL100 for a one roomed house to LSL800 for a three bedroomed house), and rental housing with about 52% of households renting single-row houses (malaene) in urban areas. Housing need seems to be on the rise particularly in urban areas (estimated at 35%) compared to rural areas which account for less than 1% and this can be attributed to urban migration. The national household average size is estimated at 4.8 persons for rural areas and 3.4 persons in urban areas, and this is a clear indicator of lack of adequate housing in Lesotho. There is a dire need for housing supply to curb the overcrowding situation. The informal housing supply in the country is estimated at 70% and rental affordability is estimated at 25-30% of household expenditure hence urban households can afford to pay between LSL208 – LSL250 (US$14.28 – US$17.16) per month and LSL417 – LSL500 (US$417.62 – US$34.32) per month.
Rental markets and house purchases in Lesotho vary, depending on the type of delivery system (being informal or formal), the geographical location (urban, peri-urban and rural) and category (low, middle and high income) households fall in.
LHLDC is a government parastatal mandated to deliver formal housing in Lesotho. To date, it has sold detached houses mainly for middle to high income and the costs vary. Twenty (20) three-bedroom houses that were customized design drawings per individual preferences in Katlehong area (plots size ranged from 540 to 604m2) for high income only were sold; 996 plots (with an average size of 450m2 for low income and 600m2 for middle to high income) were developed in Maseru South West (MASOWE) III and only 34 houses were built and sold due to financial constraints. The low-income houses sold were three one-bedroom units and three two-bedroom units while middle-income had three designs of three-bedroom units and four different designs of two-bedroom units.
In the MASOWE IV housing project, LHLDC has 448 residential plots with 189 earmarked for low-income (plot size of 450m2), 227 for middle to high income plot sizes ranging from 700 to 800m2. The target was turn-key for all income groups with a minimum price per unit of LSL85 000 and LSL160 000 (US$5 833 – US$10 981) maximum price. There are also 17 two-bedroom houses in Linakotseng which are almost completed. Linakotseng housing project was initiated by the Ministry of Local Government and Chieftainship (MOLGC) as a low income housing project. The project was later transferred to LHLDC in 2015.
Maseru Municipal Council (MMC) is responsible for planning and allocating land within the designated city boundaries. In 2012, MMC developed about 800 plots for residential housing in Masianokeng. The average plot of 600m2 was sold at LSL80 (US$5.49) per square meter. To date, all 800 plots have been sold. There is a booming market for private housing developers and this has helped to create competitive housing markets.
Private housing developers in the country, produce housing stock mainly for middle to high income. The Matekane Group of Companies (MGC) is involved in property development and to date it has built 20 three-bedroom luxury houses at Mpilo Estate. The price per unit ranges from LSL1.8 million to LSL2.5 million (US$123 536 to US$171 578). Another private company engaged in developing housing estates is Sigma Construction and Property Development that had developed low, middle, and high income residential houses (both detached and attached) in Mabote, Khubetsoana, MASOWE II and III.
Habitat Lesotho works in partnership with vulnerable groups, i.e. orphans and vulnerable children (OVC), elderly and disabled. 143 Low income houses were built at Khubeli village, in Maseru between 2003 and 2006. The houses ranged from LSL15 000 (US$1 029) for a single room with an improved ventilated pit latrine (VIP) to LSL35 000 (US$2 402) for a three rooms also with a VIP. These costs included the price of planned and surveyed plots (sizes ranged from 375 – 550m2). Habitat Lesotho also builds two roomed house and a VIP and construction costs range from LSL45 000 – LSL55 000 (US$3 088 – US$3 774) depending on the geographical location where these houses are built. To date 1 372 households have been served.
Home owners and renters use their own links such as social networks like, family and friends, to find out about property markets in the country thus making the housing market very small. Only a few, mostly middle to high income earners rely on real-estate agents. Unfortunately, the real-estate sector is not regulated hence, lack of data and inflated prices make it very expensive and inaccessible to majority of Basotho. The Housing Department within MOLGC is the designated regulatory body for the housing sector in Lesotho. Nonetheless, the sector’s growth is estimated at about 1% a year, and contributes about 9% of GDP.
Property markets are more skewed towards potential buyers in the middle to high income category, leaving out the lower income. The 2016-2020 draft National Housing Strategy reiterated that, majority of Basotho with a monthly income of about LSL1 000 are still faced with challenges of accessing affordable and adequate housing due to high unemployment rate, estimated between 30-35%, (with the poverty line of about 57.1% and population below poverty line at about 35.1%) and low income levels coupled with high property rates. In turn, this has contributed to a major increase of unplanned and underserviced residential areas especially in the peri-urban areas which are built on agricultural fields (masimo), thus reducing arable land estimated at about 10% of the total land surface of Lesotho. The National Housing Policy noted that these settlements are obtained informally through subdivision of masimo by owners and allocated by chiefs. It is further noted that, majority of these settlements lack basic services and infrastructure such as, water, sanitation, roads and electricity. This implies that the formal housing supply does not meet the housing demand in Lesotho. In order to meet the housing demand, Lesotho Housing Profile (LHP) estimated that about 5 200 houses (interpreted as about 9 000 rooms) will be needed a year to meet the urban housing demand .
Housing Policy and Regulations
The Constitution of Lesotho recognises the importance of policies that enable Basotho to have decent shelter. Section 34, notes the importance of adopting policies that encourages its citizens to acquire property including land, houses, tools and equipment, as far as economic conditions allow. It must however be noted that, this clause does not confirm that provision of a house to Basotho citizens is a constitutional right. This implies therefore, that housing in Lesotho is a basic human need but not a basic human right as such, it is a sole responsibility to individuals to provide for their own housing.
The National Strategic Development Plan (NSDP) is the Government of Lesotho (GoL)’s medium term plan to achieve accelerated and sustainable economic and social transformation. The NSDP 2012/2013-2016/2017 under its strategic framework, emphasises the importance of developing a key infrastructure plan that integrates well planned services and human settlements, thus improving access to quality housing as well as, development of shelter and property. It further encourages the implementation and enforcement of safety standards of housing and promoting planned urban densification in residential developments for maximum utilisation of limited urban space.
There are legal and regulatory instruments in place to enable forward planning and development, although they are outdated. For instance, the 1980 Town and Country Planning Act 1980, the 1989 Development Control Code, the 1991 Development Regulations, the 1990 Planning Standards and the 1995 Building Control Act as well as its 1995 regulations. There is an urgent need for government to review and update these important and critical land laws in Lesotho, in order to effectively address challenges related to development in the country.
Land administration reforms were undertaken through the support of Millennium Challenge Account (MCA) signed between the GoL and USA Government, aimed at improving land laws and policies as well as supporting the establishment of Land Administration Authority (LAA). The legislative and institutional reforms that have taken place to date include the Land Administration Authority Act of 2010; the Land Act of 2010; the Land Regulations 2011; the Land Court Regulations 2011 and the Sectional Titles Draft Bill 2011.
LAA is an autonomous body made up of former government departments which dealt with cadastre, national mapping and deeds registration. This merge was facilitated by the 2010 Land Administration Authority Act. In turn, several bottlenecks (i.e. number of days it takes to acquire a land lease from submission of documentation) which hindered speedy processing of land leases were removed, this in turn, improved the revenue collection for government through efficient land billing and collection systems i.e. land taxes. Since 2010 up to May 2016, 67 592 leases have been issued and registered with the office of the Registrar of Deeds. Nonetheless, the 2010 Land Act is yet to be fully operationalised.
In January, 2016, the LHP was launched by MOLGC, supported by UNDP and UN-Habitat in Lesotho concurrent to the consultative process carried out to review 2005 Draft National Housing Policy. LHP gives a holistic depiction of the factors influencing housing provision in the country, which includes, housing finance, land and construction, institutional, regulatory and cultural settings. Despite the reforms, policy enactment, access to finance as well as, access to land that would advance Basotho’s housing needs is still a challenge to the majority.
Housing Sector Opportunities
There is an opportunity for property markets investment due to the demand for property, particularly for the middle to higher income groups. There is also a critical need for low income group property markets given rapid urbanisation. The ongoing legislative and policy reforms coupled with the current developments which are concentrated mostly in Maseru, leaves other districts open for investments in the housing sector. Microfinance institutions which is non-existent, can provide innovative housing finance options targeted at lower income earners in order to grow the sector. Ministry of Trade and Industry implementation of the Private Sector Competitiveness and Economic Diversification Project. As a result of this initiative, the number of days required to register a company reduced from 28 to seven. Again, number of days required to obtain an industrial license reduced from 35 to five days; and turn-around time for a trade license was reduced to 15 days from 30-50 days.
Progress made in addressing land allocation and management weaknesses is highlighted previously, which in turn, reduced number of days taken to 11 days to acquiring a land lease from date of submission. This also increases investment opportunities as commercial banks accept land lease as collateral for loans. The introduction of Sectional Titles has created opportunities in property ownership as it enables separate ownership of a section or sections of a building. Apartments can therefore, be owner occupied. Processes to review the 1980 Town and Country Planning Act, which is aimed at promoting orderly development of land in urban areas have started. The reviews document will pave way to the establishment of planning boards, declare planning areas and set out procedures for the preparation of physical plans which will create opportunities for acquisition of planned sites for development in an efficient manner.