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 2017 edition, which has up-to-date profiles for 54 African countries.Download yearbook
Lesotho is a mountainous landlocked country completely surrounded by the Republic of South Africa (RSA), with an estimated de jure population of 2 007 201 as of 10th April 2016. The 2006 census population was 1 876 633. This implies that an annual population growth rate of 0.68 for the period 2006-2016.
In December 2016, the country’s inflation rate decelerated from 5.3% to 4.0% in April 2017. Overall in 2016/17, inflation in Lesotho is expected to average 6.6% mainly due to increase in cost of food and non-alcoholic beverages. However, it is projected to decline marginally in 2017/18 to 6.3%. The broad measure of money supply expanded by 10.9% in March 2017 compared with a decline of 4.2% in December 2016.
GDP stands at US$1.9 billion (2017 estimates). In 2016 it was US$2.2 billion (2016 estimates). At the end of March 2017, government budget balance is estimated to have registered a deficit of 10.2% of GDP compared to a revised deficit of 6.0% in December 2016. The economic activity in Lesotho gained momentum in the second half of 2016 due to recovery in global manufacturing which had weakened severely in 2015. The cyclical recovery in manufacturing and trade together with buoyancy in global financial markets, is expected to lead to global growth of 3.5% in 2017 and 3.6% in 2018, respectively. Following tiny recovery of only 1.7% in 2015/16 and 2.1% in 2016/17, the recovery of economic activity is projected averaging 3.4% over the medium term because of significant agricultural production recovery which sharply rose by 139% over the 2016/17 crop year. Mining growth is also projected at 1.7% in 2017/18 from 8.1% in 2016/17, as a result of recapitalization in Liqhobong Diamond Mine which has recently resumed full production. Lesotho’s manufacturing activity is dominated by textiles and apparel and the sector’s exports are predominantly destined to the United States and South Africa. In 2015/16, 70% of Lesotho-Made garments were exported to the United States under AGOA, while 30% terminated in South Africa. In summary, the Lesotho economy remains exposed to internal and external shocks and therefore close monitoring of domestic developments is necessary and crucial.
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). The first three banks offer mortgages except the Lesotho Postbank.
SLB is present in all 10 districts with a total of 17 branches, 86 ATM networks 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 holders and 10 059 credit card holders. SLB also has and offers home loans from LSL100 000 up to 10 million at the rate of 12.5% per annum. 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. 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.
There are 235 non-banking financial institutions (NBFIs), 51 active financial cooperatives, 11 insurance companies, four licensed asset managers, 30 licensed insurance brokers, 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. There are also 29 registered micro lenders in Lesotho and an estimated number of 50 not registered with the Central Bank. Amongst all these micro lenders in Lesotho, there are only two that are providing housing related loans in a specific housing portfolio and these are Lesana Financial Services and Letshego Financial Services. The average loan size given by Lesana Financial Services is Ls33 359.20 (US$2 590). Lesana Financial Services, is 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. The loans are payable at the rate between 21.5% for housing related loans and 45% for other loans a year over a period of 60 months.
The Interest rates in Lesotho follow the same trend as those in South Africa. Commercial bank prime lending rate averaged 11.7% from June to December 2016. The first year deposit rate remained unchanged at 3.5% over the review period. The large margin between the lending and the deposit rates imply low lending by commercial banks, despite high demand for start-up and working capital.
Notwithstanding all these positive trends, access to finance in Lesotho is still 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. 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%.
Lesotho is classified as one of the least developed countries globally, with the national population living below an international poverty line of US$1.25 per day estimated at 40%. Unemployment rate, nonetheless remains very high, estimated at 28.1% according to 2016 estimates and this affects the disposal income each household can have to access basic services as well as available financing avenues. A shortage of labour market contributes significantly to the country’s poverty. Persistent economic slowdown in South Africa is impacting negatively on the employment of Basotho mineworkers as well as exports and the stability of Southern Africa Customs Union (SACU) revenues.
The Lesotho National Housing Policy revealed that, about 70% of Basotho households earn less than Ls1 000 (about US$ 99) a 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. Access to housing finance is mainly through mortgage financing with about 400 loans a year provided to citizens earning more than US$900 a month.
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 determine the amount of loan.
Nonetheless, 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. The 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) a month and LSL417 – LSL500 (US$417.62 – US$34.32) a 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.
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 and 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.
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. In 2017, the cheapest newly built house by LHLDC is Ls250 000 (US$19 410) measuring an average of 40 square meters on a fully serviced plot.
Twenty (20) three-bedroom houses that were built in the Katlehong area (plots size ranged from 540 to 604m2) for high income only were all sold in 2005; 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 between 2005 and 2016 due to financial constraints. Due to financial constraints, only 16 houses were but only 5 sold in 2017 to date. 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$610) 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. In 2017, MMC has sold out serviced sites for the high income class in the inner city of Maseru at Ls250 (US$19.04) a square meter and the plots were 40 and 30 at Matala Phase II selling Ls150 (US$11.42) a square meter for middle income class. There has been a considerable consideration for low income class located at Khubelu area for 36 plots selling at Ls60 (US$4.57) a square meter.
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$137 090 to US$190 403). 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. The Green City Property Developers have planned to construct close to 800 gated housing units over a five year period to cater for the middle to high income class at an area called Pena-Pena at Ha Abia just outside the Maseru City.
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 Khubelu village, in Maseru between 2003 and 2006. The houses ranged from LSL15 000 (US$1 142.43) for a single room with an improved ventilated pit latrine (VIP) to LSL35 000 (US$2 665.65) 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 houses and a VIP and construction costs range from LSL45 000 – LSL55 000 (US$3 427.27 – US$4 188.88) depending on the geographical location where these houses are built. To date 1 372 households have been served. Between July 2016 and June 2017, 70 vulnerable families constructed two-roomed houses together with a pit latrine. Most of these houses provided under Habitat Lesotho assistance are 100% subsidised by the donors.
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. In order to meet the housing demand, LHP estimated that about 5 200 houses (interpreted as about 9 000 rooms) will be needed a year to meet the urban housing demand.
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. Property markets are more skewed towards potential buyers in the middle to high income category, leaving out the lower income. 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. Since 2010 up to May 2016, 67 592 leases have been issued and registered with the office of the Registrar of Deeds.
Table 1: 2017 Land Registration Data
|Period of Transaction||Registered Leases||Land Transfers||Registered Bonds||Registered Sub-leases||Mining Leases||Registered Variations||Registered
|January 2017||Info not received||109||69||1||0||10||53||9|
|February 2017||Info not received||125||32||1||0||8||25||23|
|March 2017||Info not received||303||49||0||1||8||23||14|
|April 2017||Info not received||49||42||1||0||13||33||15|
|May 2017||Info not received||66||37||4||0||9||30||17|
|June 2017||Info not received||69||49||1||0||7||29||
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), under its strategic framework 2012/2013-2016/2017 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, 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 still to be tabled before Parliament for endorsement.
LAA is an autonomous body made up of former government departments which dealt with cadastral 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.
Housing Sector Opportunities
There is still an opportunity for property market investment due to the demand for property, particularly for the middle to higher income groups. There has been quite a number different property estates advertising for different housing options in 2017 to cater for different housing options.
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 are gradually increasing with a focus on housing microfinance, can provide innovative housing finance options targeted at lower income earners in order to grow the sector. As a result of the Ministry of Trade and Industry implementation of the Private Sector Competitiveness and Economic Diversification Project 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 highlighted previously helped to reduce the number of days taken from 30 to 11 days to acquiring a land lease from date of submission. The number of land transactions recorded has increased tremendously in 2017 which will help to facilitate different development initiatives on the pieces of land by the land owners including housing development. This also increases investment opportunities as commercial banks accept land lease as collateral for loans. An approval of Sectional Titles will create 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.