Libya has a limited 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 Libya is six percent, as of September 2016. The cheapest newly built house by a developer recorded by CAHF is US$ 50 000, which is for a 100 square metre unit. Cement prices are higher than the continental average, at US$ 12 for a 50-kilogram bag.
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. The housing market will continue to be constrained until political and economic stability has returned to post-revolution Libya. Only then can an enabled housing market increasingly provide housing that the average household in Libya can afford.
Find out more information on the housing finance sector of Libya, 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
Libya is in North Africa and bordered by Niger, Chad, Egypt, Sudan, Algeria, Tunisia, and the Mediterranean sea. In 2016, the country has a population of 6.3 million, a decrease from 2015 as a result of insecurity that prevails in the country. 79.6 percent of the population lives in urban areas. Libya’s economy depends on oil, prior to the national unrest, the oil sector accounts for 80 percent of GDP and 97 percent of exports. Libya was considered as an upper middle income country with the highest GDP in Africa and one of the highest HDI rankings in the world.
The national unrest has resulted in the fall of Muammar Gaddafi’s authoritarian regime, civil war, chaos, tribal and religious militia and terrorist activities which has weakened the economy and affected some of the neighbouring countries. Up to 2017 the political and security situation has remained unstable. Although the country has tried to put in place a stable government but competing authorities and continued low oil revenues are having a negative impact on the economy and the population. The country is confronted with humanitarian crisis. According to African Economic Outlook, the economic growth contracted by 8.1 percent in 2016. However, the projected real GDP growth rate is estimated at -4.9 percent and -3.9percent in 2017 and 2018 respectively due to the projected rise in oil price and the anticipated recovery of the crude oil production to around 900 000 barrels per day (bpd) in 2017 and 2018 from under 400 000 bpd in 2016.
The General National Congress GNC replaced the National Transition Council in August 2012. In 2014, a new parliament was voted into power, known as House of Representatives (HOR) which relocated to the eastern city of Tobruk, leaving Tripoli controlled by powerful militia groups. These militia have taken advantage of the power vacuum caused by the outgoing GNC and the new parliament. Late in 2015, the UN brokered an agreement to form a new “unity” government, the Presidency Council, headed by the unity Prime Minister Fayez Sarraj, yet both Tripoli and Tobruk administration have been reluctant to acknowledge its authority. Mr. Sarraj set up a headquarters in Tripoli in March 2016 in a heavily guarded naval base. This new government faces opposition from two rival governments and a number of militias. As a result public policy functions such as government interventions to support affordable housing delivery have effectively stalled and budgets have not been approved for ministries or government programmes.
Since the political turmoil, oil revenues have decreased by 90 percent, there are frequent electric outages and little formal business activity. Some sources claim that nearly a third of the country’s population has fled to Tunisia as refugees. Key challenges that Libya faces include restoring the rule of law, putting in place a functional government, reducing dependency on the petroleum industry, and reaching consensus on strategies for reconstruction and long term development.
Access to Finance
Development of Libya’s financial sector has stagnated due to Libya’s instability, high inflation and a sustained liquidity crisis. The house of Representatives established a second central bank operating in eastern Libya, which printed its own Libyan’s dinars due to liquidity crisis, injecting an estimated four billion illegitimate Libya’s dinars into the economy.
In the past, Libyan banks were highly liquid and experience high levels of NPLs due to limited credit information systems and poor banking supervision which restricted the availability of housing finance. Official figures of NPLs are largely unreliable, last reported at ranging from 17.2 to 35.4 percent over the past decade, yet it is estimated that they have reached a level where most of Libya’s public institutions would be considered technically insolvent without central government funds. As a result, Libya remains essentially a cash economy, where transactions largely operate outside of the formal banking sector.
For years, the banking sector in Libya has been very isolated. Early in1970, when Gaddafi came to power, all the banks were nationalized, and international sanctions through the 1990s limited foreign investment in Libya. Libya’s banking sector was dominated by five state owned banks (which controlled about 85 percent of banking assets), 16 commercial banks, four specialised credit institutions five insurance companies and a recently established stock market.
A process of privatisation and banking reform commenced in 2007, with some foreign banks authorised to acquire shares in public banks, the legalisation of joint ventures between foreigners and local investors in 2010 and a rise of interest in seeking new banking licenses.
Bank lending for housing finance is restricted due to high collateral requirements, lack of a Libyan land register or credit bureau and inadequate central bank regulation. Libya has a very low loan–to–deposit ratio, with the most recent data reporting 23.4 percent, as of March 2013, compared to an average of 80 percent for the region. The Savings and Real Estate Investment Bank would grant subsidised housing loans to Libyan citizens at zero interest rate and tenures up to 30 years. Yet, there was a lack of independent oversight, which allowed mismanagement and many Libyans view these loans as grants, so there are very high default rates. The bank’s poor targeting of home loans and lack of enforcement for repayment distort the housing finance market and restrict the development of a functioning mortgage system.
Domestic credit to the private sector has risen to 35.7 percent of GDP in 2015, largely due to falling GDP, rather than more lending. The ratio of housing finance to GDP ratio is estimated to have remained low, at below one percent. Unless allocated a loan through the government program, for which households who do not yet own a home qualify for, it is particularly difficult for low income or small borrowers to access finance for housing.
In 2013, the government passed a law to enforce a strict Islamic Banking regime and ban interest in financial transactions starting in January 2015. Libya being the third Middle Eastern country behind Iran and Sudan, to ban non-sharia compliant banking. Nevertheless, lack of government control of the country has left enforcement of this policy in limbo and many commercial banks have ceased lending, effectively paralyzing the banking sector.
Oil revenue offered the government of Gaddafi to carry out an ambitious housing programme after the coup d’etat which brought him to power. The government put in place policies to provide houses for all Libyans and as such the shortages of late 1960s were resolved. From 1973 there was an abundance of housing. Each household was entitled to a government subsidised home. Starting from 1984 housing shortages was recorded. The gap between production and demand is not only due to population growth but to other factors such as legislation that prohibited private initiatives and the isolation of Libya due to Gaddafi’s past activities. Up till 2017 the gap between supply and demand of housing has widened.
After the political turmoil the housing shortage has deteriorated to a point that in 2016, 65 percent of Libyans were said to be dissatisfied with housing delivery according to African Economic Report 2016, the lowest rate in the continent. At least 70 percent of the Libyan working population is estimated to be employed in the public sector while a mere four percent are working in the private sector. GDP per capita at US$ 14 359 though improved from 2015 but compared to before the civil war had a large impact on affordability. Prices of rents are accelerating to a point that is well beyond the affordability of an average household; a one bedroom unit in central Tripoli costs between US$ 400- US$600 per month and estimated at US$376 outside the city centre.
Housing is very difficult to access on the private market due to the small amount of private land available for purchase and development. As a result most households in the past would sit on waiting list for years until they are able to access a subsidised house from the Libyan government, often living in poorly serviced informal neighbourhoods or overcrowded units housing multiple families.
In 2007, a minimum wage was established at US$200 per month for an individual worker, yet the enforcement of this minimum is not clear. Overall unemployment was estimated at 33 percent in 2012 and even higher for youth, up to 50 percent, with the majority of the unemployed holding university degrees. As a result of the political situation unemployment is expected to rise and the earning capacity of Libyans has continued to fall due to disruption in government and in business.
Housing in Libya has historically been the main responsibility of the government with the government providing free education, transport, healthcare and public housing offered to households with zero percent interest loans under Gaddafi’s regime. In the 1970’s the government had an ambitious programme for housing as a result the shortage experienced in the late 1960s was eliminated as a matter of fact there was a surplus between 1973 up to 1981. In 1973 there were 17 274 residential units in surplus. The surplus decreased yearly till 1982 when there appeared to be a shortage which has continued till today. From 1989 to 1996, around 75 percent of housing was constructed by the public sector. From 1997 onward, the government has continued to play an instrumental role in housing supply. Activity in the housing construction and real estate sector has been halted by the political turmoil. In 2014, the housing shortage was estimated at 350 000, yet there has been a lot of destruction in cities and displacement of people, which will exacerbate housing shortage estimates once peace is restored.
The Housing and Infrastructure Board (HIB) of the Ministry of Housing and Utilities (MHU) was traditionally responsible for the implementation of public works contracts. HIB works on infrastructure and public building projects, along with managing the state’s residential projects on a turn-key basis, contracting with both national and multinational firms.
At its creation in 2007, HIB was tasked with building 200 000 units. Official figures from the MHU in 2012 indicated that 134 341 housing units were under construction, 94 500 were in their biding phase and 11 121 had been completed. The entire programme has been on hold since, with an estimated US$ 11 billion worth of uncompleted housing projects under construction. EU imposed sanctions on HIB, that had put restrictive measures in place since 2001, were lifted in January 2014, yet due to the poor security situation, the majority of HIB projects have remained unfinished.
Since 2011, many foreign and local investors involved in housing construction in Libya has been forced to abandon or face interruptions in their work. Efforts to recommence have been disrupted by continued insecurity, arguments over payments for delays, and increased cost in the intervening period. This had resulted in very limited new supply and an increasing housing backlog. In December 2013, AECOM announced partnership with HIB worth over US$205million for 25 months, yet the programme has not been implemented due to the unstable security situation. Another international firm, Egypt’s Al Abd halted work on housing projects worth US$102 million in 2015 over ongoing security tensions.
The property market in Libya has been influenced by the legislation which prevents ownership for leasing purposes. Under the socialism regime of Gaddafi, one of the most important laws regarding housing development is Law n° 4 which prevented activities for profit purposes stopped housing rents and prevented the private sector from building houses for leases purposes. As a result of the socialist regime a lot of changes occurred that led to administrative instability and the situation is even worse in 2017 due to the political situation. There are no procedures in place for obtaining a construction permit, registering property or resolving insolvency, giving Libya a ranking of 187th, out of 190 countries in those sections of the 2017 Doing Business report. Large plots of land previously owned by Italian farmers, about 38 000 hectares, were confiscated and redistributed among Libyans after the coup d’état in 1969. These plots have been further fragmented over time due to the traditional inheritance system guaranteeing each son a part of their father’s land. In 1971, the state confirmed all confiscated land as state land and was involved in further confiscations of uncultivated land and reallocation to citizens in accordance with what was considered acceptable to fulfil their needs. As a result, it is very difficult to determine ownership.
In the years before the fall of Gaddafi’s regime, Libya attempted to open up its real estate sector and enabled foreign investment in real estate, known as Decree 21 in 2006. This decree allowed the HIB to contract private and foreign developers for property development. Although foreigners can now buy real estate, a lack of clarity on property rights prevented much uptake, and efforts to open the property and real estate markets have been significantly set back due to the sustained insecurity following the 2011 revolution, which have scared away potential investors.
Following the revolution, property markets have been in disarray as many former owners of confiscated land returned to lobby for reform of the property laws and compensations. Draft bills on property were brought before parliament; however nothing has been passed due to the political fragmentation and controversy of such reforms. The situation is further complicated by the fact that many properties have been resold since confiscation and property registration were destroyed in the early 1980s. It is estimated that up to three-quarters of homes in Tripoli could have been formerly confiscated properties.
Until the ambiguity of property rights is resolved the banks will remain reluctant to register property as collateral. The property market is further constrained due to insecurity and difficulties in the ease of doing business and because corruption remains so high in Libya. Transparency International‘s 2016 Corruption Perceptions Index rated Libya 170th in the world out of 176 countries.
Housing Policy and Regulations
Libya housing policy and regulation can be classified under three periods after the coup d’état of 1969, 1970 to 1978, 1979 to 1988 and 1989 to 2000.
After the coup d’Etat, a number of laws were passed to organise the housing sector among which are the resolution of the Council Leadership Decision for leases which gave rights to people and companies to lease property. Law 116 in 1972 gave commercial banks the right to give loans for housing. Law 88 in 1975 stipulated the nationalisation of land, Law 28 in 1976 reduced loan charges by 30 percent and prevented advance rent as well.
This period witnessed vast political and economic changes. Libya adopted socialism as economic system in 1977. Laws have since been published according to the green book, Moamar Al Gaddafi thoughts. This period was marked by Law 4 which prevented leases and restricted the right of ownership to one house beyond which property was confiscated. As a result of law 4 the government confiscated all dwellings prepared for lease by the private sector. The dwellings confiscated were transferred or used for housing with the inhabitants purchasing and paying for their property by monthly payments. By the end of this period law 88 was passed in 1988. This law gave right to practise economic activities.
1989 – 2000
Post sanction period, more flexible laws were passed among which is law 11 regarding possession of real estate was passed in 1992 and modified by law 14 which gave the right to posses more than one house or piece of land suitable for construction.
According to some studies the policies aimed to provide suitable housing in quantity and in quality for the people of Libya however some internal and external factors have contributed to the effective implementation of the policies and the gap between the supply and demand for housing. The three periods were dominated by Gaddafi and the policies were political and economic tools. Libyan policies under the authoritarian regime has been characterised by large-scale subsidies. The country also for some time was isolated which made it difficult to access information. Gaddafi’s government did carry out mass construction of housing to ensure an adequate house for all Libyans but the deficit of housing was a challenge. The post Gaddafi’s Libya is still in a state of uncertainty. Once the rule of law is restored there will be a need for reconstruction. Infrastructure and housing should be the top of priorities in addition to putting in place policies and regulation that encourage the creation of wealth. Regarding housing the lawful authorities should adopt policies that promote effective development and protect the population. Policies that promote real estate development, policies that will empower Libyans to participate effectively in the reconstruction of their country.
Housing Sector Opportunities
It was estimated by the World Bank that restoring Libya’s infrastructure will cost US$200 billion over the next ten years. A peace settlement in Libya could lead to a rebound in oil outputs and exports, which would improve the fiscal deficit and current account imbalances, and allow Libya to address housing shortages and economic development. According to African Economic outlook, the GDP is projected for -4.9 percent in 2017 and -3 percent in 2018 due to projected oil prices and anticipated recovery of crude oil production to 900 000 bpd from under 400 000 bpd in 2016.
The economic outlook for 2017 and 2018 depends on the political unity and the extent of improvements in security. Libya is one of the richest countries in the world, the potentials are immense and the country offers a lot of opportunities. Once Libya becomes peaceful, addressing the chronic housing shortage and providing to internal displaced people can be expected to become a primary priority of the government.