Mozambique 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 Mozambique is 25 percent, as of September 2016, and requires at least a 20 percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 63 000, which is for an 81 square metre unit. Cement prices are lower than the continental average, at US$ 4.93 for a 50-kilogram bag.
With an urbanisation rate of 3.63 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. Mozambique is currently going through an economic slowdown but several firms, such as Reall and Socremo, have undertaken innovative projects that increase access to housing, while Financial Sector Deepening Moçambique does important work to increase financial inclusion. 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 Mozambique can afford.
Find out more information on the housing finance sector of Mozambique, 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
Mozambique has a relatively low level of urbanization with only 32.2 percent of people living in cities. However, the urbanization rate is estimated to grow by 3.27 percent per annum and it is expected to increase following urban growth patterns across the continent.
The country still suffers from high levels of poverty and vulnerability. The United Nations Development Programme’s (UNDP) Human Development Report (HDR) 2014 ranked Mozambique 178th out of 187 countries. The poverty rate remains high at 55 percent with most of the rural poor living below the consumption poverty line of US$ 0.6 a day. Mozambique is characterized by high unemployment (22 percent) while the vast majority of the labour force relies on subsistence farming and informal activities. The government approved a long-term National Strategy for Development, Estratégia Nacional de Desenvolvimento (ENDE) for the 2015 to 2035 period. The ENDE places particular emphasis on industrialization and identifies agriculture, fisheries, industrial diversification, infrastructure, the extractive industries and tourism as key priority areas.
Due to Mozambique’s major liquidity risks and its unresolved efforts to restructure its debt, the sovereign fell into default in early 2017. Macroeconomic instability will persist in the near-term and, owing to low foreign investment and fiscal constraints, economic growth is expected to perform poorly.
Mozambique’s economy has been growing at an average rate of between 7.5 to eight percent over the past decade and its future economic potential is underpinned by natural resources. Despite this potential, economic challenges remain. In 2016, the IMF has reported a decline in the country’s economic growth to 3.8 percent. Economic growth is now projected to reach a high of 4.7 percent in 2017, mainly on account of a surge in coal production and exports. Inflation remains elevated but is expected to decline, from a year-on-year peak of 26 percent in November 2016 to about 18 percent in June, despite large increases in fuel prices in March.
Mozambique continues to develop from a very low base and continues to be among the lowest-ranked countries on a GDP per capita basis, (averaging US$619 between 2010 and 2014).
Access to Finance
The Mozambique financial sector has seen a fast expansion during the last years, although it is still considered to be underdeveloped. Approximately 90 percent of Mozambicans do not have a bank account with a formal financial institution, and formal credit is available to only an estimated three percent of the population.
The banking sector has 19 registered banks, accounting for 95 percent of total financial system assets. However, 87 percent of the total financial sector’s assets are concentrated in the five main banks. The sector is fast expanding, both in assets and geographical coverage, and can be described as healthy and stable. The latest available data (2014) reveals an average bank capital adequacy ratio of 15.9 percent and reserves ratio of 10.1 percent (the regulatory reserve rate remained at eight percent), while the non-performing loan (NPLs) rate remains below four percent, in accordance with international standards.Lending rates remain very high. Banco de Mozambique decreased its benchmark rate by 7.5 percentage points since January 2012 and prime lending rates fell to 14.8 percent in 2015 from 19 percent in 2011. Because of the current economic situation, Banco de Mozambique has raised the Standing Lending Facility to 16.25 percent and prime lending rates have increased to 22.75 percent. This sets mortgage interest rates at around 28 percent with a repayment term of 15. 20 or 25 years and a minimum down payment of 20 percent.
Most of Mozambique’s commercial banks offer a mortgage product, but the mortgage loan to GDP ratio is very low and was measured at 0.91 percent at the end of 2014 according to Banco de Moçambique. Banks’ mortgage portfolios represent 2.42 percent of total outstanding loans according to WDI. The conditions for mortgage loans are generally restrictive reflecting the banking industry’s austerity. Loan-to-cost maximums are generally set at 80 percent. Commercial banks request another property or fixed assets as collateral for a transition loan at least until the construction is 80 percent complete and can thus be mortgaged. Average annual effective interest rate for housing loans is calculated based on the banks’ prime rate of 22,75 percent plus a mark-up of up to five percent depending on the client’s credentials (typically 28 to 30 percent). The minimum loan amount is around MZN 300 000 (US$5 000).
To make housing loans more accessible, some banks offer property leasing or rent-to-buy schemes in which the property is made available on a rental basis to a tenant who has an option to buy the property at the end of the lease. The Fund for Housing Promotion (FFH) has agreements with several banks to make mortgage loans accessible to public employees. These loans have shorter terms, sometimes five to ten years. In some cases, the lender requires a guarantee or other forms of collateral. Developer finance is considered to be too limited and expensive, with rates of up to 30-35 percent.
Although the microfinance sector is vibrant, only five microfinance providers offer housing microfinance as a product. There have been significant changes in this industry over the past few years and the depth of financial intermediation remains low. Currently only Socremo, at a very small scale, offers housing loans for home improvements and rehabilitation.
Prospects of commodity linked earnings were the main drivers behind house price increases due to a high demand and relatively small housing stock on the housing market. The 2016 public debt crisis and metical devaluation has reduced the demand, bringing down the price of houses. Newly built condominiums have increased the availability of housing in higher income markets contributing to lower prices. There are several additional reasons for high housing costs. These include high construction costs (30 percent higher than South Africa) due to higher material costs, low labour productivity and high financing costs. A small percentage of construction materials are locally manufactured most materials are imported from South Africa, Portugal and China. Only the most basic materials (such as cement and wood) are sourced locally. Furthermore, the lack of basic infrastructure adds to the total costs of the development. Plots are often far from main roads and not linked to the public water and electricity network.
Although the minimum wage was revised to MZN 3642 (US$55) a month in April 2017 with the metical depreciation, the majority of the population earns less than US$ 60 a month. Banks offering mortgages have a minimum loan amount of MZN 300 000 (about US$5000), which is far out of reach of the majority and far less than the cheapest house in the market. At the current rate of 28 percent, the minimum loan would be affordable only to a household with a monthly income of about MZN22 000 (around US$ 370). The mortgage applicant would also need to save a third of the purchase price to cover the deposit requirements, registration costs and taxes, and valuation and origination fees.
With regards to the lack of affordable housing and the lack of access to finance, most families rely on their own savings, local materials and auto-construct their homes. UN-Habitat suggests Mozambican families have invested at least US$3 billion in informal housing in Maputo alone.
Housing affordability is also a challenge in the rental market, where high demand and the lack of adequate supply have resulted in highly inflated prices across all income brackets with owners setting monthly rents in the upper market from US$1 000 to US$10 000 a month in Central Maputo. The lower income market is offering rental houses from US$100 to US$300 a month in the informal neighbourhoods.
Demand for housing far outstrips supply in the middle and low-income market. Low income households are largely excluded from the formal housing market and have no choice, but to rely on auto-constructed, informal housing options.
FFH estimates a housing deficit of two million units and over 13.5 million people that require housing. The equivalent of 2.5 million families, or 60 percent of the Mozambican population live in substandard housing; approximately 70 percent of households in Maputo live in informal housing. In Maputo, has been estimated that 23 000 units will be needed by the year 2020 in the areas of Baixa, Museu, Polana, Sommerschield I, Sommerschield II and Marginal. Only 4 500 new housing units are expected to enter the market in central Maputo over the same period . The housing deficit is also felt in other emerging economic centres in the country, such as Tete, Nampula and Pemba. By 2020, housing demand in Nacala is expected to grow to 4 475 units and 6 500 units in Pemba.
There is very limited investment in the low-cost housing sector, as investors prefer high-end projects. Potential developers are also put off by the need to build supporting transport and services infrastructure for new sites and the lack of government support for low-cost housing schemes. However, the main challenge remains the poor accessibility of low-income households to affordable finance. Some private projects aimed to deliver affordable housing such as the Casa Jovem in Costa de Sol and Intaka projects are often mentioned as one example of affordable housing projects. Casa Jovem is a 36 hectare housing project under development on the outskirts of Maputo. The project comprises 1 680 flats in four to eight storey walk-ups, and 300 houses. To date, 100 flats have been constructed. However, with the price of flats ranging between US$47 000 and US$130 000, it is out of the reach of most Mozambicans.
In its previous five-year plan (2010-2014), the government committed to build 100 000 houses and service 300 000 plots of land by 2014. According to local sources, the government only delivered 1922 houses by the end of 2014. The housing target in the new five-year plan (2015-2020) is less ambitious with the state committing to build 35 000 houses by 2019 (7 000 a year), but this number remains unrealistic as the government of Mozambique continues to experience fiscal pressures. Some projects have begun in Marracuene, Tete and Nampula, but there is not a clear strategy to solve the lack of housing in Mozambique. The ‘Housing Action Plan for the Young, Civil Servants, and Old Combatants’ sets more detailed plans housing deliveries. 20 percent of the planned housing delivery is to be completed by government, 30 percent by the private sector and 50 percent by residents themselves through auto-construction. Only five percent of houses would be fully subsidised. The FFH should take the lead in the implementation of the action plan and should collaborate with all municipalities in the future. The FFH foresees the development of public private partnerships to diversify its financial resources.
Over the years, there have been some noteworthy public private partnership arrangements. This includes the construction of the project Intaka (started in 2012), with the intention to build 5 000 houses in the southern city of Matola, in partnership with Henan GoujiI mobiliária. Unit prices are between US$63 000 to US$158 100. An agreement with the Chinese government promised a further 5 000 houses in other cities. A partnership with a Spanish construction group also wanted to develop of 4 500 houses in three provinces, with prices starting at US$30 000. Construction was supposed to launch in 2014 but works never started.
In 2013, FFH launched the building of 100 houses in Mutaunha (Nampula) financed through the sale of houses in the Olympic Village, the first phase of which has been completed. Furthermore 240 apartments were expected to be constructed during the second phase of construction with a total value of US$30 million. This will increase the Olympic Village housing stock to about 1 100 homes. Other developments include a US$217 million facility provided through three credit lines by the Indian government in 2013 to fund public works and housing projects. The projects included the construction of 1 200 houses in Tete (400 Units), Zambézia (400 units) and Cabo Delgado (400 units) but works did not start yet. In addition, FFH also signed agreements for new social housing projects in the Provinces of Cabo Delegado, Nampula, Tete and Maputofor 50 000 housing units at a total cost of US$5.5 billion. The Municipality of Maputo has recently signed a memorandum with the Turkish Akay Constructions to build 5 000 houses in Zimpeto, Polana Caniço and Ka-tembe with a starting cost of US$70 000. Akay is looking for 2 500 people interested to start the construction of the houses.
Despite all the new housing developments in the market, the cost of the housing units is out of reach for the majority of Mozambicans and is only affordable to middle higher income earners and civil servants. Auto-construction remains the only option for low income groups. There are pilot projects run by Reall in Beira based on an incremental housing concepts but no units are available in the market yet. Casas Melhoradas in Maputo is another approach to improve housing in unplanned settlements with low cost materials but it is still in the pilot phase with only three units built. Casa Minha, also in Maputo, is an affordable housing project with an innovative strategy to transform an informal settlement into a neighbourhood, they are building seven houses in a first demonstration phase with a plan to be scaled up to 160 houses in the next five years.
The state owns all land in Mozambique. Land rights may not be sold, mortgaged or otherwise alienated. The Land Law recognises a “use right to land”, known by the Portuguese acronym DUAT (directo de uso e aproveitamento dos terras). Any investment made on the land itself is considered to be private property and can be bought, sold or mortgaged.
Plots that are already more developed are however transferred at high prices even though the law clearly outlines that land is government owned and may not be acquired, the right to use the land may be passed on through the property of the investment.
Land use rights are obtained by inheritance, occupation, state grant, purchase or lease. In urban Mozambique, 62 percent of household’s access to the land through the land market, either obtaining land on the formal market by buying or leasing use-rights held by DUAT holders or, more commonly, obtaining use-rights on the informal markets. Other means of accessing land include customary rights systems such as inheritance or borrowing (19 percent), state allocation (13percent) and occupation (6 percent). Most rural land is held by communities, which have perpetual DUATs based on historical occupancy. Foreign persons and entities with local residences may obtain DUATs in connection with approved investment projects. Some developers are cautioned by the fact that land can be leased for 50 years with an option of renewal. According to the Global Housing Indicators, only 20 percent of properties are registered. It takes an estimated 40 days to complete the six procedures involved in registering property and the process costs an estimated 6.9 percent of the property value.
The registration and cadastre systems still only cover limited urban areas. This limit the amount of formally financeable land through mortgages and contributes to a general lack of clarity on property titles. Secondary sales are also limited. Apart from the fact that they are difficult due to the protracted procedures and consents necessary because of leasehold tenure, owners also avoid the risk of forfeiting current rights in the process of sale (fearing, for example, that the title may be questioned). The problem of collateral enforcement is exacerbated by the long times it takes to go through the courts (on average three years), and that there are many instances of fraudulent titles.
Approximately only 15 percent of residential properties with mortgages have legal titles.
Some rental housing stock converted to private ownership is emerging from government’s policy since 1991 of divestiture to existing tenants at concessionary prices and interest rates. The majority of this stock has already been sold.
A country specific property market issue pertains to the occurrence of “downward raiding” by higher income earners of plots occupied by low income groups due to the unmet demand for suitable land for housing. As a result, local buyers are pushed out of the cities into cheaper areas. The ensuing land scramble has caused further problems as some local Mozambicans have faced losing their homes (especially those without a formal title to their houses) and those who live on “illegal” land.
Housing Policy and Regulations
Many of the laws governing property date as far back as the 1960s and have not been updated since. Housing is coordinated through two government organizations. The National Directorate for Housing and Urbanization (DNUH) and the Fund for Housing Promotion (FFH), both under” Ministério das Obras Públicas e Habitação”(MOPH), are the two government agencies with specific mandate for housing. With the reorganization of the MOPH in 2010, the different departmental roles were clarified so that DNHU is in charge of the politics side and FFH has the mandate to act as an implementation agency. At the same time, within the MOPH, a Directorate that is responsible for the building materials was also created.
The policy and regulation frameworks governing the housing sector is based on article 109 of Mozambique’s Constitution of 2004 and states that all ownership of land vests in the state and all Mozambicans shall have the right to use and enjoy land as a mean for the creation of wealth and social well-being. The Constitution further provides that the state shall recognise and protect land rights acquired through inheritance or by occupation, unless there is a legal reservation or the land has been lawfully granted to another person or entity.
The Land Law of 1997 reasserts the state’s ownership of land and provides that individuals, communities and entities can obtain long-term or perpetual rights to use and benefit from land. The Land Law protects the customary rights of communities to their traditional territories and recognises rights obtained through traditional and good-faith land occupancy, as equivalent to rights obtained by government grant. Community land use rights are legally equivalent to rights granted by the government to individuals and entities. Women and men have equal rights to hold land. Nationals have unrestricted rights of access to land; foreign individuals and entities must have a local residence and an approved investment plan.
- The Rural Land Law Regulations of 1998 provides rules for the acquisition and transfer of use-rights. The process for identifying and recording the rights of local communities and good-faith occupants is governed by the 2000 Technical Annex to the Land Law Regulations
- The National Land Registry and Real Estate Cadastre Decree No. 1 of 2003 established new provisions for the registration of inherited land use rights and secure rights to customary rights-of-way.
- The Urban Land Regulations 2006 apply to existing areas of towns and villages and to areas subject to an urbanization The regulations govern the preparation of land use plans, access to urban land and the rights and obligations of owners of buildings and DUAT holders.
- The Financial Sector Development Strategy 2013-2022 (MFSDS) provides an overall vision and a comprehensive and detailed roadmap for reforms in the financial sector. The strategy foresees the elaboration of a policy on housing finance, which will address necessary reforms for the development of the financial market for construction and purchase of housing. A first step in improving housing finance has already been implemented by revising the status of the FFH, giving it access to a variety of refinancing resources.
- The Economic and Social Plan, and the Slum Upgrading Strategy, both of2012, add emphasis to housing and urban infrastructure upgrading.
- The Housing Policy of 2011 foresees the creation of adequate housing at an affordable price for all social groups. The policy recognizes the need to improve land management, facilitate access to infrastructure as well as promotion of housing construction and availing financing resources. It highlights the need for the creation of institutional structures which will allow coordination of the joint effort of line ministries in implementing necessary reforms.
The Housing Policy is being reviewed in 2017 by DNUH to implement the new strategy of the five-year plan (2015-2020).
Housing Sector Opportunities
The previously healthy economic growth rates and foreign investment in Mozambique have significantly slowed in the last two years. Analysts suggest that the development of the natural gas and coal reserves in Mozambique should have a big impact on GDP growth and create opportunities in the industrial and commercial sectors.
There are a wide range of opportunities for both public and private sectors to strengthen the development of housing finance, as well as increase its supply. Possible initiatives include expanding tailored housing loan products to low income groups and introducing innovative and competitive incremental auto-construction housing solutions. There is a big need and potential for housing microfinance with many supporting reasons such as a vibrant microfinance industry, auto-construction being an accepted building method, provision of starter plots by the Housing Promotion Fund and secure tenure among urban dwellers.
Furthermore, given the price escalations of building materials, opportunities exist regarding the use of alternate approaches, technologies and local materials that could help to reduce the need for imported building materials and speed up the delivery of affordable housing.