Namibia has a developed 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 Namibia is 10.5 percent, as of September 2016, and requires at least a five percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 40 788, which is for a 60 square metre unit. Cement prices are lower than the continental average, at US$ 6.15 for a 50-kilogram bag.
With an urbanisation rate of 4.43 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. The scarcity of available serviced land is both slowing down the process of housing delivery and pushing up the prices of serviced land, and is the key challenge facing the housing sector. 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 Namibia can afford.
Find out more information on the housing finance sector of Namibia, 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
Namibia is a middle income country in Southern Africa, with the GDP per capita of US$ 4 695 in 2015. Namibia is one of Sub-Saharan Africa’s most stable countries, it is also one of the most attractive investment destinations in its region.
The country recorded a slight decrease in the real GDP growth from 6.7 percent in 2014 to an estimated 4.4 percent in 2015. This decline is forecasted to weaken further to 4.2 in 2016 according to African Economic Outlook, even though statistics by the NSA (2016) indicate that the real GDP for the first quarter of 2016 recorded a slow growth of 3.5 percent compared to 7.3 percent registered in the corresponding quarter of 2015. The highest improvement was in construction which went from 19.2 in 2014 to 27.8 in 2015 according to NSA.
The bulk of Namibia’s imports, including most food products, are sourced from South Africa. As a result, domestic inflation will remain heavily influenced by inflationary trends in South Africa. According to the Bank of Namibia website (2016) the inflation rate for Namibia was recorded at 6.70 percent.
The high unemployment rate in Namibia has been improving over the past few years. It stood at 28.1 percent in 2014, this represents a -1.5 percent decrease from the 29.6 percent recorded in 2013 according to African Economic Outlook. Namibia is comprised primarily of two economies, one modern with a skilled workforce and the other based on subsistence farming.
Access to Finance
Namibia has a mature and efficient banking system. There are 12.8 commercial bank branches per 100 000 adults and 53.68 ATMs per 100 000 adults in Namibia (2014). Namibia scores high in terms of ‘ease of getting credit’, ranking in 59th place out of 189 countries in 2016, thus up two places from 61st place recorded in 2015 according to the World Bank’s 2016 Doing Business Indicators Report.
There are four large privately owned commercial banks in Namibia. Three of the banks (Nedbank, Standard Bank and FNB Namibia) are subsidiaries of South African banks; the fourth (Bank Windhoek) is Namibian-owned. EBank, a branchless commercial bank that began operations in November 2014 is Namibian owned. FIDES Bank Namibia, a micro-credit bank and the SME Bank focus on small and medium-sized enterprises. Furthermore, there is Development Bank of Namibia which is responsible for financing development infrastructure, one savings bank (Nampost), an ABSA Representative Office and 31 insurance companies according to NAMFISA. Namibia’s banks are regulated by the Bank of Namibia (BoN or Central Bank) while insurance companies and microlenders are regulated by the Namibia Financial Institution Supervisory Authority (NAMFISA).
According to the NSA GDP, the banking sector slowed down in the first quarter of 2016, recording a growth of 6.0 percent compared to 9.3 percent in the same quarter of 2015. The insurance subsector activities slowed down to 0.7 percent in the first quarter of 2016, compared to the growth of 5.0 percent recorded in the corresponding quarter of 2015.
Commercial banks in Namibia are generally regarded as well-capitalised and profitable. Although the banks appear to be healthy, they are nevertheless exposed to risks such as the credit risk arising from household mortgages. According to the Bank of Namibia’s Financial Stability Report the ratio of household debt to disposable income rose to 89.1 percent in December 2015 from 85.5 percent in December 2014. The concentration of lending in mortgages heightens the banking sector’s vulnerability to shocks in the property market. As a proportion of disposable income, mortgage loans rose to 53.4 percent during December 2015, from 50.3 percent in December 2014 (Bank of Namibia) therefore bearing an impact on the household debt which despite moderating to 12.5 percent in December 2015 from 13.3 percent in December of the previous year, remained elevated.
The infrastructure to facilitate mortgage lending is fairly well developed. In terms of the World Bank’s 2016 Doing Business Report, Namibia scores seven out of a possible eight on the ‘depth of credit information’ index, as the country has three private credit bureaus that include data on about 62.8 percent of the adult population. According to the Doing Business Report 2016 Namibia improved access to credit information by guaranteeing by law borrowers’ right to inspect their own data.
Microlending for housing purposes is on the rise through organisations such as the Shack Dwellers Federation of Namibia (SDFN), a community organisation that aims to improve living conditions of poor Namibians by providing its members with building loans ranging from N$20 000 (US$ 1 410.99 ) to N$ 35 000 (US$ 2 469.24 ). The loans are repayable within a period of 11 years at an interest rate of 0.5 percent per annum.
The Mass Housing Development Programme (MHDP) was launched and implemented by the Government of the Republic of Namibia in 2013. The programme is aimed at increasing investment in the affordable housing sector in order to increase the production of the housing stock and significantly increase the supply towards meeting the demand for housing in the country. The increase in the housing supply will result in the reduction of the prices for houses in the long run as the economic principle of supply and demand dictates.
Furthermore, in order to ensure that the government can deliver on its affordable housing delivery targets, the Presidency has proposed that the funding model as was proposed in the mass housing Blueprint will be used for the implementation of the Mass Housing Development Initiative including financing modalities tailor-made to resource the sub-programmes. Private developers play a vital role in the housing construction industry and therefore have been encouraged to refrain from charging exorbitant and inflated prices.
The model consists of four major sources of funding, namely:
- Government grants and subsidies: The government will provide, within its resource capacity, annual grants to households in the income bracket of between N$1 500 (US$ 82) and N$4 900 (US$ 345.69 ) per month. To start with, government subsidies will mainly go towards land development, building input cost mitigation, rural sanitation and programme management. Current Government grants provided under 2013/2016 MTEF for housing projects will be diverted to the mass housing development programme and will serve as a start-up capital to kick start the programme.
- Public Private Partnerships: Significant financial resources will be mobilised through public private partnerships to be entered into between the National Housing Enterprise (NHE) and private sector entities. The partnership model, which is already being pursued by the NHE in its current capital financing operations, entails the mobilisation of funding through turnkey solutions, bridging finance and co-end user financing. Turnkey funding solutions are provided by companies that bring in finances and have the technical capacity to construct, whereas bridging financiers are those that provide funding to enable the roll out of projects and immediately recoup their investment at the completion of such projects. End-user financing is provided by commercial banks that have entered into partnerships with NHE to finance part of the clients, while NHE finances the remainder of the clients. The first phase of the programme is being implemented using conventional building materials (brick and mortar) whereas alternative building materials may be considered in subsequent phases.
- Debt financing by local and foreign financial institutions: The option of debt financing through the conventional way of borrowing will also be pursued in financing part of the programme. In certain instances, borrowing by NHE will require Government support through the provision of a guarantee or other facilitative support.
- Savings of households involved in SDFN housing schemes: The utilisation of savings of households involved in the Shack Dwellers Federation of Namibia (SDFN) housing saving schemes will also be used to partly fund land servicing and the people housing processes component of the programme. An annual budgetary allocation of N$50 million (US$ 3.53 million) will be made to the Twahangana Fund operating under the auspices of SDFN assisted by Namibian Housing Action Group (NHAG).
The Minister of Urban and Rural Development, Sophia Shaningwa, instructed the NHE in May 2015 to halt construction being carried out through the Mass Housing Programme. The New Era newspaper reported that the decision to withdraw the implementation from the NHE was taken by Cabinet on July 21st 2016. Part of the cause for the withdrawal of the project was that it failed to make a dent in the housing backlog after only 1 468 houses out of the planned 10 000 units were completed during the first phase. Another was lack of funding. The government has given the National Housing Enterprise the mandate to finance and sell houses constructed in the first phase. It is speculated this will have an impact on the original pricing planned for the housing units.
According to the December 2015 First National Bank (FNB) Housing Index, the median house price for 2015 was N$800 000 (about US$5 6125.34), up from N$700 000 (US$49109.67) by a private developer in 2014.
The annual median house price for Namibia has been increasing by a percentage of 14.29 percent per year. Hence the relative change from NS$640 000 (about US$44 900) in 2014 to NS$700 000 (about US$49 109) in 2015 (FNB, 2015). Besides being influenced by poor land delivery, the price growth is also a result of increasing demand due to increase in the labour force. The potential introduction of new taxes, higher interest rates and higher inflation of basic goods which will impact consumers’ disposable income pose further downside risks to this sector according to the FNB Housing Index, 2015.
According to African Economic Outlook 2016, the rate of urbanisation in Namibia has been higher than the population growth rate. This has led to a proliferation of informal settlements in the major towns and urban centres, largely resulting from low access to serviced land and low incomes among unskilled and semi-skilled immigrants. About 74 percent of Namibian households cannot afford conventional housing as access to credit remains difficult. The “Getting Credit” section of the World Bank’s Doing Business 2016 report ranks Namibia at 60 out of 189 countries. Low incomes and high costs for servicing of land have excluded many poor people from acquiring land and constructing their own houses. This is evident in that towards the end of 2015 the average price per square meter was N$472 (about US$ 33.30) for new property coming into the market.
The National Housing Enterprise, a state-owned company mandated to provide housing solutions in order to alleviate the national housing need, faces a backlog which is estimated to be around 110 000 and growing at an annual rate of 3 700 units according to the Central Bank of Namibia. The NHE’s waiting list has dramatically increased from 18 000 in 2013 to 76 800 in 2016.
According to FinScope Namibia 2011, the majority of Namibians claim they own their housing, although the majority cannot prove this with a title deed. Only 24.3 percent say they bought their home; the majority (62.4 percent) say they built it themselves. A further 11.8 percent inherited their homes. Some 38 percent funded the ownership (purchase or construction) of their housing themselves through savings. An additional 36 percent said that their housing did not cost anything, as they had used materials they found to construct the dwelling which suggests a high level of informal housing. Approximately 80 percent of people have access to water within their yard, 52 percent have piped water into their dwelling or yard and 25 percent have access to a public tap.
Since 2003, the NHE has built about 450 houses per year for its target market: households earning between N$5 000 (US$ 352) and N$20 000 (US$ 1 410) per month. Apart from constructing houses, the NHE has also been involved in servicing land in a number of local authority areas, resulting in a total investment in service infrastructure of about N$145 million (about US$10.23 million) between 2006 and 2012. Small NHE houses cost about N$275 000 (about US$ 19 401), on average inclusive of land cost. NHE loans are offered at a maximum of prime (10.25) minus one percent.
The Otjimuise project is implemented by the National Housing Enterprise and the City of Windhoek. Its purpose is to help meet the dire need for adequate housing to reduce the number of people still living in shack dwellings and forms part of the Namibian Mass Housing Programme. Igen Africa has been appointed project manager and is partnering with the South African division of Calgro M3 and Namibian Contractor, Afrikuumba, in a joint entity named CalkuumBA. CalkuumBA was initially contracted to build 1 191 units in the Otjomuise township in Windhoek, but made the decision to build 2 542 units instead following a redesign. The initial estimate was based on free standing simplex houses, while the new plan will provide more housing typologies; including free-standing, multi-storey and semi-detached houses. The project awarded to CalkuumBA will amount to approximately NAD1 billion (about US$ 72 665 190). This three-year project, which started in 2014, is intended to provide 2 542 units during phase one and two. Thereafter, a planned phase three is anticipated to produce 12 000 units, according to Bigen Africa.
The Ministry of Urban and Rural development released in early 2016 that there are about 27 310 serviced plots available countrywide, while over 89 399 plots are ready to be serviced. This means that around 116 709 plots will be given to land seekers countrywide. However, the exact time frame on when these 116 709 plots will be made available has yet to be announced, according to the Namibian).
The private sector continues to engage with the demand for affordable housing. To this end, Ohorongo Cement, FNB Foundation and Pupkewitz Foundation have partnered with the Shack Dwellers Federation of Namibia (SDFN) for the construction of houses for low-income families in Otavi in early 2016. The three private companies joined hands to support the provision of community-driven houses for low-income families, by pledging NAD 3 million (about US$ 217 995) to SDFN and National Housing Action Group in March this year. In the quest to build 91 houses for 2016, the identified projects are currently manufacturing bricks in Omaruru. In Tsumeb the group has commenced with land clearing and planning of houses. In Tsandi, building materials have been purchased and construction should be completed by September, while in Otavi housing plans have been approved with the first foundations laid and brick-making in full swing.
According to the World Bank’s 2016 Doing Business Report, Namibia ranks 174th out of 189 countries for ease of registering a property, a drop from 2015’s ranking of 173. On average the eight procedures involved in registering a property take 52 days and cost 13.7 percent of the property value. In mitigating risks associated with quality, Namibia made transferring property more difficult by requiring a building compliance certificate before conveyancing can go ahead. The limited availability of serviced land is mainly due to a lengthy and outdated approval process for proclamation, surveying, subdivision and registration of land according to the Presidency (2013). The various cumbersome procedures applicable in the process of acquiring a property in Namibia have a bearing on escalating property prices of the limited housing stock available.
When calculating the cost of transfer and registration of full title residential property, a house that costs N$800 000 will be N$14 420, which is 1.8 percent of the purchase price. However, for sectional title of the same property price transfer and registration will cost 1.6 percent of the purchase price according to calculations on Namibia Real Estate website.
The scarcity of available serviced land is both slowing down the process of housing delivery and pushing up the prices of serviced land, and is the key challenge facing the housing sector. Land prices saw an increase of 109 percent month-on-month in May 2014 and averaged N$122 000 (about US$8 998) for a 300m² serviced stand and is therefore likely to add inflationary price pressure to new housing delivery further down the line. Land auctioning, the main technique used by local authorities to dispose of land until recently, is yet another contributing factor to the rising property prices.
Housing Policy and Regulations
According to the Presidency (2015) the Vision of the Namibian Government is to eradicate poverty in its entirety by, among others, providing affordable housing to all Namibians in line with Vision 2030.
The National Development Plan (NDP) was adopted as a medium term plan developed after the launch of Vision 2030. All the national development plans starting from the first (NDP1) to the last (NDP4) are supposed to implement programmes and plans that help achieve the goals of Vision 2030. Within the context of the 4th National Development Plan (NDP4), Government undertakes to have a “robust and effective housing delivery programme where affordability is the key feature of the programme”, a concept that has seen the initiation of the MHDP as well as the MLSP. If these programmes are implemented effectively, Government may attain its objective of housing 60 percent of its population by the end of NDP4 (2016/17).
In 2013, a National Housing Technical Committee was also established to develop a mass housing development strategy. A member of the group, the NHE highlighted limited access to affordable, serviced land, the inflexibility in the current land tenure system, legislative and policy constraints that slow delivery and a rapidly appreciating property market as some of the challenges. The proposed plan sets out a differentiated funding model to cater for different economic and social segments of the Namibian population, drawing on government, private sector and household financial resources.
The National Housing Policy guides all actions taken by the Directorate of Housing in the field of housing administration. The Housing Policy identifies the need to develop a National Shelter Strategy and to implement a National Housing Programme. It further guarantees the right to a house especially for the formerly disadvantaged groups of the society. The Local Authorities Act, No 23 of 1992 was enacted with the vision of empowering local authority councils to contribute towards the improvement of the inhabitants within their geographical reach. Section 57 to 62 of the Act deals with Housing Schemes. The Namibia Estate Agents Act of 1976 was established to provide for the establishment of an Estate Agency Affairs Board and an Estate for the control of certain activities of estate agents in the public interest. The National housing enterprise Act, No. 5 of 1993 (NHE) is a state owned enterprise governed under the auspices of the Ministry of Regional and Local Government, Housing and Rural Development (MRLGHD). NHE is tasked to provide financial assistance by the delivery of affordable housing and credit facilities in the form of housing loans to low- and middle- income households. The Pension Fund Act of 1956 makes provision for registered pension funds to be used as a guarantee. The Namibia Financial Institutions Supervisory Authority Act was put in place to establish an Authority to exercise supervision over the business of financial institutions and over financial services. The National Housing Development Act, No 28 of 2000 establishes a National Housing Advisory Committee (NHAC) that is responsible for the establishment of a Housing Revolving Fund by local authority councils and regional councils.
Housing Sector Opportunities
Over the past two years, government has showed renewed interest in addressing the housing needs of the country by allocating more resources into the housing portfolio. The MLSP is expected to contribute to the enhancement of the affordability capacity of many Namibians as the cost of servicing this land will be subsidized by government (100 percent). This will impact positively on the end prices of houses.
Regarding alternative building methods, a trial by NHE in which land was offered to alternative building technology developers to showcase their products proved that this building method does not necessarily offer cheap products as prices were generally the same and in some instance more expensive. The only advantage that could be drawn from ABTs is the time frame for delivery of houses which is faster compared to traditional building methods. Therefore, construction using traditional brick and mortar may dominate the housing market in the foreseeable future.
Not much has changed regarding the status of commercial banks as they remain overexposed to mortgages, which remains an ongoing concern in the economy. Therefore, there have been calls to provide greater opportunities for fundraising through securitisation, for example. This could increase the number of investment instruments and deepen the financial sector, as well as enable local authorities to raise the funds necessary for urban infrastructure development and thus increase the housing provision.
The recognised successes of the Shack Dwellers Federation of Namibia through its group savings and lending methods, incremental approaches to housing and use of land laws such as the Flexible Land Tenure System suggest a high potential for housing microfinance.