Housing Finance in Senegal

Macroeconomic Overview

The population of Senegal was estimated at 16 209 125 in 2019,[1] of which 46.7[2] percent is urbanised and charaterised by the predominance of youth (52.1 percent are under the age of 20). Senegal’s political and economic capital is Dakar, which houses 23 percent of the  population.[3]

Senegal has a long tradition of promoting housing. It is one of the pioneers in Africa in the production of planned housing and serviced plots. The public real estate companies, National Moderate Rent Housing Corporation and Cape Verde Real Estate Company, were established before independence. Senegal was the first country in Africa to host a site and service project in the 1970s. However, despite political and regulatory initiatives, notably the implementation of the Housing Bank of Senegal (BHS), the enactment of laws on housing cooperatives, and the promotion of social housing, the country has a significant housing deficit. It was estimated at more than 300 000 units in 2013 and since then has increased by about 10 000 units a year,[6] resulting in an estimated backlog of 370 000 units in 2020.

The cities have the largest human settlements and are also the main entry points into the country. With their ports and airports, they were the most affected by the COVID-19 pandemic. The region of Dakar is the most affected with more than 70 percent of patients (9 481 out of 13 456) on 29 August 2020.[7]

[1] ANSD 2020. Population of Senegal 2019. National Agency for Statistics and Demography. http://www.ansd.sn/index.php?option=com_ansd&view=titrepublication&id=30 (Accessed 28 August 28 2020). Pg. 4.

[2] Ibid. Pg. 5.

[3] Ibid. Pg. 20.

[4] ANSD (2020). Senegal’s economic growth stood at 5.2%, after 6.4% in 2018. National Agency for Statistics and Demography. 30 March 2020. http://www.ansd.sn/index.php?option=com_content&view=article&
id=589:2020-03-30-08-26-41&catid=56:depeches&Itemid=264 (Accessed August 29, 2020). Pg. 1.

[5] Ministry of Economy, Planning and Cooperation (2020). National and International Mobilisation Economic and Social Resilience Program for the COVID-19 Pandemic Response and Solidarity Fund, April 2020. Pg. 11.

[6] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[7] Ministry of Health and Social Action (2020). Coronavirus: Region and District breakdown of Covid-19 contamination cases in Senegal from 29 August 2020. http://www.sante.gouv.sn/mediatheque/phototheques/
coronavirus-r pour centC3 pour centA9partition-par-r pour centC3 pour centA9gion-et-district-des-cas-de-contamination-76 (Accessed 30 August 30 2020). Homepage.

Access to Finance

Senegal is home to 25 banks and four financial institutions. This makes Dakar one of the main financial hubs of the West African Economic and Monetary Union (WAEMU) zone. In addition, the BHS, established in 1979, is the first of its kind in WAEMU. Interest rates have fallen in recent years to between 6.5 percent and 10 percent. With BHS, the average rate is 7.2 percent.

The 218 microfinance institutions[1] play a crucial role in financing the country’s economic activities. In the fourth quarter of 2019, outstanding loans of these institutions amounted to CFA440 billion (US$753 million) for a total of 460 547 loans.[2] These microfinance institutions provide non-mortgage loans, usually for housing improvements.

Almost all commercial banks in the country offer mortgages. The national banking system injects nearly CFA 50 billion (US$85.6 million) annually into housing, but this represents only a small share of total loans in the economy as a whole.[3] Also, according to a study by the International Finance Corporation (IFC), bank financing covers only 15 percent to 20 percent of mortgage needs and there is a question of whether the cause is structural[4] (limited bank capacity) or operational (insufficient bankable applications).

Acceptance of loan applications is decided primarily by the applicant’s solvency, which is determined by income and the prescribed assignable share. In Senegal, the usually applied quota is 33 percent of income. However, some banks allow exemptions on this rate in favor of high incomes, while ensuring that the borrower has enough to live decently after the repayments. Another element of mortgage eligibility is the effort rate or personal contribution, which is usually 20 percent. Unless there is a waiver, the minimum is 10 percent. (BHS grants a waiver to its clients, public servants whose salaries are domiciled in its institution. Borrowers in this category may be exempt from contribution.)

Housing is a social property that everyone wants to acquire and preserve. This, coupled with the nature of the guarantee (mortgage on the product), means that the default rate is generally well contained. The BHS default rate is 2020 is 1.09 percent,[5] while the Central Bank of West African States (BCEAO) reports a 5.2 percent rate of deterioration for all bank loans in Senegal for April 2020.[6]

In addition to mortgages, financial institutions provide credit to developers and housing construction companies. The promoters are financed in the form of revolving credits to cover their needs before reaching the financial autonomy that comes after the break-even point marking the balance between investment disbursements and marketing cash flow. As for companies, they benefit from advances of funds from the banks against the collateral of their work contracts. As part of the response to the pandemic, the state has also put in place a mechanism for banks to inject financing of around CFA200 billion (US$342 290) in the form of cash credits or investment for companies.[7]

[1] Directorate of Microfinance (2015). Microfinance Sector Policy Document and Action Plan 2016-2020. Table 1.  December 2015. http://www.microfinance.sn/app/uploads/2019/07/LPS_Microfinance_2016-2020.pdf (Accessed 16 August 2020). Pg. 11.

[2] Department of Finance and Budget (2020). Note on the situation of the SFD. Fourth Quarter 2019. https://drs-sfd.gouv.sn/sitedrs/wp-content/uploads/2020/02/NOTE-TRIM-4-2019.pdf (Accessed 16 August 16 2020). Pg. 12.

[3] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[4]IFC (2020). Housing Market Study in Senegal. International Finance Corporation. Pg. 60.

[5] Email communication with Mamadou Gueue, BHS, 10 August, 2020.

[6] BCEAO (2020). Bulletin. Central Bank of West African States. https://www.bceao.int/sites/default/files/2020-07/Bulletin pour cent20Mensuel pour cent20des pour cent20Statistiques pour cent20Juin pour cent202020 pour cent20 pour cent281 pour cent29.pdf  (Accessed 15 August 2020). Pg. 60.

[7] Ministry of Economy, Planning and Cooperation (2020). Economic and Social Resilience Program. National and international mobilization for the COVID-19 Response and Solidarity Fund. Pg. 19.

Affordability

Housing affordability in Senegal is a controversial issue. The lack of supply means that all products put on the market by end up being sold. It is rare to see serviced plots or turnkey dwellings remain unsold for a long time because, as a last resort, the most difficult assets to acquire are bought by real estate investors which will lease them.

According to the National Agency for Statistics and Demography (ANSD), the most common housing occupancy is property (70 percent) and rent (23.3 percent), while 3.4 percent are housed free of charge.[1] In the Plateau district of downtown Dakar the average monthly rent for a three-bedroom apartment is CFA1.6 million  (US$2 735),[2] while the monthly rent for a newly built dwelling in the extension areas of the Dakar metropolitan area is CFA138 814 (US$238).[3] This is the average for the first five months of 2020 and reflects a 24.1 percent decrease compared to the same period in 2019.[4] This relatively large decline in the first half of 2020 could be attributed to the uncertainty of the economic outlook created by the COVID-19 pandemic.

Due to relative household poverty  (the poverty index was at 37.8 percent in 2019),[5] almost all the products currently listed by real estate developers are financially inaccessible for the vast majority of those looking for a property. A loan on the best terms from the banks to acquire the cheapest housing currently available on the market would require a monthly income of about CFA232 000 (US$397),[6] which excludes 70 percent of potential applicants.  As 80 percent of the homes currently on the market cost more than CFA20 million (US$34 229),[7] it would require a monthly income of CFA444 966 (US$762), excluding also more than 80 percent of housing applicants.

This shows how distorted and selective the real estate market is. To mitigate the effects of this, the government has initiated a project of 100 000 housing units over five years. Through this project, the state intends to provide support to the housing sector, which can reduce the costs by up to 38 percent (half in developed land, the other half in the form of tax facilities).[8] Nevertheless, the cheapest housing is expected to cost CFA10 million (US$17 114), excluding taxes, and will only be accessible to 30 percent of households.[9]

[1] National Agency for Statistics and Demography (2020). Summary Note No 5. Household Habitat Conditions: Lighting Elements in Pandemics linked to COVID 19. Pg. 4.

[2] MaMaison.sn. Houses for rent. https://www.mamaison.sn/maisons-a-louer/plateau/2-chambres (Accessed 2 September 2020).

[3] ANSD (2020). Monthly Economic Statistics Bulletin for May 2020. Table IV.2-2 (continued), line entitled: Monthly gross rent of a hard house, insulated with internal toilets. National Agency for Statistics and Demography. https://www.ansd.sn/ressources/publications/Bulletin_mai_2020.pdf (Accessed 17 August 2020). Pg.54.

[4] Ibid. Pg. 54.

[5] ANSD (2020).Communication of the poverty results of the Harmonized Survey on household living conditions in Senegal (EHCVM 2018/2019). National Agency for Statistics and Demography. July 2020.   https://www.ansd.sn/ressources/publications/Communication_Resultats_EHCVM_Juin2020_Senegal.pdf (Accessed 26 August 2020). Pg. 1.

[7] IFC (2020. Housing Market Study in Senegal. Distribution of available supply by price range. International Finance Corporation. Pg. 54.

[8] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[9] Sénégal Housing Bank Simulator. Taking a loan of 10 million FCFA over 20 years at a rate of 7%.

https://www.bhs.sn/simulateur

Housing Supply

The government’s 100 000-houses project includes benefits related to facilitating access to land and tax incentives, and includes a framework agreement with developers. The agreement stipulates that 50 percent of the allocated area is reserved for social housing costing less than CFA12 million (US$20 537), and 20 percent of the area for economic housing costing less than CFA20 million (US$34 229). The framework agreement is complemented by specifications on minimum technical and comfort requirements for social housing (two-bedroom, living room with a minimum of 60m² built) taking into account the size of households in Senegal. While more than half of Dakarians live in households with less than 10 people, most households outside Dakar have 10 or more people, with 64.2 percent living in rural areas and 56 percent in urban areas.[1]

As part of this ambitious project, the government has identified thousands of hectares in the urban area within the Dakar-Mbour-Thiès triangle and in other localities in the country. In addition, in 2020, the state has set up two support structures: the Society for Land Development and Urban Renovation (SAFRU) and the Fund for Social Housing (FHS). The latter will be financed, among other things, by the payment of the parafiscal tax on cement and other materials. FHS resources will be used to support supply by financing development and demand through loan guarantees as well as interest rate enhancements.[2]

Nevertheless, housing production is still mainly insufficient in relation to demand. The reasons for this paradox are found in the high cost of construction, the poverty of households, the constraints related to land, and less interest by developers in low-end housing.

[1] ANSD (2020). Summary Note No. 5. Household Habitat Conditions: Lighting Elements in Pandemics linked to COVID 19. National Agency for Statistics and Demography Pg. 2.

[2] Ministry of Housing and Public Hygiene (2016 and 2020). Law No. 2016-31 of 8 November 2016, establishing the rules for the organisation and operation of the Social Housing Fund (FHS).

[3] Ministry of Housing and Public Hygiene (2020). Sector Review Report. Appendix 2. June 2020. Pg. 54.

Property Markets

Despite the huge housing deficit, the Senegalese residential real estate market is active. However, it suffers from a lack of reliable and up-to-date data because, apart from the ANSD statistics, usually from housing censuses, there is no recent study of the housing market in Senegal.  In reality, there is confusion between the need for housing and the actual demand for housing (in the commercial sense of the term) and whether it is property to acquire or to rent.

Prices vary widely (from single to quadruple) from one area to another in the Dakar metropolitan area. For example, to acquire housing, the selling prices per square metre vary from an average of CFA238 618 (US$408)[1] in the new extension zones to more than CFA1 000 000 (US$1 709)[2] in the city centre of Dakar.

There are also huge constraints on access to land. The registration of land on the national domain follows a long procedure involving the local authorities; the decentralised services of the state (departmental services for cadastre, urbanism, domains and others); the Directorate General of Taxation and Domains (which provides the secretariat for the Government Operations Control Commission-CCOD); the ministry in charge of domains (which prepares the report for the presentation of the draft registration decree); and the Presidency of the Republic (for the signature of the registration decree by the President of the Republic).

Despite the legislation in this area from 1964, including the law on the National Domain Act, which marks the implementation of modern/regular land tenure, the traditional method of tenure by communities persists. The co-existence of these two regimes (formal/informal) explains the small number of formally created land titles. By 2014, only 152 000 land titles[3] had been issued, accounting for less than eight percent of households in the country. Since then, significant efforts have been made to create property title deeds. For example, the Property Conservation and Land Law Offices of Ngor and Pikine,[4] located in the Dakar region, saw a significant increase in the creation of new land titles between January and July 2020. At the Ngor Office, 2 420 titles were created between January and August 2020 out of a cumulative 22 810 titles registered on the land book, an increase of more than 10 percent in eight months.[5]

There is some information on land management through the Land Management Support Project. In addition, some Land Conservation offices have begun computerised entry of land data. However, land management is still mainly dominated by the manual listing of titles. For the procedure to transfer a title, for example, from the purchase of an already registered property, Senegal recorded a score of 58.3 points out of 100 in the World Bank Doing Business 2020 report.[6]

[1] This is the average calculated as follows: SICAP (CFA10.5 million for an area of 64m² or CFA195 313 m²⁾ SNHM (CFA12 million for 41m² or CFA292 683 m²), GETRAN Immo (CFA18 million for 79m², or CFA227 848m²). This gives an average of CFA238 618m².

[2] Direct interview with Mr. Babacar Faye, Chairman of the Senegal Private Real Estate Developers’ Association, 11 August 11 2020.

[3] IFC (2020). Housing Market Study in Senegal. International Finance Corporation. Pg. 23.

[4] The Pikine office is currently one of the largest in Senegal for land transactions because it covers the territory with the most coveted land reserves for housing, as well as the departments of Rufisque and Mbour.

[5] Direct interview on 11 August 2020 with Mr Kasse, Head of Office.

[6] Word Bank (2020). Doing Business 2020. Senegal. Pg. 21.

Policy and Regulations

Senegal’s housing policy took a significant turn in 2020 with the organisation of the 3rd International Housing Fair (SENHABITAT DAKAR), the creation of SAFRU and FHS, and the holding of the Presidential Council on Housing.

The state does not directly intervene in the construction of housing. This is left to parapublic and private real estate developers, cooperatives and households (self-construction). However, the state has tried to create a conducive environment by liberalising the profession of real estate developer, creating the BHS, framing housing cooperatives, establishing the Housing Guarantee Fund, and passing the Law 2016-31 of 8 November 2016 under the Social Housing Orientation Act.

In addressing costs and access to land, the 100 000-housing project  plans to reduce costs through local production of building materials and reserves 50 percent of the land for units costing less than CFA12 million (US$20 537). Also, the Presidential Council of 20 August 2020 has established a single window to initiate land and administrative procedures for developers selected for this national project.

Opportunities

The huge housing deficit in Senegal indicates considerable potential. The 100 000-housing project revealed an over-demand of more than 110 percent: 213 744 eligible applications were registered for a projected bid of 100 000 units.[1] In addition, the 100 000-housing project requires an annual bank financing of CFA200 billion (US$342.3 million) while banks currently finance houses up to CFA50 billion (US$85.6 million).[2] This is a real opportunity for financial institutions willing to provide mortgages.

Other opportunities are the construction of rent-to-own housing and the production of serviced plots for self-construction, self-financing and incremental construction. These opportunities are justified by the fact that certain segments of the market, especially those earning less than CFA115 000 (US$197) a month (corresponding to the first five deciles of the income scale) will have difficulty accessing property built through a mortgage.

Senegal’s political stability, its freely convertible currency and controlled inflation (around one percent) are also strengths. However, the country remains largely dependent on imports and still faces the high cost of inputs such as fuel and electricity.

[1] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[2]  Ibid. Pg. 16.

Availability of data in housing finance

The following are the main sources of housing data and statistics in Senegal.

• ANSD is the main source of statistical data for the building and public works and housing sectors. ANSD collects and publishes its data through censuses, surveys and studies.
• The BHS collects its data from developers and clients receiving loans.
• The Directorate of Regulation and Supervision of Decentralized Financial Systems collects data from microfinance institutions.
• BCEAO collects its data from commercial banks.
• The African Development Bank publishes socioeconomic data on African countries.

The main data challenges are related to lack of specificity (data are often global and not disaggregated by sector or subsector), the lack of regular updates and sometimes unreliable nature of the data provided.

COVID-19 response

The state, in partnership with the banking sector (BCEAO and commercial banks) has set up a financing mechanism for companies affected by the COVID-19 crisis. “The aim of this was to enable companies in the most vulnerable sectors to access the necessary resources, in terms of interest rates and maturity that take into account their situations, enabling them to meet urgent needs.”[1] Initiatives include the payment of CFA302 billion (US$516.9 million) debt owed to government suppliers, CFA100 billion (US$171.1 million) financial support for the most affected sectors, and the distribution of basic food kits to one million poor households, the majority of whom live in disadvantaged urban and rural neighbourhoods.[2]

The government created the COVID-19 Pandemic Response and Solidarity Fund. This fund, worth CFA1 trillion (US$1.7 billion), is being used to fund the Economic and Social Resilience Program to improve people’s living and housing conditions, including the distribution of food to one million vulnerable households, also in poor urban neighbourhoods, and payment by the state of bills covering two months of electricity and water consumption for all.[3]

As part of the response to the pandemic, the state has also put in place a mechanism for banks for financing of around CFA200 billion (US$342 290) in the form of cash credits or investment for companies.[4]

The government also deferred payment of taxes until 15 July 15 2020 for the entire population. In the housing sector, it invited landlords and homeowners to refrain from processing evictions during the state of emergency and agreed to support two months of consumption of electricity and water bills.

[1]Ministry of Economy, Planning and Cooperation (2020). Economic and Social Resilience Program. National and international mobilization to abound the COVID-19 Pandemic Response and Solidarity Fund. April 2020. https://www.ipar.sn/IMG/pdf/plan_re_silience_-_ministere_de_l_economie.pdf. Pg. 19.

[2] Ibid. Pgs. 15, 18 and 19.

[3] Ministry of Economy, Planning and Cooperation. (2020). Economic and Social Resilience Program. National and international mobilisation to abound the COVID-19 Response and Solidarity Fund. Pgs. 15-17.

[4]Ibid. Pg. 19.

Websites

Central Bank of West African States www.bceao.int

Directorate of Regulation and Supervision of Decentralized Financial Systems www.drs-sfd.gouv.sn

Microfinance Directorate www.microfinance.sn

Cape Verde Real Estate Company www.sicap.sn

National Agency for Statistics and Demographywww.ansd.sn

National Moderate Rent Housing Corporation www.snhlm.sn

Housing Bank of Senegal www.bhs.sn

MaMaison www.mamaison.sn

Senegalese Real Estate www.senegalaisedelimmobilier.net

African Development Bank www.afdb.org

Directorate of Regulation and Supervision of Decentralized Financial Systems www.drs-sfd.gouv.sn

Central Bank of West African States www.bceao.int

Ministry of Economy, Planning and Cooperation, Business Support Measures www.covid19.economie.gouv.sn

Microfinance Pulse Fund www.fimf.sn