Housing Finance in Benin

Macroeconomic Overview

 

Benin is a country in West Africa that covers an area of ​​114 763 km.[1] The country is located between Togo, Niger and Nigeria. In 2019, the total population of Benin was estimated at 11 801 151 and the population growth rate was estimated at 2.72 percent.[2] Demographic projections in Benin, mainly in urban areas around Cotonou, Porto Novo or Abomey Calavi show rapid urbanization. According to official figures, Benin will have 12 million inhabitants in 2022, 55 percent of whom will be located in the large urban areas.[3] However, housing supply does not follow this dynamic. Over the past 10 years, between 2010 and 2020, the housing demand has been estimated at 320 000 units, while the public offering has produced only 2 000 units for the same period.

Like many African countries, the country’s regional capitals are developing through an anarchic and extensive occupation of land on the periphery. This form of extension poses challenges in terms of access to water, electricity, and other basic social services such as hospitals, schools, etc. This situation has a negative impact on the quality of life of the inhabitants and the viability of housing, particularly in Cotonou and its periphery which is located in a marshy area. Despite this situation, the urbanization rate was estimated at 47.86 percent in 2019 with an annual growth of 3.87 percent.[4]

In 2019, the growth rate of gross domestic product (GDP) was 6.87 percent.[5] The Beninese economy is suffering from the negative impacts of the closure since August 2019 of the land borders by Nigeria. Indeed, trade with this country represents nearly 20 percent of Benin’s GDP. For 2020, with the aftermath of the crisis linked to the global COVID-19 pandemic, forecasts expect economic growth to contract to 2.7 percent.

[1] The World Bank. Country profile.

https://databank.worldbank.org/reports.aspx?source=2&country=BEN (Accessed 11 July 2020).

[2] The World Bank. Country profile.

https://databank.worldbank.org/reports.aspx?source=2&country=BEN (Accessed 11 July 2020).

[3] Achille HOUSSOU (2017). Construction program of 20 000 social and economic housing units in Benin.https://crrhuemoa.org/wp-content/uploads/2017/03/Programme-de-Construction-Logements-sociaux-et-%C3%A9conomiques-au-B%C3%A9nin-Achille-HOUSSOU.pdf (Accessed 12 August 2020).

[4] The World Bank. Country profile.

https://data.worldbank.org/indicator/ SP.URB.TOTL.IN.ZS ?locations=BJ (Accessed 21 August 2020).

https://data.worldbank.org/indicator/ SP.URB.GROW ?locations=BJ

[5] The World Bank. Country profile.

https://databank.worldbank.org/reports.aspx?source=2&country=BEN (Accessed 11 July 2020).

Access to Finance

Access to finance is a challenge for most Beninese who want to own a home. Most housing projects are carried out by mobilising personal savings over several years.

According to the latest statistics from the Central Bank of West African States (BCEAO), Benin had 14 banks and one financial institution, namely the African Guarantee and Bonding Company (AFGC), on 31 December 2020. According to the BCEAO, the percentage of the adult population holding an account in banks, postal services, national savings banks, and the Treasury for 2019 was 24.8%.

Housing finance by commercial banks remains marginal. In an economy heavily dominated by the informal sector, few Beninese have recourse to home loans to finance their housing projects. This situation is essentially linked to the restrictive conditions required by banks for granting mortgage loans. For example, Orabank Benin asks its clients to provide a work contract or a pension card and proof of a salary transfer or a direct debit. The client must also have 10% of the amount requested. Another limiting factor is the absence of a guarantee (linked to the land title in most cases), in a context of insecurity of property rights.

The amounts granted by the banks can range from CFA25 million (US$45 189) to CFA100 million (US$180 755) depending on the needs of the clients, namely: land acquisition, renovation, or new construction. The microfinance sector in Benin is quite dynamic with more than 112 participants listed in 2019.9 According to a 2019 BECAO report on decentralised financial systems, total clients numbered 2 633 256. However, microfinance plays a paltry, if not negligible, role in housing finance although some of the credit extended to clients is certainly invested in housing projects. It would be wise for these institutions to explore the possibility of offering financing solutions for the real estate sector.

In recent years and following the impact of COVID-19, financial inclusion via mobile financial services has accelerated rapidly. Two operators are active on the Beninese market, namely MTN and Moov Africa. According to the 2020 report of the Regulatory Authority for Electronic Communications and Post of Benin (ARCEP), 5 253 233 accounts were active in 2020, an increase of 41.7% compared to 2019. This is the number of subscribers who use mobile financial services. According to the same report, the number of operators that accept electronic currencies has also increased by 437.7%. The volume of transactions increased from 336 368 074 to 603 737 776 in 2020, an increase of 79.5%. Of the transactions 20% concern money deposits and 23% withdrawals. This clear increase in mobile financial transactions is due to the promotion of digital finance and, in the era of COVID-19, allows for social distancing.

[1] Central Bank of West African States (2018). Financial inclusion monitoring indicator in WAEMU from 2008 to 2018.

https://www.bceao.int/sites/default/files/inlinefiles/Tableau%20de%20bord%20de%20l%27inclusion%20financi%C3%A8re%20dans%20l%27UEMOA_2018.pdf (Accessed 1 August 2020). Pg. 1.

[2] Ministry of Economy and Finance (2020). 2019 directory of decentralized financial systems in Benin. https://finances.bj/annuaire-2019-des-systemes-financiers-decentralises-du-benin/ (Accessed 27 August 2020) Pg. 1.

[3] National Agency for the Supervision of Decentralized Financial Systems (ANSSFD) (2020)

https://www.anssfd.org/htdocs/statsfd/?annee=2020&trimestre=trim2 (Accessed 1 August 2020).

[4] Central Bank of West African States, BCEAO. Banking Landscape. https://www.bceao.int/fr/content/paysage-bancaire (Accessed 1 August 2020).

[5]Regulatory Authority for Electronic Communications and the Post, ARCEP. Annual activity report 2019.

https://arcep.bj/wp-content/uploads/2020/04/Rapport-Annuel-2019-ARCEP-BENIN.pdf (Accessed 11 August 2020).

[6]

Regulatory Authority for Electronic Communications and the Post, ARCEP. Annual activity report 2019.

https://arcep.bj/wp-content/uploads/2020/04/Rapport-Annuel-2019-ARCEP-BENIN.pdf. (Accessed 31 August 2020). Pg. 57.

Affordability

In Benin, housing finance by conventional banks is not common for reasons of affordability. Indeed, the average net income per capita is CFA723 094 (US$1 280) per year according to World Bank figures from 2020. This level of income, therefore, leaves little opportunity for the majority to have recourse to home loans.

The interest rates of real estate loans vary according to the banks. In the case of NSIA Banque, the rate is 7.9% excluding taxes for a maximum of 20 years. At the Bank of Africa (BOA), the duration of the loan can go up to 20 years and the amount can reach 80 to 100% of the value of the property or the overall construction cost. For some banks, the duration of the loans can be as long as 25 years.

Prices vary in the rental market according to geographical areas and the condition of the accommodation. For example, a two-bedroom plus living room apartment located in the Gbégamey district of Cotonou can cost CFA100 000 (US$181) in rent, while in a more upscale district such as the Haie Vive, the rent can triple for the same space.

[1] Presidency of the Republic of Benin. Benin revealed, program of actions. Living environment. http://revealingbenin.com/programme-dactions/programme/cadre-de-vie/ (Accessed 31 August 2020).

[2] Real Estate and Urban Development Company (SIMAU). Project of 20 000 low-cost housing.https://simau.com/projet-logement/ (Accessed 12 August 2020).

Housing Supply

The supply of housing from the state is in full revival after several failed projects. The Société Immobilière et d’Aménagement Urbain (SIMAU) is the operational arm of the state, responsible for realising state real estate ambitions. This company was created in 2017 as part of a partnership between the state, banks and financial institutions, and insurance companies. It centralises all projects and coordinates their execution. It is the privileged contact for developers who wish to invest in the real estate sector in Benin. The Cité Ouédo development is one of the flagship projects piloted by the Beninese government as part of the 20 000 social housing projects carried out under the Government Action Programme (PAG). This is still the only project piloted by the state in the field of housing production. The construction programme is still underway with the recent launch of tenders for lots 1 and 2 worth CFA16.5 billion (US$29.8 million) and CFA13.4 (US$24.3 million) respectively. The first housing units resulting from this project are expected to be built in 2022.

The first batch, of 1 735 housing units, is being built by the Spanish company Pablo and Natalia Holding Group (PNHG) through its local subsidiary, PNBN. With a construction method based on concrete walls instead of traditional bricks, the objective is to provide habitable buildings within 18 months. The financing method does not require any contribution from the buyer before the start of the project. This project aims to be innovative in several respects: the effective improvement of living conditions through the delivery of housing equipped with water, electricity, and sanitation, on serviced plots and in developed neighborhoods; the improvement of technical standards and know-how by popularising high-quality mass construction methods; and promotion of new housing methods by combining individual houses and high-density units.

A few projects by private developers are developed in a scattered manner. One example is the GCITT Bethel (General Trade, Industry, Transport and Works) city project located in Ouédo. This project started in 2019 in Abomey Calavi and is supported by the state. The city is composed of 600 socio-economic houses built over an area of 30ha. The houses are built with stabilised earth bricks. According to the developers, the advantages of this technology are time and cost of construction, comfort, and respect for the environment. The use of stabilized earth for housing in Benin is still marginal. The main material used remains cement, with a local production capacity of approximately 3 200 000 tons per year.

[1] Ngounou B. (2020). BENIN: Government promotes the rapid expansion of access to water in rural areas. 26 May 2020.Afrik 21. https://www.afrik21.africa/-le-gouvernement-favorise-lextension-rapide-de-lacces-a-leau-en-zone-rurale/ (Accessed 17 August 2020).

[2] National Institute of Statistics and Economic Analysis (INSAE). Synoptic table of socioeconomic indicators.

https://www.insae-bj.org/actualites/173-tableau-synoptique-des-indicateurs-socio-demographiques (Accessed 27 August 2020).

[3] Government of the Republic of Benin. Implementation of the PAG: Minister TONATO presents SIMAU to Beninese companies. July 19, 2019. https://www.gouv.bj/actualite/301/mise-en-%C5%93uvre-du-pag-le-ministre-tonato-presente-la-simau-aux-entreprises-oises/ (Accessed 26 August 2020).

[4] Presidency of the Republic of Benin, Benin revealed, living environment action program. http://revealingbenin.com/programme-dactions/programme/cadre-de-vie/ (Accessed 31 August 2020).

Property Markets

The real estate market in Benin is still unstructured. Official and precise data on the prices of rental housing by area are not available. The sale of vacant land, rather than residences and housing rental, constitutes the bulk of transactions. For the rental market and for the acquisition of plots of land, there is a network of poorly trained real estate agents who assist customers with their various needs. Generally, a visit fee of CFA2 000 (US$3.62) is required.

Attempts to better structure the network of real estate agents in Benin have so far been inconclusive. Requests are generally for medium-sized apartments or villas located in the city centre or in peri-urban areas. According to those involved in the sector, an apartment in good condition with two bedrooms and a living room in the populous districts of Cotonou, such as Agla or Gbegamey, is negotiated between CFA100 000 (US$181) and CFA150 000 (US$) 271) per month.

Law No. 2021-02 amending and supplementing Law No. 2018-12 of 2 July 2018 on the legal regime of the domestic lease was adopted in January 2021. It brings some changes to the real estate sector. For example, the commission received by the real estate agent now cannot exceed 50% of the monthly rent.

Rapidly expanding areas are located on the outskirts of large urban areas such as Cotonou, Porto Novo, Bohicon, or Parakou in the north of the country. The need for drinking water, electricity and even internet connections is increasing.

[1] Cadastre of Benin. https://services.andf.bj/  (Accessed 12 August 2020).

[2] Doing Business 2020. Economy Profil Bénin. https://www.doingbusiness.org/en/reports/global-reports/doing-business-2020  (Accessed 24 september 2020). Pg. 20.

[3] General Secretariat of the Government. https://sgg.gouv.bj/doc/loi-2018-12/  (Accessed 21 August 2020).

Policy and Regulation

Successive governments have taken action and devised policies to improve the urban areas to cope with the high level of urbanisation unfolding in the country’s main cities. Among others, there have been: the drafting, by municipal councils, of planning documents such as the master plan for the development of the municipality (SDAC); the development plan of the municipality (PDC); urban plans in built-up areas; rules relating to the use and allocation of land; detailed plans for urban development and subdivisions; the preparation in 2009 by the Cotonou Agglomeration of an Urban Development Strategy (UDS); and the preparation in 2007 by the development territory known as “Grand Nokoué” (townships of Cotonou, Abomey-Calavi, Ouidah, Sêmê-Podji, and Porto-Novo) of its Master Plan for Urban Development and Planning (SDAU “Grand Nokoué”). However, these strategic documents need to be updated to take into account recent developments.

The state intervenes in the supply of housing in Benin mainly through social housing projects in the form of public-private partnerships. Historically, the projects carried out by the authorities have come up against several obstacles: a defective project framework, poor management or a financing plan out of touch with the realities on the ground, or a non-optimal financing scheme. The most recent development in the legislative framework concerns the rental market, with Law No. 2021-02 modifying and supplementing law No. 2018-12 of 2 July 2018 on the legal regime of the lease for domestic use in the Republic of Benin, as adopted in January 2021. This new law formalises the activity of real estate agents. Any tenant can also acquire the property he rents.

Opportunities

The only social housing project in the country is that of the 20 000 social housing units. For the current phase, only the lots located in Ouédo are under construction.

The cities in the interior namely Parakou and Porto Novo, are not yet involved. Besides this major project, other initiatives are underway to improve the living environment of the population. One example is the establishment in 2018 of the Société de Gestion des Déchets de la Salubrité du Grand Nokoué (SGDS-GN), whose mission includes collection, sorting and recycling of waste, helping local authorities to implement waste management solutions, and environmental preservation.

Sanitation and development projects on the outskirts of Cotonou are also underway and represent opportunities for direct and indirect participation. In housing finance, the banks should improve access to real estate loans with more flexible conditions to encourage the construction of housing. The state could also, in the sense of promoting access to housing, consider reducing taxes levied on the main construction materials such as cement or concrete iron. The legal framework of land ownership, which has improved in recent years, is also a guarantee of success for the housing sector.

[1] Real Estate and Urban Development Company (SIMAU), Project of 20,000 low-cost housing.  https://simau.com/projet-logement/ (Accessed 7 september 2020).

 

Availability of data on housing finance

The availability of data on the housing market in Benin remains a handicap. There are no regular studies on the housing deficit or on rental supply. Data on housing finance from banks and microfinance institutions are not centralised.

Some financial information is available from the BCEAO. For instance, the amounts of credit granted by microfinance organisations are available – without being able to distinguish the part destined for real estate and statistics on banking transactions, however. However, data deficiencies are not reserved for the housing market.

The data available on the website of the National Agency for Decentralized Financial Systems (ANSFD) was not updated for 2021 for microfinance. Recent studies on the housing deficit in the country cannot be found.

The National Institute of Statistics and Economic Analysis (INSAE) remains the main and most reliable source of information on sociodemographic and economic data.

The official website of the Beninese government provides information on the measures taken to combat COVID-19.

ARCEP’s annual report makes it possible to follow the evolution of digital finance and understand its impact on financial inclusion.

Urban Informality

According to World Bank statistics from 2018, 58% of the urban population in Benin live in slums.19 With an annual population growth rate of around 2.7% and a high urbanisation rate of 3.84% in 2020, solutions must be found quickly to improve the living conditions of the population and anticipate sanitation and social infrastructure needs. With this in mind, the city of Cotonou is the subject of a rainwater sanitation programme that aims to limit the risks of flooding, improve the living environment of the population, and ensure urban mobility during the rainy seasons.

In addition, the Beninese state has also undertaken work to improve access to drinking water. According to official data, nearly 70% of the population now has access to drinking water.

According to figures from the public statistical agency (INSAE), the proportion of brick houses is 61%, while 24.6% are made of earth in the Atlantic region, where the country’s capital is located.

Websites

Government of the Republic of Benin https://www.gouv.bj

Ministry of Economy and Finance https://finances.bj/

Ministry of Living Environment and Sustainable Development: https://www.cadredevie.bj/

National Estate and Land Agency: https://www.andf.bj/

National Estate and Land Agency / E-Notary Platform: https://www.enotaire.andf.bj/

National Agency for the Supervision of Decentralized Financial Systems: https://www.anssfd.org/

Benin Government Action Program Revealed: http://revealingbenin.com/

Real Estate and Urban Development Company: https://simaubenin.com/

Cadastre of Benin: https://cadastre.bj/

Online building permit application: https://permisdeconstruire.gouv.bj/

National Geographic Institute http://ign.bj/

Agency for the execution of urban works http://www.agetur.bj/

Société de Gestion des Déchets de la Salubrité du Grand Nokoué
https://www.sgds-gn.bj /

 

 

Additional Sources

The other laws governing land and rental in Benin are the following in

chronological order

In 1999, Decree No. 99-313 of 22 June 1999 organised the performance of the

real estate sector;

In 2005, Benin’s housing policy defined the framework for housing policy and

housing finance;

In 2007, law No. 2007-03 January organised the rural land tenure system;

In 2009, Decree No. 2009-693 of 31 December 2009 approved the framework

letter for land reform in Benin;

In 2010, Decree No. 2010-329 of 19 July 2010 approved Benin’s land policy

declaration;

In 2013, the law 2013-01 of 13 August 2013 represents the current land code

of Benin, the first of its kind in Benin that organises land property rights ;

In 2015, Decree No. 2015-010 of 29 January 2015 created the l’Agence

nationale du foncier et du domaine, to develop and manage Benin’s future land

registry; and

In 2018, Law No. 2018-12 of 2 July 2018 regulates the rental market.