Housing Finance in Cabo Verde

Macroeconomic Overview

Independent since 1975, Cape Verde, or Cabo Verde, is an island State which is part of a group of volcanic islands located off the northwest coast of Africa.  The total area of Cape Verde is 4 033 km² supporting a population of 543 767 (2018) according to the World Bank estimation. Cape Verde is renowned for its Afro-Portuguese Creole culture and its many beaches. The largest island, Santiago, is home to the current capital, Praia.

During the last 20 years, the Cape Verdean population has increased, particularly in urban areas. In the municipalities of Praia, Sal and Boavista, the repercussions of urbanisation are apparent.  The key indicators of this demographic pressure in Cape Verde are related to the country’s recent political, demographic and socio-economic history, the bioclimatic cycles linked to regular drought and increased tourism, for the islands of Sal and Boavista. Internal migration flows and emigration are also key determinants of growth and urban development. The imbalances in the urban environment are also caused by difficulties in accessing clean water and electricity.[1]

The Cape Verdean government named the year 2009 as the “Year of Housing” and developed strategies to promote social housing throughout the country. The Cape Verdean population has always advocated for “adequate housing” hence the government’s challenge to create the conditions for its progressive implementation. It is with this perspective that the “House for All” programme was created in 2009 to fill the estimated housing deficit of 40 000 housing units (according to data from the Ministry of Housing). However government struggled to implement a public housing policy programme that was capable of carrying out the construction of new housing (8 500 units) and the rehabilitation of pre-existing precarious housing (approximately 16 000 units).

The economy is focussed on trade, transport, tourism, and public services.  These sectors represent three-quarters of the Gross Domestic Product (GDP) for the country. Cape Verde is also dependent on development aid, foreign investment, remittances and tourism.[2] Remittances are a growing and stable financial source for Cape Verde development and are mainly used to invest in housing or for consumption purposes.

At the beginning of 2010, the average annual economic growth was around 5 percent, inflation was under control and GDP per capita in 2010 was CVE 282 148 (US$3 000), a good performance compared to the findings in the rest of sub-Saharan Africa.[3] According to the National Institute for Statistics, nearly 46 percent of the 40 000 inhabitants live on less than CVE 189 (US$1.90) a day in the city of Santo Antao. Across the country, poverty affects 35 percent of the 550 000 Cape Verdean’s (compared to 58 percent in 2001). Tourism is developing, although the remoteness of the country makes it a relatively marginal destination despite its real attractions.

The COVID-19 crisis in 2020, with the precautionary suspension of flights, sea transport and travel restrictions to these islands, has suspended tourism in Cape Verde, which before the pandemic represented 20 percent of GDP.

[1] Geo-Eco-Trop (2015). Cities and urban living conditions in Cape Verde. http://www.geoecotrop.be/uploads/publications/pub_392_07.pdf (Accessed on 20 September 2020). Pg. 1.

[2] Central Intelligence Agency. Publication World Factbook archive (2017). Economy-overview: http://archive.wikiwix.com/cache/index2.php?url=https%3A%2F%2Fwww.cia.gov%2Flibrary%2Fpublications%2Fthe-world-factbook%2Fgeos%2Fcv.html (Accessed on 20 September 2020).

[3] Pelissier R. (Date not specified). Cape Verde: From the indigent economy to the development model.  https://www.universalis.fr/encyclopedie/cap-vert/2-de-l-economie-indigente-au-modele-de-developpement/ (Accessed on 20 September 2020).

Access to Finance

The financial sector in Cape Verde is highly concentrated and dominated by two commercial banks: Banco Comercial Atlântico and Caixa Económica. These two banks account for 90% of assets and deposits. The entry of foreign banks into the market has stimulated competition. Mortgage providers benefit from central bank refinancing and customer deposits foreign aid is almost non-existent, so foreign direct investment (FDI) has become one of the most important sources of external financing for the Cape Verdean economy. The State has considered increasing foreign direct investment (FDI) as an objective since the late 1980s. The growth of FDI was previously stimulated by privatisation, and then by a growth in tourism initiated by real estate, which requires financing for mortgage loans.

The various banks providing mortgages in Cape Verde are: Banco Comercial Do Atlantico, Caixa Economica De Cabo Verde, Ecobank Cape Verde and Banco Interatlantico. No non-bank providers of mortgages could be identified. Bank loans are granted through a credit bureau or credit analysis committee that examines each mortgage loan application to determine the client’s medium- and long-term solvency. The ratio of debt to income must not exceed 40%, including all the client’s monthly bank commitments. The debt limit could make home ownership more accessible, but households face other problems, such as the burden of medical, and educational expenses, and an income gap that continues to grow.

The lowest interest rate on residential mortgages is 5.50%, as is the case at Banco Comercial Do Atlantico. Conversely, the highest interest rate on residential mortgages offered by mortgage providers can reach 11.5%.2 Banco Comercial Do Atlantico’s various housing products include (mortgage and security): the gold package which has an annual rate of 6.4%, the silver package which has an annual rate of 7.5% and the Kasa package which can range from 8 to 11.5% with a tax of 3.5% for all packages. The list is not exhaustive.

Also, the maximum term for residential mortgages is 30 years, with the age limit of applicants being 65 years at the maturity of the loan. The minimum term is five years.

Banks have taken steps to allow for relief for those suffering negative economic effects of the COVID-19 pandemic. Bank Interatlantico, for example, has taken exceptional and temporary measures to protect the credit of families, companies, private social solidarity institutions, non-profit associations, and other entities. To this end, it provides a moratorium on repayment of loans, rent, and interest without triggering a breach of contract or activation of early repayment clauses. This allows those who benefit from the moratorium not to be reported as debtors in difficulty, which would make it difficult for them to access credit at a later date.

[1] This information is confirmed by an e-mail exchange with Bénédicte Godefroid (Head of Unit Capacity Building and Sector).

[2] Bernardino S., Freitas Santos J. and Vicente Z. (2018) Microcredit: Role of Entrepreneurial Ventures in Development of Cabo Verde. In: Carvalho L., Rego C., Lucas M., Sánchez-Hernández M. and Noronha A. (eds). Entrepreneurship and Structural Change in Dynamic Territories. Studies on Entrepreneurship, Structural Change and Industrial Dynamics. Springer, Cham.

[3] Banco de Cabo Verde. (2019) Financial and Statistical Information on Banks. http://www.bcv.cv/vEN/supervision/Insurance/Paginas/Insurance.aspx. (Accessed on 29 September 2019).

Affordability

 

 

 

 

 

 

The average cost of an apartment in the city centre is CVE67 157.65/m2 (US$722.11/m2) while outside the city centre it costs CVE56 393.74/m2 (US$606.37/m2). The rent for a one-bedroom apartment in the city centre is CVE27 832.46 (US$299.27) and outside the city centre it is CVE12 732.29 (US$136.90). The rent for a three-bedroom apartment in the city centre is CVE50 000 (US$537.62) and outside the city centre it is CVE20 000 (US$215.05). The average net monthly income (after tax) is CVE30 464.58 (US327.57).

To qualify for a mortgage loan, the ratio of expenses to household income must not exceed 40% taking into account all monthly bank commitments.

FDI has become one of the most important sources of external financing for the Cape Verdean economy. In general, FDI was stronger from 2005 onwards, rising to 4% of GDP between 1991 and 2005. Private investment in tourism began to increase in 1995 as a result of the country’s economic liberalisation policies but did not really pick up until 2003.4 The promotion of tourism contributes in parallel to the growth of the real estate sector.

[1] National Directorate of Planning (2018). SDG Cabo Verde: Voluntary National Report on the Implementation of the 2030 Agenda for Sustainable Development. June 2018. https://sustainabledevelopment.un.org/content/documents/19580Cabo_Verde_VNR_SDG_Cabo_Verde_2018_ING_final_NU_280618.pdf (Accessed on 30 August 2020). Pg. 8.

[2] UNDP. Elimination of poverty and MDGs: Cape Verde on track 21 September 2010. https://www.undp.org/content/undp/fr/home/presscenter/articles/2010/09/21/cape-verde-on-track-to-end-poverty-and-meet-most-mdgs.html

(Accessed on 30 August 2020).

[3] Numbeo. Real estate prices in Cape Verde (August 2020). https://fr.numbeo.com/prix-de-l%27immobilier/pays/Cap-Vert (Accessed on 30 August 2020).

[4] Source: News Agency Xinhua (2019). Cape Verde: China will finance the construction of 88 social housing units on the island of Sao Vicente. http://french.china.org.cn/foreign/txt/2019-02/01/content_74430782.htm  (Accessed on 30 August 2020).

Housing Supply

Cape Verde is a highly urbanised country with more than 60% of its population living in cities. The post-2015 urban orientation must therefore focus on cities with high potential in terms of infrastructure, services and basic sanitation, and where income-generating opportunities are accessible to all citizens.

Approximately a quarter of the population is concentrated in the city of Praia (the country’s capital). However, from the 1990s, there has been a progressive growth in other cities, such as: the Vila da Preguiça on the island of Sal, the city of Pedra, in the municipality of Santa Cruz, the city of Assomada, in the municipality of Santa Catarina, the city of Porto Novo and the city of São Filipe.

In urban areas, 60.8% of homes have access to the public water supply network, 53.8% of which have water within the home. Wastewater disposal is still deficient: only 19.4% of households are connected to the sewerage system. In urban areas, this coverage is 29.4% and in rural areas only 1.1%. Approximately 46.6% of houses have a septic tank, i.e., 48.1% in urban areas and 44.0% in rural areas. At the national level, therefore, many do not have access to a minimum and adequate sewage disposal service. Approximately 15.6% of Cape Verdeans use garbage trucks (20.5% in urban areas and 6.1% in rural areas). However, 56.5% of the population have access to garbage containers, i.e., 71.1% in urban areas and 28.2% The Government of Cape Verde, in partnership with UN-Habitat, has developed and implemented a National Programme for Urban Development and City Capacity Building (PNDUCC) within the framework of the United Nations Country Development Assistance, UNDAF 2012-2016. The programme also aims to consolidate the activities started in previous years under the first phase of the Participatory Slum Upgrading Programme (PSUP), which consisted of the establishment of urban profiles of Cape Verdean municipalities, financed by the European Commission. This programme aims to promote: the reduction of urban poverty, the identification of priority projects in the field of local urban development, and actions developed in projects related to urban security and the organisation of urban space. Also, it aims to promote the continuity and consolidation of actions of territorial citizenship and local leadership for strategic formation of the cities, within the framework of the Local Programme of Urban Development signed between the Government of Cape Verde and UN-Habitat in 2009. It serves as a basis for the drawing up of a national urban policy, which many UN-HABITAT member states have adhered to as a platform of choice to bring together urban development efforts and to ensure that countries have clear urbanisation perspectives and objectives for the next 20 years.

In accordance with government measures to limit the spread of COVID-19, some establishments are currently implementing additional sanitary measures.

Property Markets

Housing administration in Cape Verde is complex due to the absence of a land register to regulate land ownership.  A land register would guarantee the correct identification of buildings, and solve problems of mismanagement of land, land resources, and would aid local development. The housing sector faces problems such as confusion over land registration, generating conflicts around land ownership; delay in administrative acts of registration and authorisation, slow and cumbersome real estate transaction procedures; lack of security in the legal transit of goods; and real estate speculation.

The absence of a Land Register is an obstacle to identifying buildings and does not allow for relevant information on ownership or whether there are administrative restrictions on ownership. It is often difficult to identify who exercises ownership rights over the buildings. Many challenges have arisen in the physical delimitation of property between the State and local governments and individuals, precisely because of the lack of a land register. There is no planning on the part of the authorities, in a coherent, systematic manner and with a strategic and inclusive vision of land management. From this point of view, the lack of planning for quality urban spaces, the difficulty of access to land and housing, particularly for low-income citizens, are the consequences of the lack of involvement of local authorities. Cape Verdeans have not yet grasped the importance of the value of public space and urban culture as a fundamental issue of the quality of life.

A parcel or land register certificate can be obtained from the municipality to get a title deed (certidão predial) from the land registry within seven days at a cost of CVE1 243 (US$13.37). A third party may submit a permit application form followed by proof of their license showing that they are authorised to carry out the type of project applied for. The same form can be used for new construction or for an extension of an existing permit. This form includes dates of approval of architectural and structural plans, landowner information, and information on the architect or engineer in charge. Fees are based on the size of the construction project, traffic impact, and duration (3, 6, or 12 months). Obtaining a building permit can take 14 days at a cost of approximately CVE75 000 (US$806.44). It is essential to obtain a title deed mentioning the value of the property as well as information about the beneficiary. The lawyer will search the land registry to obtain the land registry certificate (certidão do registo predial) confirming that the seller is the owner of the property and has exclusive legal rights to sell the property. This certificate, which will also indicate all the encumbrances on the property, is valid for one year.

Local residential property websites are Banco Comercial Do Atlantico (BCA) website which offers apartments, villas, buildings, and land in Cape Verde. The real estate agency and developer Kaps Habitat is in charge of buying, selling, renting, and holiday rentals in Cape Verde.

Policy and Regulation

Non-governmental organisations and community development associations have been able to carry out activities thanks to resources mobilised from international partners and the central government. Municipalities have created social housing programmes with their own resources or through the leasing of land, the provision of building materials, and a model factory, especially in small towns. In these small towns, the community has used solidarity as a resource, through the provision of labour from friends and family in the construction of housing in informal settlements. Migrants in small urban centres have contributed to urban development through investments in housing, as well as the establishment of enterprises in the sector in partnership with the municipality and the central government.

In response to the urbanisation challenge, UN-Habitat has worked over the years with a focus on devising ways to improve the lives of residents of informal communities, such as the creation of the slum upgrading programme PSUP, in partnership with the African, Caribbean and Pacific (ACP) States Secretariat and members of the European Commission (EC). The overall objective of the PSUP is to contribute to improving the living conditions of urban populations by providing technical support to actors in ACP countries to address the multidimensional nature of the challenge of rapid urbanisation.

The National Strategic Housing Plan aims to provide strategic guidelines for the definition of an integrated housing policy in Cape Verde and the mechanisms for structuring a national housing system. Specifically, the National Housing Plan is intended to provide the country with an instrument for identifying regional and local housing needs, by category of housing deficit and the specific features of that deficit, as well as strategies for its resolution. The critical and comparative analysis of housing legislation and policies is another asset of the document, as it allows discovering the weaknesses of national legislation and policies, and designing strategies to remedy them.

[1] Beakal South-south (2018). Support for housing development in Cape Verde. http://www.southsouthworld.org/fr/component/k2/71-solution-fr-fr/1903/apoio-ao-desenvolvimento-habitacional-de-cabo-verde-fr-fr (Accessed on 17 September 2020).

 

Opportunities

The seaside resorts have good occupancy rates. The existing tourism environment and good governance in the country favor large external operators. In addition to attracting FDI and remittances from the diaspora, the country generates high returns per tourist and creates jobs throughout the country. Cape Verde has always been outward-looking, gaining the equally important confidence of international investors and donors. The development of infrastructure, especially inter-island transport, helps to reduce costs and strengthen growth links in the different islands and in foreign markets. Infrastructure includes transport, energy, and water, which are capital-intensive sectors that require clear prioritization among competing needs. Cape Verde has a great deal of potential, but the country needs strategic guidance, especially for integrating small and medium-sized enterprises (SMEs) in the urban planning and housing sector.

 

Availability of data on housing finance

The most recent approved consolidated strategy for tourism was in 2010, and the associated mandate and implementation period ended in 2013. No evaluation or impact of its implementation is known, and no strategic master plan has been put in place since then. The Cape Verdean government framework would benefit from significantly reducing the housing deficit. However, no local body collects reliable information on housing finance. Official websites of banks, microfinance, and real estate developers are sources of relevant information as are international bodies such as UN-Habitat. Additional information is hard to come by. For example, for this profile, official letters were sent to banks, microfinance, and local officials. No response has been received to date. All the work of the survey was carried out by consulting publications of the World Bank, UN-Habitat, and others. Therefore, we have reservations about the reliability of some of the information, which remains to be studied in greater depth.

Urban Informality

The mobilisation of resources to improve housing conditions in the country presupposes a union of efforts between the different sectors of Cape Verdean society since these neighborhoods are often associated with the lowest social classes, the poor population, migrants from rural areas, and, more recently, the poor.

In the past, Cape Verde was essentially rural. Today, the country is projected as a developing country with an intensification of the urbanisation phenomenon. The urban population rose from 35.5% in 1980 to 45.9% in 1990 and 53.9% in 2000. According to preliminary data from the 2010 census, the urban population is 62%, located precisely in the two main city centers of the country – Praia, and Mindelo. Thus, out of every 100 Cape Verdeans, approximately 62 live in urban areas.

Under the Constitution, all Cape Verdean citizens have the right to adequate housing. The existence of informal and precarious settlements are anomalies linked to the country’s structural poverty. The Ministry of Decentralisation, Housing, and Territorial Development (MDHOT) presented the “Casa para Todos” programme in May 2009 with the aim of promoting democratisation and equity in access to housing. The primary objective of this programme was to provide a framework for the housing issue; clarify the social actors and their roles; establish strategic guidelines; mobilise partnerships and resources; monitor the evolution of the sector (make the necessary adjustments to minimize the deficit and improve the quality of housing), and fulfilll the constitutional right to housing for all.

[1] BAD (2020). Economic outlook for Africa 2020: In the context of the Covid-19. https://www.afdb.org/sites/default/files/documents/publications/afdb20-04_aeo_supplement_full_report_for_web_french_0706.pdf (Accessed on 17 September 2020). Pg. 76.

[2] African Development Bank Group (2020). Economic outlook for Africa 2020: In the context of the Covid-19.https://www.afdb.org/sites/default/files/documents/publications/afdb20-04_aeo_supplement_full_report_for_web_french_0706.pdf (Accessed on 17 September 2020). Pg. 76.BAD (2020). Economic outlook for Africa 2020. In the context of the Covid-19.

 

Websites

Caixa geral de depositos https://www.cgd.fr/particuliers/emprunter/Paginas/Projets-immobiliers.aspx

Banco comercial do atlântico (bca) https://www.bca.cv/Conteudos/Artigos/detalhe.aspx?sidc=0&idc=2808&idsc=16 18&idl=1

Ecobank https://www.ecobank.com/ci/personal-banking/products-services/loans

Banco interaltântico http://www.bi.cv/

Kaps habitat http://www.kaps-habitat.com/fr/

Numbeo https://fr.numbeo.com/prix-de-l%27immobilier/pays/Cap-Vert