Housing Finance in Eritrea


This profile is also available in French here.

To download a pdf version of the full 2020 Eritrea country profile, click here.

Eritrea is located on the coast of the Red Sea, bordering the countries of Ethiopia, Sudan and Djibouti and is considered one of the world’s least developed countries, with 65 percent of the population living in rural areas. According to UN Habitat, all the urban centres in Eritrea were badly affected by the 30-year war that created an extreme need for housing and shelter. All Eritrean land is considered state-owned and citizens have no property rights. This limits investment in housing as it comes with considerable risk of expropriation by state operatives.

The country’s (real) gross domestic product (GDP) was 3.1 percent in 2019. The real GDP rate in Eritrea can be accounted for by the activities of agriculture and mining, while the most visible economy is dominated by investments in energy, roads and irrigation infrastructure. Eritrea’s unemployment rate however, rose from 5.1 percent in 2018 to 5.14 percent in 2019.

Eritrea has an undeveloped financial sector that offers a limited number of financial services, as well as a banking sector wholly controlled by the state. There are three banks in the country: The Housing and Commercial Bank of Eritrea, Eritrean Investment and Development Bank and the Commercial Bank of Eritrea. These do not publish financial statements, which instills considerable public mistrust.

Eritrea is faced with daunting housing and urban growth challenges even though it has a low urbanisation rate by global standards. There is a notable shortage of land, urban planning services, finance, building materials as well as skilled construction labour. The majority of people live in the densely populated highlands in traditional hidmo houses that have no resale market owing to their temporary nature and cultural source. Moreover, while the rich may want to buy houses, Eritrea’s underdeveloped financial markets are highly illiquid owing to government regulations restricting cash withdrawals, it requires a homebuyer a number of years to withdraw enough cash to buy a house as the market does not support bank transfers. Furthermore, the government introduced price controls on rental properties in 2017, thus disrupting a practice whereby rental property rates were determined by market forces.

The World Bank Doing Business 2020 score for registering property ranks Eritrea at position 178 out of 190 countries, an indication of poor performance on that parameter. Eritrea uses a cadastral system of land registration and the Cadastral Office is responsible for the registration of immovable property. Traditional homes on communal land are regarded as usable assets rather than resale assets due to cultural priorities and lack of documentation. Further, property owners are required to sign rental agreements at the nearest government office, while in other cases property rent is collected by government officials from tenants and delivered after tax rent to landlords.

Due to the COVID-19 pandemic, Eritrean landlords agreed to waive rents as a confirmation of the country’s “rich culture of compassion and solidarity”. The government also banned employee layoffs and deferred utility bill payments – in addition to the physical lockdowns and cessation of movement within the country.

Find out more information on the housing finance sector of Eritrea, including key stakeholders, important policies and housing affordability:

Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2020 edition, which has up-to-date profiles for 55 African countries.

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