Housing Finance in Ghana
Overview
This profile is also available in French here.
To download a pdf version of the full 2021 Ghana country profile, click here.
Affordable housing in Ghana continues to be an urgent socio-economic concern despite the growing economy, as incomes fail to match house price increases. The housing deficit is intensifying especially in urban areas. In 2015 it was estimated that population growth would likely add two million extra-urban households in Ghana by 2020. The government put the housing shortage before the pandemic at more than 2 million units, and approximately 60% of the working population need help to access housing, while 35% will not be in a position to access housing even with the intended government subsidy.
In 2020, Ghana’s economy grew by 0.4%, due to the impact of COVID-19. Following government interventions implemented since March 2020 to mitigate the effect of the pandemic, Ghana’s GDP recorded growth of 3.1% in the first quarter of 2021 (excluding oil 4.6%). In the attempt to tackle
the crisis, the government has initiated Ghana CARES “Obaatan Pa” program and is expected to provide long-term and sustainable funding for businesses in the country.
In the past year, the government has proposed several affordable housing interventions, including resuscitating initiatives that were stalled at various stages of development in Tamale, Accra (Borteyman), Tema (Kpone), Kumasi (Asokore mampong), Koforidua, Wa, Prampram (Sagelmi) and Sagnarigu. Of this, it is expected that by 2022 the stalled housing developments in Borteyman, Kpone, and Saglemi would have been completed in addition to 150 new housing units to be provided for public officials.
Find out more information on the housing finance sector of Ghana, including key stakeholders, important policies and housing affordability:
- Introduction
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Regulation
- Opportunities
- Urban Informality
- Availability of data on housing finance
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2021 edition, which has up-to-date profiles for 55 African countries.
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Introduction
Ghana’s rapid urbanisation of 56.7 percent[1] has occurred at a time when there is a huge affordable housing deficit of 5.7 million rooms[2] in the country. The mortgage system in the country is at an elementary stage of development but appears promising as the government has pledged commitment to make housing financing available.
Ghana recorded a real GDP growth of 6.5 percent representing a 0.5 percentage point gain over 2018’s figure of 6.3 percent.[3] Ghana’s GDP growth positions the country as one of the Africa’s six economies leading the world’s 10 fastest growing economies. The service sector dominates the economy with a share of 47.2 percent followed by the Industry (34.2 percent) and Agriculture (18.5 percent) sectors.[4] The real estate sector witnessed appreciable gains as its contribution increased from 1.0 percent in 2013 to 2.7 percent in 2019.[5] This represents an annual growth rate of 0.25 percent from 2013 to 2019. Mortgage to GDP ratio has remained below 0.5 percent over the years with 0.8 percent of households financing their housing acquisition through mortgages.[6] Inflation in the country has remained in the single digits. The end of year inflation rate for 2019 was 7.9 percent for the consumer price index. Average lending rate witnessed a marginal decline from 23.9 percent in 2018 to 23.6 percent in 2019.
The policy direction for the economy has been to reposition it from tax dependent to production based. Consequently, the government is promoting its initiative of establishing an industry in each of the 260 districts. For 2020, the IMF predicts the economy to grow by 1.5 percent.[7] This contraction in growth is due to COVID-19’s impact
[1] World Bank (2020). Urban population (% of total population) – Ghana. https://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS?locations=GH (Accessed 10 August 2020).
[2]Ministry of Water Resources, Works and Housing (2015). 2015 National Housing Policy. https://www.mwh.gov.gh/wp-content/uploads/2018/05/national_housing_policy_2015-1.pdf (Accessed 31 August 2020). Pg. 5
[3] Ministry of Finance (2020). 2020 Mid-year Review of the Budget Statement and Economic Policy and Supplementary Estimate. https://www.mofep.gov.gh/sites/default/files/budget-statements/2020-Mid-Year-Budget-Statement_v3/.pdf (Accessed 31 August 2020). Pg.
[4] Ghana Statistical Services (2020) Rebased 2013-2019 Annual Gross Domestic Product. https://statsghana.gov.gh/gssmain/fileUpload/National%20Accounts/Annual_2013_2019_GDP.pdf (Accessed 31 August 2020) Pgs. 3-5
[5] Ibid. Pg. 5
[6] Gyamfi-Yeboah. F (2020). The mortgage industry landscape in Ghana. https://www.myjoyonline.com/opinion/dr-frank-gyamfi-yeboah-the-mortgage-industry-landscape-in-ghana/. 9 September 2020. Joy Online. (Accessed 10 September 2020)
[7] International Monetary Fund (2020). Ghana at a Glance. https://www.imf.org/en/Countries/GHA#ataglance (Accessed 31 August 2020)
Access to Finance
The banking sector dominates Ghana’s financial services, while the pension, insurance, and capital markets are less developed. This has contributed to the limited availability and high cost of long-term wholesale finance for banks. Domestic credit to the private sector (10.9% of GDP) as an indicator of the level of financial development in Ghana is lower than that of Sub-Saharan Africa (excluding high-income countries) of 17.2%.
With an underdeveloped financial market, the cost of capital for the construction and housing sectors is exorbitant. The average lending rate of commercial banks in 2020 was 20.1%. Nine of the current 23 banks in the country have official mortgage products including home purchase, home improvement, equity release, home construction, and land purchase. Home purchase mortgages typically have a loan to value ratio of 80% with amortisation of 15 years, although some banks such as the First National Bank offer 100% mortgages. Annual interest rates on Ghana Cedidenominated mortgages ranged from 18.7% to 31.7% in 2019. US dollar-denominated mortgages have comparatively lower interest rates, ranging from 11.4% to 15%. In 2020, the central bank’s annual average monetary policy rate, as a signal of the business risk, was 15.25%. On the other hand, the average annual commercial lending rate by the banks stood at 22%.
Several factors restrain householders’ access to home finance aside from the high-interest
rates and associated transaction costs. Compared with loans for commerce, lenders tend to have more stringent qualification requirements on mortgages and conduct extensive due diligence. Mortgagees may also have conditions on the towns or cities where residential properties must be located, with a preference for gated estates, primarily those within the Greater Accra and Greater Kumasi Metropolitan Areas. Mortgagee banks, except for the Ghana Commercial Bank, operate in predominantly large urban areas.
The mortgage debt as a proportion of the overall household debt to GDP ratio of 2.5% (Q3 2019) is 0.5%, relatively low as few households take mortgage loans. Non-bank institutions tend to offer more general-purpose loans to individual and household borrowers, although their combined asset value was GH¢12.32 billion (US$2.098 billion), inclusive of mortgage institutions, in 2019.
[1] Bank of Ghana (2007). A Note on Microfinance in Ghana. https://www.bog.gov.gh/wp-content/uploads/2019/07/Microfinancing1.pdf (Accessed 15 August 2020).
[2] PWC (2019). Banking reforms so far: topmost issues on the minds of bank CEOs. https://www.pwc.com/gh/en/assets/pdf/ghana-banking-survey-2019.pdf (Accessed 10 August 2020) Pg. 2
[3] Bank of Ghana (2019). Annual Report 2019. https://www.bog.gov.gh/wp-content/uploads/2020/06/AnnRep-2019.pdf (Accessed 15 August 2020) Pg. 21
[4] PWC (2020). COVID-19 and its impact on the Ghanaian banking industry-Counting the cost. https://www.pwc.com/gh/en/assets/pdf/covid-19-and-its-impact-on-the-ghanaian-banking-industry.pdf (Accessed 15 August 2020)
[5] Deloitte (2020). Financial risk implications of COVID-19 on banks. https://www2.deloitte.com/gh/en/pages/financial-services/articles/financial-risk-implications-of-COVID-19-on-banks.html?id=gh:2em:3cc:4dcom_share:5awa:6dcom:financial_services (Accessed 10 August 2020)
[6] Ministry of Finance (2019). The Budget Statement and Economic Policy of the Government of Ghana for the 2020 Financial Year. https://www.mofep.gov.gh/sites/default/files/budget-statements/2020-Budget-Statement-and-Economic-Policy_v3.pdf (Accessed 30 August 2020)
Affordability
Affordability remains an issue because of prevalent low household incomes, restricting access to shelter, be it ownership or rental. The incomes of more than three-quarters (77.4%) of households in Ghana plunged since the COVID-19 hit the country. Conversely, less than 5% of households reported an increase in income.
The cheapest newly built house costing GH¢134 684 (US$22 938)13 remains out of reach of those earning the average annual household income of GH¢33 947 (US$5 781). Factors contributing to this include rising land prices, high mortgage rates, and limited use of cheaper local building materials, and outdated building codes and regulations.
Under the National Mortgage and Housing Finance Initiative, mortgages for public sector workers have been offered at interest rates between 10%-12% compared to the average market rate at 28%. Mortgage loans are offered for houses starting from GH¢140 000 (US$23 843) for a standard two-bedroom house, and GH¢90 000 (US$15 328) for a one-bedroom unit. The initiative is designed to promote affordable housing for low-income workers through a rent-to-own scheme. The average monthly rent paid by beneficiaries under the initiative is GH¢525 (US$89) for a standard two-bedroom and GH¢625 (US$106) for a three-bedroom unit as against GH¢650 (US$111) for a standard two-bedroom and GH¢850 (US$145) for a standard three-bedroom unit in the same locality. It is envisioned that the initiative will be rolled out on a national scale, with a financing need of approximately GH¢435 million (US$74 million).
[1] Aklorbortu, P. (2019). Public sector workers to enjoy 40 percent increase in salaries, allowances from 2020. Yen. https://yen.com.gh/132590-public-sector-workers-enjoy-40-increase-salaries-allowances-2020.html . (Accessed 31 August 2020)
[2] Meqasa (2020). Ghana’s Housing Story. 5 March 2020. Meqasa. https://blog.meqasa.com/ghanas-housing-story/ (Accessed 31 August 2020)
[3] CalBank (2020). Loan Products: CalBank Mortgage. https://calbank.net/for-me/loan-products/cal-mortgage/ (Accessed 31 August 2020)
Housing Supply
The government has been reforming land delivery to reduce bureaucratic impediments and cut costs under the Land Administration Project. These have included the establishment of a Client Service Unit, digitalisation of its services, and the revision of the longstanding land law of 1962, among others. The government’s focus on infrastructure development has led to expansion in road infrastructure, making most communities accessible, thus increasing the demand in the real estate sector.
Growth in GDP in 2021 has led to an improvement in land registration and building permit systems, coupled with new regulatory support.18 This is a direct indicator of the government’s efforts to improve access to housing and other socio-economic developments. The resumption of services on the Accra-Tema rail line also gives people in affordable houses in the peri-urban areas access to work in urban areas as well as other services.
New sites to cater to the growing population in the Accra Metropolis have been identified at Saglemi, Prampram, with the off-site infrastructure done. In 2019, a partnership with the United Nations Office for Project Services to deliver 200 000 affordable houses, starting off with 6 500 units, was announced by the government.
A new structure plan for the Greater Accra metropolitan area is being prepared as the previous one, developed in 1991, has become outmoded, with the metropolis tripling in size and population over the period. In partnership with UN-Habitat, a new city extension project is also being implemented in Prampram.
Traditionally, local building materials are dominated by soil-based or timber-based building products. These comprise compressed earth blocks (CEB), improvised laterite blocks (landcrete), and clay bricks. It has been known for some time that substantial clay deposits exist in various areas of the country. However, the preponderance of these deposits has not driven any significant industrial development in building materials or applications. Local brick factories are largely informally run, with limited outputs. Sandcrete blocks, made of cement and sand, have long dominated the building market as walling material. Lately, the
desire for improved strength of the sandcrete blocks has led to the incorporation of quarry dust in the cement-sand mixes making up sandcrete blocks. The prevalence of clay deposits in Ghana has partly induced the establishment of a ceramic tile manufacturing factory with a 10 000 000m2 a year capacity by Chinese investors in 2016. Attempts to popularise rattans and bamboo in construction have failed to yield any uptake, beset by misperceptions as an inferior material. Growing awareness of climate change, sustainable development, and circular economy responses are driving the emergence of other materials recovered from waste, with plastic waste being repurposed as building materials, in the form of blocks and pavers.
[1] Ghana Statistical Service (2014). 2010 Population and Housing Census-Housing in Ghana. National Analytical Report. https://statsghana.gov.gh/gssmain/fileUpload/pressrelease/2010_PHC_National_Analytical_Report.pdf (Accessed 31 August 2020) Pg.26.
[2]Ibid). Pg. 372
[3] Ministry of Water Resources, Works, and Housing (2015). 2015 National Housing Policy. https://www.mwh.gov.gh/wp-content/uploads/2018/05/national_housing_policy_2015-1.pdf (Accessed 31 August 2020). Pg. 5
[4] Amegayibor. S. (2020). Here’s how many homes gov’t needs to build to bridge housing deficit gap. 3 August 2020. GhanaWeb. https://www.ghanaweb.com/GhanaHomePage/business/Here-s-how-many-homes-gov-t-needs-to-build-to-bridge-housing-deficit-gap-1024477 (Accessed 30 August 2020)
[5] Ghana Statistical Services (2019). Ghana Living Standards Survey 7. https://statsghana.gov.gh/gssmain/fileUpload/pressrelease/GLSS7%20MAIN%20REPORT_FINAL.pdf (Accessed 30 August 2020) Pg.136
[6] Ibid. Pg.136
[7] Meqasa (2020). List of Affordable Housing Projects in Ghana. 1 June 2020. Meqasa. https://meqasa.com/blog/list-of-affordable-housing-projects-in-ghana/. (Accessed 31 August 2020)
[8] Munen A. (2019). Ghana to construct 10,000 affordable housing units. https://constructionreviewonline.com/2019/02/ghana-to-construct-10000-affordable-housing-units/. 17 February 2019. Construction Review Online. (Accessed 30 August 2020)
Property Markets
Despite the steady easing of restrictions imposed by the government, the significant
impact of the pandemic on the Ghanaian economy persists and the real estate sector is no exception. In 2020 a decline in the tourism industry, which drives the high-end residential property market, resulting in demand for high-end residential properties plunging. The impact of the pandemic on activities in the mid to low-end residential property market was less dramatic. Many commercial properties recorded low occupancy levels due to the pandemic. The impact of the pandemic is likely to influence new innovations in building designs in favor of confined individual spaces due to the potential decline in preference for shared or communal properties.
On the other hand, the real estate market in Ghana is experiencing a surge in diaspora demand as more Ghanaian citizens abroad return home due to the devastating impact of COVID-19 on their lives in Europe and the United States. Anecdotally, this new trend is expected to continue until after the pandemic. Ghana’s economy is expected to bounce back in 2021 with a GDP growth rate of just under 5%, and economic growth is one of the variables, along with unemployment and high-interest rates affecting house prices, according to a study of housing in Accra where the housing market is concentrated.
For a residential housing unit, a breakdown of the price indicates 20% for the cost of land and infrastructure, 70% for the actual cost of building, and 10% for fees and charges.
The cost of land varies immensely depending on location. The average cost of land increased consistently from 2018 to 2019 across various localities of Accra. The lowest average cost of a plot of land in Accra within the East Legon Hills neighborhood increased from GH¢110 742 (US$18 860) in 2018 to GH¢133 168 (US$22 680) in 2019. On the other hand, North Ridge, the neighborhood with the most expensive cost of land within the period, saw a rise in average cost of land from GH¢3 949 652 (US$672 663) in 2018 to GH¢4 400 385 (US$749 427) in 2019. The increased demand for land by non-resident Ghanaians and foreigners accounts for escalation in land prices.
Ghana’s land sector is governed by customary and statutory systems, which often result in overlaps between the two legal systems. Approximately 80% of land in the country is held under customary arrangements and approximately 20% of the land is officially owned by the State. Private ownership of land may arise from the outright purchase from customary landowners, compulsory acquisition, or gift usually for individual development purposes.
[1] Ghana Statistical Service (2014). 2010 Population and Housing Census-Housing in Ghana. https://www2.statsghana.gov.gh/docfiles/2010phc/Mono/Housing%20in%20Ghana.pdf (Accessed 28 August 2020)
[2] UN-Habitat and Global Land Tool Network (2014). Land Tenure Security in Selected Countries: Synthesis Report. https://unhabitat.org/sites/default/files/download-manager-files/Land%20Tenure%20Security%20in%20Selected%20Countries_English_2014.pdf (Accessed 28 August 2020) Pg. 4.
Policy and Regulation
The 2015 National Housing Policy remains the primary guiding framework for the government’s intervention in the housing market. Various programs outlined in the policy require the government to supply housing directly by leveraging public-private partnerships, for example. The State Housing Corporation and Tema Development Corporation remain the primary quasi-state institutions for housing delivery. Other attempts at direct state affordable housing provision at Borteyman, Kpone, Asokore-Mampong, Koforidua, Tamale, and Wa stalled. The Saglemi Housing Project is one of the most recent attempts by the government to supply affordable housing through various setbacks that have bedeviled the project.
The Home Mortgage Finance, 2008 (Act 770),36 which complements the Mortgages Act, 1972 (NRCD 96), regulates mortgage lending for constructing, completing, renovating, and purchasing fixtures and chattels for residential properties. The Act, among others, has streamlined the processes of foreclosure and improved mortgagees’ rights. Where a mortgagor fails to comply with provisions of the act in relation to financing granted for housing, the financial institution can repossess the property without a court adjudication. The Credit Reporting Act, 2007 (ACT 726) mandates all financial institutions to report data
on new borrowers to the Credit Reference Bureaus within 72 hours. Reported data must be updated monthly.
The National Housing and Mortgage Fund (2019), established by the Ministry of Finance will improve access to comparatively less expensive mortgages. Through the scheme, 204 housing units have been built in Tema, for public sector employees. Real Estate Investment Trust (REIT) guidelines were established in 2019 but regulations by the Securities and Exchange Commission are yet to be promulgated. The HFC REIT, now Republic Bank REIT, remains the country’s only REIT. The Ghana Commercial Bank recently announced the establishment of the GBC REIT, but the information is scanty.
The Real Estate Agency Act (Act 1047) passed in 2020 will regulate real estate agency practice in the country while the Land Act 2020 (Act 1036) consolidates and harmonises land-related laws in the country to improve land administration and tenure security. The act particularly protects the property rights of spouses and makes it illegal for one spouse to lease, sell, exchange, or mortgage land rights and interest jointly acquired during the marriage.
[1]GhanaWeb. (2020). Rent Bill before Cabinet for Approval. 24 June 2020. GhanaWeb. https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Rent-bill-before-cabinet-for-approval-989308 (Accessed 31 August 2020)
[2] Ministry of Finance (2020). 2020 Mid-year Review and Supplementary Estimate. 23 July 2020. https://www.mofep.gov.gh/sites/default/files/budget-statements/2020-Mid-Year-Budget-Statement_v3.pdf (Accessed 31 August 2020)
[3] National Housing Mortgage Fund (2020). National Housing and Mortgage Fund Limited. https://nhmf.com.gh/about-us# (Accessed 31 August 2020).
Opportunities
Ghana’s post-pandemic economic recovery looks promising − a phenomenon conducive for investors. The local currency has gained much stability against other currencies and foreign direct investment increased by 71.2%. These positive macroeconomic indicators present great opportunities for housing and other real estate actors to plan effectively for future investments.
Again, the Government of Ghana has signed onto and is also hosting the secretariat of the African Continental Free Trade Area (AfCFTA) initiative, which aims at “accelerating intra-African trade and boosting Africa’s trading position in the global market.”The AfCFTA is estimated to generate a combined consumer and business spending of $6.7 trillion by 2030, leading to an improved investment climate, the creation of new industries, and the expansion of key sectors including the housing sector.
The challenge of securing long-term guaranteed loans for housing development will be addressed with the proposed Development Bank of Ghana (DBG), which is expected to start operating in the third quarter of 2021. The DBG is to mobilise adequate capital from both domestic and international sources and provide long-term financing to major sectors of the economy, including mortgages for the housing sector.
The informal sector continues to strongly support housing delivery in Ghana. It is estimated that 90% of Ghana’s housing stock in the urban areas is classified as informal as the dwellings do not conform to local authority control. There are instances where through non-conventional means, tenants agree with landlords to expand the housing units or improve the services within the unit to meet their socio-economic statuses. The associated costs are deducted from rents. These informal approaches somehow have become structured in different communities and are socially recognised. They should be researched, formalised, and supported to boost housing financing in the country.
Incremental housing financing supports the bulk of urban housing development in Ghana as the mortgage system is underdeveloped. International best practices for incremental housing models, which ensure residents are supported with the “unaffordable” components of home construction (well-serviced land at good locations, infrastructure, and foundational structure) are good options. Through Public-Private Partnerships, “half houses” could be provided for residents to complete at their own convenience and in accordance with their financing capacities and preference. Incremental housing financing also requires a combination of savings, subsidies, and credits.
[1] Ministry of Works and Housing (2019), New Technology for Building a House in 11 Days. https://www.mwh.gov.gh/index.php/2019/02/new-technology-for-building-a-house-in-11-days/
(Accessed 30 August 2020)
[2] Ibid.
[3] Ghana Investment Promotion Centre (2020). The Immense Opportunities of Property Development in Ghana. https://www.gipcghana.com/press-and-media/617-the-immense-opportunities-of-property-development-in-ghana.html. (Accessed 30 August 2020)
Urban Informality
Ghana in 2012 developed a National Urban Policy Framework and Action Plan which is undergoing a review. Efforts at urbanisation have mostly been reactive rather than proactive. Housing has been on the agenda on both the demand and supply sides.
Approximately 30.4% of the population lives in slums. As of 2018, there were approximately 23 slums of which 11 were in Accra. The government, through various schemes such as the Participatory Slum Upgrading Program, has undertaken in situ upgrading, providing access
roads, potable water, and drainage facilities. The current government has announced plans to modernise and transform two of such informal communities, Nima and Maamobi into world-class residential enclaves. However, another informal community that served as a refugee camp, Budumbram is up for eviction and demolition. Aside from government
intervention, a number of non-state actors play a role in these informal communities especially through support for water, sanitation, and hygiene facilities and services. The policy outcome the Ministry of Works and Housing envisages is to upgrade slums and prevent the occurrence of new ones.
In 2020, the urbanisation rate was 3.3% while the population growth rate was 2.1%. In Ghana, 68.4% of the urban population get water from pipe-borne sources while 25.1% source it from wells. The proportion of the urban population with access to sanitation (toilet facilities) is 94.1%.
Availability of data on housing finance
Data on housing finance in Ghana is mainly collected by the Bank of Ghana and the Ghana Statistical Service. Data available from the Ghana Statistical Service includes census data, stock of houses in each geographical area, rental values, expenditure on housing, housing
typologies, conditions of housing, households, and dwelling room density, among others. This data is collected through the Population and Housing Census every decade and the Ghana Living Standard Survey. From the Bank of Ghana monthly mortgages and the growth of the real estate sector is among the data available upon request.
Housing Finance Data is difficult to come by and not always publicly available. Institutions are not always responsive to requests for data on housing finance and this often leads to reliance on outdated information. In 2021 the Ghana Statistical Service conducted the Population and Housing Census which would provide up-to-date information on the
country’s population and housing growth.
Websites
Bank of Ghana https://www.bog.gov.gh/
Ghana Statistical Service https://statsghana.gov.gh/
Ministry of Water Resources, Works and Housing https://www,mwh.gov.gh/
First National Bank Ghana https://www.firstnationalbank.com.gh/
Cofundie Investment Technologies https;//www.cofundie.com/
