Housing Finance in Namibia

Overview

This profile is also available in French here.

To download a pdf version of the full 2021 Namibia country profile, click here.

The key affordable housing issues in Namibia are high urbanisation rates, the lack of access to affordable housing and finance, the lack of serviced land, the poor production of housing stock, and the increasing number of informal settlements across the country. There are 285 informal settlements in towns across Namibia, meaning 40% of its urban inhabitants or 216 000 urban households are informally settled. Despite high levels of urban informality, most households have access to clean water and sanitation (63% of the urban population have access to sanitation and 99.4% have access to clean water).

The subdued growth of the economy was responded to with the relaxation of credit interest that was then eroded by increased inflation caused by COVID-19. The economy is expected to grow by 2.7% in 2021, indicating that housing prices and rental rates will remain depressed for some time due to reduced business and household demand. Suppressed demand influenced the retention of the repo rate at 3.75% for the second year in a row as the financial sector studiously monitors the debt-to-income ratio to protect national liquidity. Key affordable housing developments occurring in the country’s urban areas are the Ongos Housing Development in northern Windhoek, the Development Workshop (DW), and the Shack Dweller Federation (SDFN) land acquisition and development activities in towns across the country. Such developments are critical as four of every 10 urban Namibians live in an informal settlement.

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

Overview
Access to finance
Affordability
Housing supply
Property markets
Policy and regulation
Opportunities
Availability of data on housing finance
Urban Informality
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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Namibia

Overview

[1] African Development Bank (2020). Republic of Namibia: Country Strategy Paper (CSP) 2020-2024. Pg. iv.

[2] Ibid. Pg. 3.

[3] African Development Bank (2020). Africa Economic Outlook: Supplement amid COVID-19. Pg. 90.

[4] Krause-Jackson, Flavia. (2019). Namibia Commits to Rand Peg as Economy Limps Out of Slump. Bloomberg.

[5] African Development Bank (2020). Africa Economic Outlook: Supplement amid COVID-19. Pg. 90.

[6] Ibid. Pg. 19.

[7] Erastus, N. and Amukeshe, L. (2020). Namibia: Foreign investments not enough for 2030 dream. 27 August 2020. All Africa. https://allafrica.com/stories/202008270937.html (Accessed 7 October 2020).

Access to finance

Access to finance in Namibia is the biggest challenge for market entry and the scalable growth of businesses in the country. Only 20% of businesses in Namibia have access to credit, a situation exacerbated by the economic contractions in the primary, secondary and tertiary sectors in 2020.7 The ratio of non-performing loans (NPLs) to total loans reached 6.5% in the first quarter of 2021.

The four main commercial banks reduced their prime lending rate from 9% to 7.5% in Q3 2020 in response to the repo rate being cut to 3.75%. This reduction in interest rates provided households with much-needed debt servicing relief and it has also encouraged investment in distressed sales. A devaluation of up to 20% observed on medium-to-luxury properties has also encouraged repeat buyer sales, as these buyers have access to large cash reserves required for the down payments required by loan-to-value (LTV) regulations, though the high LTV ratio regulations favour first-time homebuyers. The LTV for first-time homebuyers is 100%, 90% for second-time buyers, and 80% for third and subsequent buyers.

In the same breath, the reduced mortgage rates did not reduce the number of Non- Performing Loans. NPLs in the mortgage category increased by 24.2% and in the overdraft category by 59.7% in the first quarter of 2021. The Bank of Namibia (BON) implemented monthly regulatory reporting to monitor the increased credit risk with the banking institutions to mitigate the impact of the NPLs on the sector.

Seven commercial banking institutions (Bank BIC, Banco Atlantico, Bank Windhoek, First National Bank, Nedbank, Standard Bank, and Trustco Bank) and one nonbanking entity (First Capital) offer mortgages. In the depressed economic climate, the non-bank financial sector in Namibia was reportedly stable and has managed to grow its assets. During the 2021 first quarter, the sector recorded an improved performance in the equity markets, resulting in an increase of assets to N$356.7 billion (US$24.7 billion).

At present, 377 microfinancing institutions (MFIs) across the country offer nonmortgage housing loans. The MFI loan book value stood at N$6.8 billion (US$471 million) in the first quarter of 2021, an increase of 12.9% from 2020 Q4 and yet a year-on-year decrease of 8.1%. Approximately 96% of the MFI loan book that is N$6.6 billion (US$457 million) comprised term loans. The number of new payday loans and term loans (134 391) increased and the average value of credit extended decreased to N$27 250.2 (US$1 887) for term-lenders and N$2 281. (US$158) for payday lenders.

COVID-19 reduced disposable income, forcing households to seek credit to cover the shortfall. As such the household debt-to-disposable-income ratio increased by 1.7% relative to the 89.1% growth in credit. However, because most of the debt is collateralised mortgage lending, banks can recover much, if not the entire, portion of the credit extended.

TransUnion and Compuscan are the only two credit bureaus in the country that assess the risk and determine the creditworthiness of borrowers. Commercial banks also require eligible clients to take out mandatory life, funeral, and loss of employment cover with the mortgage. This is to ensure the asset can be retained in the case of sudden death or loss of employment as had been witnessed during the pandemic.

[1] Namibia Statistics Agency (2018). Namibia Financial Inclusion Survey. August 2018.

[2] Bank of Namibia (2020). Licences Commercial Banks. https://www.bon.com.na/Bank/Banking-Supervision/The-Banking-System-in-Namibia/Licensed-Banks-in-Namibia.aspx (Accessed 7 October 2020).

[3] Amukeshe, L. and Erastus, N. (2020). Banks face property loans stress. 3 July 2020. The Namibian. https://www.namibian.com.na/202276/archive-read/Banks-face-property-loans-stress (Accessed 9 October 2020).

[4] The exchange rate applied throughout this profile is US$1 = N$17.2.

[5] Bank of Namibia (2019). Annual Report 2019. Pg. 204.

[6] Bank of Namibia (2019). Namibian banking industry aggregated balance sheet, quarterly figures for the year 2019. Pg.3.

[7] Namibia Financial Institutions Supervisory Authority (2020). Financial Stability Report, April 2020. Pg. 37.

[8] Amukeshe, L. and Erastus, N. (2020). Banks face property loans stress. 3 July 2020. The Namibian. https://www.namibian.com.na/202276/archive-read/Banks-face-property-loans-stress (Accessed 9 October 2020).

[9] Bank Windhoek (2020). Bank Windhoek introduces more affordable mortgage loan. https://www.bankwindhoek.com.na/Pages/News/Bank-Windhoek-introduces-more-affordable-mortgage-loan.aspx (Accessed 12 October 2020).

[10] First National Bank. (2019). FNB EasyBond. https://www.fnbnamibia.com.na/loans/home-loans/easyBond.html (Accessed 7 October 2020).

[11] Namibia Financial Institutions Supervisory Authority (2020). Financial Stability Report, May 2020. Pg. 26.

[12] Namibia Financial Institutions Supervisory Authority (2020). Annual report 2020. Pg. 16.

[13] Ibid. Pg. 136.

Affordability

Housing affordability in Namibia is a profound challenge. In 2019 and 2020, the real estate market saw an upsurge of first-time buyers acquiring property valued between N$498 215 (US$34 500) and N$1.5 million (US$103 870). Seventy percent of the workforce can only afford a small house (i.e., priced below N$1.5 million). Though the reduced interest on credit has provided some financial relief on household income, the amount of disposable income is still eroded by the high inflation induced by the outbreak of the pandemic. Additionally, to qualify for credit in the small housing segment, an individual or household needs to earn from N$14 960.9 (US$1 036) to N$44 911.5 (US$3 110) per month and must be permanently employed. Furthermore, bank mortgage credit processes discriminate against self-employed and lower-income earning individuals. The slow production of housing has inflated housing prices, making them unaffordable to the lower mass market segment.

A symptom of this is the number of informal settlements in major urban centres, which is indicative of the high urbanisation rate in the country. This market is one where the vast majority is employed in the unskilled blue-collar industry, domestic work, and agricultural sector, and are also active employers and employees in the informal retail sector, or unemployed. As such, this housing market, comprising those who migrate to urban centres in search of employment opportunities to send remittances to their rurally based families, is the least served. They also form part of the 40% of the urban inhabitants living in shacks.

Despite intentions to serve this market, the National Housing Enterprise (NHE) business model has pushed the pricing beyond affordable levels. Property developers target civil servants, as they have housing allowances and security of employment, making them preferable as tenants or buyers to private sector employees and the lower mass market. At present, the SDFN and the DW are some of the few community-based organisations actively servicing the informally settled lower mass market, where the members of informal settlements actively join and invest in a communal fund for the in-situ acquisition and development of their property.

[1] Namibia Statistics Agency (2019). The Namibia Labour Force Survey 2018 Report.

[2] Namibia Statistics Agency (no date). Namibia Household Income and Expenditure Survey (NHIES) 2015/2016 Report.

[3] Namibia Financial Institutions Supervisory Authority (2020). Financial Stability Report, April 2020. Pg. 27.

[4] The Global Economy (2020). Namibia: Unemployment rate. https://www.theglobaleconomy.com/Namibia/unemployment_rate/ (Accessed 7 October 2020).

[5] Ministry of Finance (2015). Concept Note – Affordable Housing Public Private Partnership Project. Pg.2

[6] Muller, Anna. (2019). Meeting the Needs of the Urban Low-Income Shack Dwellers: Towards Partnership for Community-led Habitat Housing Processes. Namibia Economic Growth Summit 2019.

[7] Know your city. (2020). Namibian Federation and Namibian Housing Action Group: Responses to COVID-10. 30 April 2020. http://knowyourcity.info/2020/04/namibian-federation-namibian-housing-action-group-responses-covid-19/ (Accessed 9 October 2020).

[8] First Capital Namibia (2020). First Capital House Building Cost Index. First Capital. January 2020. Pgs. 6-11.

[9] Erastus, N. (2020). Rise in cost of building houses hits four-year low. 28 February 2020. The Namibian. https://www.namibian.com.na/198518/archive-read/Rise-in-cost-of-building-houses-hits-four-year-low (Accessed 9 October 2020).

[10] First Capital Namibia (2020). First Capital House Building Cost Index. First Capital. January 2020. Pg. 10.

Housing supply

SDG 11 focuses on making the urban environment inclusive, safe, resilient, and sustainable. Targets 11.1 and 11.3 are most relevant to Namibia, where 11.1 aims to ensure access to safe, affordable, and adequate housing, utilities, and the upgrading of informal settlements. Target 11.3 looks at enhancing inclusive and sustainable urbanisation and the capacity for integrated participatory human settlement planning in the country by 2030.

In hindsight, the implementation of the Urban and Regional Planning Act 5 of 2018 (URP) and the Flexible Land Tenure Act of 2012 (FLT) are steps towards realizing target 11.1. The acts stipulate the various functions and responsibilities of the different stakeholders, and the government has developed policies (Mass Housing Initiative, Built Together Programme) to supply such housing. The acts, however, still focus on administering property development rather than improving the socio-economic condition of the urban poor. The bureaucratic nature of the land development process at the local and central government levels is cumbersome and a key contributor to the delayed delivery of housing stock in the country.

Bottom-up approaches have taken advantage of the opportunities presented by targets 11.1 and 11.3 as there are more effective channels for in-situ land acquisition and development. Grassroots movement initiatives like the SDFN have achieved this, where the entity acquires and develops land in full partnership with members, their stakeholders.

The URP enables decentralisation of the land development function to local authorities. It amalgamates the two planning boards at the central government level into a single body, expediting planning procedures.

An Institute for Public Policy Research (IPPR) report recommended that state funding be focused on land development as opposed to housing production, to make serviced land available for development. This increases the housing stock production rate and reduces housing cost inflation. This is aligned to the FLT Act, as it accommodates people-led acquisition and development as a valid approach to property ownership. The people-led approach uses the sweat labour (i.e., the free and voluntary labour of unemployed individuals in the community) to construct their own homes and actively contribute towards a revolving fund in the hope of property ownership to create buy-in. What encourages commitment is people’s involvement in the participatory planning, design, and development process of their living. The approach has seen the creation of partnerships between the state and private sector (Standard Bank Buy-a-brick campaign, First National Bank (FNB) Happiness Store are examples), resulting in donations of millions of Namibian dollars towards their effort.

In Namibia, the bulk of construction materials are imported, making the cost of housing construction unaffordable. The response is the growing number of informal settlements across urban areas in Namibia. These informal settlements come with flourishing economies that largely remain untapped as they only use basic saving facilities offered by commercial banks.

Public transport is largely driven by privately owned taxis (sedans), buses that travel between the Central Business District (CBD) and suburbs, and privately owned buses and radio taxis. The provision of public transport systems should be included in planning and developing affordable housing. Living environments are designed with a heavy emphasis on housing, with no provision for bus or taxi ranks, leading to congested peak-hour road traffic in towns All property developed via the top-down approach has 100% access to refuse removal services. The same cannot be said about property developed in informal settlements. This is largely due to varying issues such as lack of title deed, and bureaucratic planning procedures. A study by Shoonga et al showed that people living in informal settlements either have access to communal sanitation and/or water, or none at all.

[1] Erastus, N. (2020). N$76b needed to clear housing backlog. 21 October 2020. The Namibian. https://www.namibian.com.na/94854/read/N76b-needed-to-clear-housing-backlog (Accessed 7 October 2020).

[2] Africa GeoPortal (2019). Average household size in Namibia. https://www.africageoportal.com/datasets/7e0866b23dcb44b08081587ae18bbe03 (Accessed 9 October 2020).

[3] National Housing Enterprise (2017). Strategic Plan 2017/18 – 2022/23. Recent articles indicate a target of 1 200 low cost houses by July 2022.

[4] Nambadja, C. (2020). Homes for 10 Windhoek families. 5 October 2020. The Namibian. https://www.namibian.com.na/95344/read/Homes-for-10-Windhoek-families (Accessed 7 October 2020.

[5] Ngatjiheue, C. (2020). Affordable housing project launched. 2 July 2020. The Namibiain. https://www.namibian.com.na/202230/archive-read/Affordable-housing-project-launched (Accessed 7 October 2020).

[6] Gkionaki, M. (2019). Affordable home, green home in Namibia. 23 October 2019. European Investment Bank. https://www.eib.org/en/stories/namibia-affordable-housing (Accessed 9 October 2020).

[7] Namibia Statistics Agency. (2020). Building Plans Sectoral Report – July 2020. Pg. 2.

[8] Nuugulu, S.M and Homateni, L. (2020). Estimating the economic impact of COVID-19: A case study of Namibia. University of Namibia. Pgs. 12-16.

Property markets

Namibia scored an overall ranking of 104 on the World Bank’s Doing Business index, where the registration of property ranked at 40.6. It takes 44 days to register a property in Namibia and that registration costs 13.8% of the property value. The most popular form of tenure is freehold, but the FLT Act has made leeway for the acquisition and in-situ upgrading of informal settlements through starter and land hold titles.

In Namibia, 63,2% of the population owns the property they live in, while 36,4% are renting. The real estate industry is governed by a real estate board to ensure the conduct of real estate professionals remains legally compliant in the formal market.

Sluggish rental demand induced by the pandemic has put pressure on rents. An overall monthly rental price reduction of 3.1% (at end of March 2021) from 0.0% (at end of March 2020) was recorded, and the national average monthly rental price demand was readjusted to N$6 671.7 (US$462) from N$7 451.6 (US$516). Rental price contractions were also observed in the annual rentals of the 1, 2, and 3-bedroom market segments while the 4-and-more-bedroom segment grew by 0.3%. The current national average rental price for this segment is N$17 141 (US$1 187). All this shows the growing demand for multi-family rental accommodation to cope with adverse economic headwinds.

On the other hand, FNB’s House Price Index surged 7.2% in the first quarter of 2021 from -5.6% in the first quarter of 2020, with Northern Namibia recording a 23% index growth, thanks to easier monetary policy. Limited stock availability and serviced land put a dampener on price growth in the small housing segment, however. Also, despite pronouncements, digitising and centralising the Deeds Registry office has yet to happen.

[1] World Bank (2020). Namibia economy profile: Doing Business 2020. Pg. 4.

[2] Namibia Real Estate Online Calculator. (2020). Full Title Cost Calculator. http://www.namibia-realestate.com/index.php?option=com_fulltitletransfercostcalculator&Itemid=23

(Accessed 7 October 2020).

[3] Namibia Real Estate. (1987). Namibia Estate Agents Act.

[4]Erastus, N. (2020). Artificial forces holding up property prices. 24 March 2020. The Namibian. https://www.namibian.com.na/199431/archive-read/Artificial-forces-holding-up-property-prices (Accessed 7 October 2020).

[5] Nandango, R. (2019). FNB Rental Index Reports, December 2019. Pg.2.

Policy and regulation

From a legislative and policy perspective, the URP Act of 2018, the amended Local Authorities Act of 2018, the National Housing Enterprise Act of 2000, and the Flexible Land Tenure Act of 2012 cohesively work together to expedite and enable dual-land development processes in Namibia. The state continues to act as an enabler by contributing to people-driven initiatives, facilitating the funding efforts of initiatives such as the Ongos Housing Development Programme alongside private investors. Government intervenes more on the demand side, bypassing laws and facilitating initiatives that encourage foreign investment in housing development. Also, amended LTV regulations enabled buying opportunities for first-time buyers. Still, in its early stages, the amended LTV regulations also gave commercial banks an opportunity to develop mortgage credit facilities for the urban ultra-low mass market, which has been excluded from homeownership despite the high demand it represents.

[1] Sweeney-Bindels, E. Housing Policy and Delivery in Namibia. Institute for Public Policy Research. Kingdom of the Netherlands.

Opportunities

From an investor’s perspective, opportunities lie in the lower mass market, where the need for affordable housing is great. The urban poor comprise two distinct markets, one with low-income earning individuals who migrate to urban centres in search of employment and with no intent to invest in or acquire property; and individuals who want to live and own property in town but do not qualify for mortgage credit. Various opportunities such as gap market financing, for example, the Rent-to-Own model introduced by the Ongos Property development group, present themselves. Here, the focus is on giving previously unqualified tenants the necessary literacy skills to become mortgage-qualifying individuals with local banks within a set period of time.

Another opportunity is social housing developments geared towards those in the ultra-low-income market who wish to work in town. Special emphasis will have to be put on consumer education about tenancy and tenancy agreements, as this market has limited literacy and disposable income N$500 (US$34) to N$2 000 (US$138) and may best appreciate communication in the vernacular.

Another opportunity lies in the market for those who earn just below the criteria to access a mortgage, i.e., between N$5 000 (US$345) and N$14 500 (US$1 002). This group has most likely been renting 2- or 3-bedroom houses at a cost of between N$3 000 (US$207) and N$9 000 (US$622) per month.

Another rather promising opening is student accommodation complexes that can accommodate students from low-income households. This gap is a guaranteed and yet overlooked population that is renewed every year.

The financial sector can also investigate alternative collateral methods the ultra-poor may be open to and have in their possession to access credit for land development. Potential property developers may leverage the sweat labour that is readily available in informal settlements to develop the said property in partnership with local authorities, and organisations such as the SDFN, DW, and others in the country. Private sector expertise and engagement can make the adoption of alternative and or green building material more appealing and easier. Smart partnerships of this nature put grassroots organisations in a better negotiating position in the bulk procurement of construction materials. These smart partnerships can also be used by financial institutions to develop special mortgage packages for these market segments.

Other opportunities investors and developers can consider are the construction of social amenities such as schools, police stations, information centres (libraries), local economic development spaces (open markets, shopping complexes, shared workspaces), parks, clinics, or health centres, sports centres, etc. These add value to the living environment and help create inclusive multi-nuclei urban centres where enterprise and economic activity are not limited to one location.

[1] All Africa (2020). Namibia: Housing enterprise to commence with construction of 335 houses in July. 16 June 2020. https://allafrica.com/stories/202006160696.html (Accessed 9 October 2020).

[2] The Namibian. Harambe plan capital market invasion. 12 August 2020. https://www.namibian.com.na/203457/archive-read/Harambe-plan-capital-market-invasion (Accessed 9 October 2020).

Availability of data on housing finance

No organisations collect and share housing finance data. Rather, they collect either housing data, mainly from the Deeds Registry Office, Namibia Statistics Agency (NSA), or financial data on credit, mainly obtained from the Bank of Namibia (BON), and the Namibia Financial Supervisory Authority (NAMFISA). The housing finance data would be sourced from the Deeds Registry Office, as the bureau for all property data and the value of said transactions. The BON and Namibia Financial Institutions Supervisory Authority report on the overall performance of the financial and non-financial industry. First National Bank (FNB) Namibia reports on the performance of real estate sales and rentals nationwide. The NSA publishes the monthly building index, a report on the volume of approved building plans in four major urban centres that cover 70% of national building volumes.

The Deeds Registry data, however, is not available online, and the BON data does not indicate what percentage is newly acquired mortgage credit. The FNB reports exclude properties valued below N$100 000 (US$6 925); properties with second, third, and fourth bonds; properties with bonds registered as close corporations, trusts, and private companies; properties paid in cash; and properties with sectional bonds, as sufficient data is lacking.

Urban Informality

Namibia has an urbanisation rate of 4.2% and a population of the growth rate of 2% p.a. where 63% of the urban population have access to sanitation and 99.4% to clean water. There are 285 informal settlements in towns across Namibia, meaning 40% of the country’s urban inhabitants or 216 000 urban households are informally settled. Grassroots Movements such as the SDFN receive an annual grant from the Ministry of Urban and Rural Development that is added to their revolving Fund. The SDFN has also clinched additional partnerships with several local authorities to facilitate informal settlement upgrades. In 2020, the MURD launched the Informal Settlement Upgrading Affordable Housing Pilot Project in partnership with the City of Windhoek and the NHE that saw the completion of 194 incrementally developed houses by July 2021. This partnership aims to deliver 1 200 units between July 2020 and June 2022, valued at below N$204 052 (US$13 826).