Housing Finance in Senegal

Macroeconomic Overview

The population of Senegal was estimated at 16 209 125 in 2019,[1] of which 46.7[2] percent is urbanised and charaterised by the predominance of youth (52.1 percent are under the age of 20). Senegal’s political and economic capital is Dakar, which houses 23 percent of the  population.[3]

Senegal has a long tradition of promoting housing. It is one of the pioneers in Africa in the production of planned housing and serviced plots. The public real estate companies, National Moderate Rent Housing Corporation and Cape Verde Real Estate Company, were established before independence. Senegal was the first country in Africa to host a site and service project in the 1970s. However, despite political and regulatory initiatives, notably the implementation of the Housing Bank of Senegal (BHS), the enactment of laws on housing cooperatives, and the promotion of social housing, the country has a significant housing deficit. It was estimated at more than 300 000 units in 2013 and since then has increased by about 10 000 units a year,[6] resulting in an estimated backlog of 370 000 units in 2020.

The cities have the largest human settlements and are also the main entry points into the country. With their ports and airports, they were the most affected by the COVID-19 pandemic. The region of Dakar is the most affected with more than 70 percent of patients (9 481 out of 13 456) on 29 August 2020.[7]

[1] ANSD 2020. Population of Senegal 2019. National Agency for Statistics and Demography. http://www.ansd.sn/index.php?option=com_ansd&view=titrepublication&id=30 (Accessed 28 August 28 2020). Pg. 4.

[2] Ibid. Pg. 5.

[3] Ibid. Pg. 20.

[4] ANSD (2020). Senegal’s economic growth stood at 5.2%, after 6.4% in 2018. National Agency for Statistics and Demography. 30 March 2020. http://www.ansd.sn/index.php?option=com_content&view=article&
id=589:2020-03-30-08-26-41&catid=56:depeches&Itemid=264 (Accessed August 29, 2020). Pg. 1.

[5] Ministry of Economy, Planning and Cooperation (2020). National and International Mobilisation Economic and Social Resilience Program for the COVID-19 Pandemic Response and Solidarity Fund, April 2020. Pg. 11.

[6] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[7] Ministry of Health and Social Action (2020). Coronavirus: Region and District breakdown of Covid-19 contamination cases in Senegal from 29 August 2020. http://www.sante.gouv.sn/mediatheque/phototheques/
coronavirus-r pour centC3 pour centA9partition-par-r pour centC3 pour centA9gion-et-district-des-cas-de-contamination-76 (Accessed 30 August 30 2020). Homepage.

Access to Finance

Senegal’s banking network will have 26 banks8 and four financial institutions by 2021. This consolidates the important place of Senegal in the financial dynamism of the West African Economic and Monetary Union (WAEMU).

Various actors are involved in financing affordable housing: the State (via subsidy instruments), technical and financial partners (a World Bank International Development Association grant through the UEMOA Projet sur le Financement du Logement Abordable (PFLA), Qatar, and the French Development Agency (AFD), the Senegalese Housing Bank(BHS), commercial banks, housing cooperatives through their savings, and microcredit institutions through small successive credits for self-construction.

The outstanding loans to customers in the Senegalese banking system amount to CFA5.25 billions9 (US$9.5 million) in 2020, compared to CFA4.87 billion (US$8.8 million) in 2019. The BHS, a historical player in the financing of housing policy, accounts for 7% of this total. The loan-to-value ratio varies according to the income of the beneficiaries. The category of customers defines the interest rates charged by the banks. The BHS charges between 5.5% and 9%10 for individuals, and on average other banks charge 7.5%.

In Senegal, financial institutions surmount real difficulties to finance mortgages through their deposits, the BCEAO and the WAEMU Regional Mortgage Refinancing Fund. The maximum term of residential mortgages is 25 years and 29 mortgage providers are listed in 2021. Financing organisations can also today, to a lesser extent, benefit from the subsidy instruments set up by the State of Senegal, namely the Guarantee Fund for Access to Housing (FOGALOG) and the Social Housing Fund (FHS). These funds are supplied by a contribution from cement manufacturers on the sale of cement (2%), other specific taxes, donations, and bequests, and by other resources set aside in financing agreements intended for the promotion of social housing.

The microfinance sector is dynamic and provides financial services to all categories of Senegalese in all the country’s urban and rural areas. At the end of 2020, approval was withdrawn from 10 microfinance institutions. Thus, the number of decentralised financial services decreased from 304 in 2019 to 294 in 2020. In the first quarter of 2021, the sector recorded outstanding loans of CFA477 billion (US$862.6 million), deposits of CFA395 billion (US$714 million), and 97 278 beneficiaries. Microfinance is considered a home improvement loan. The amounts granted are limited and the repayment periods are relatively short (between two and five years) compared to mortgage loans.

To support the ongoing economic recovery, the BCEAO opened a “Special Refinancing Window”13 in August 2021 to help WAEMU governments meet the financing needs of the recovery. The amount of bonds eligible for the new refinancing window for Senegal is equivalent to 4% of the forecast GDP for 2021.

[1] Directorate of Microfinance (2015). Microfinance Sector Policy Document and Action Plan 2016-2020. Table 1.  December 2015. http://www.microfinance.sn/app/uploads/2019/07/LPS_Microfinance_2016-2020.pdf (Accessed 16 August 2020). Pg. 11.

[2] Department of Finance and Budget (2020). Note on the situation of the SFD. Fourth Quarter 2019. https://drs-sfd.gouv.sn/sitedrs/wp-content/uploads/2020/02/NOTE-TRIM-4-2019.pdf (Accessed 16 August 16 2020). Pg. 12.

[3] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[4]IFC (2020). Housing Market Study in Senegal. International Finance Corporation. Pg. 60.

[5] Email communication with Mamadou Gueue, BHS, 10 August, 2020.

[6] BCEAO (2020). Bulletin. Central Bank of West African States. https://www.bceao.int/sites/default/files/2020-07/Bulletin pour cent20Mensuel pour cent20des pour cent20Statistiques pour cent20Juin pour cent202020 pour cent20 pour cent281 pour cent29.pdf  (Accessed 15 August 2020). Pg. 60.

[7] Ministry of Economy, Planning and Cooperation (2020). Economic and Social Resilience Program. National and international mobilization for the COVID-19 Response and Solidarity Fund. Pg. 19.

Affordability

The impact of COVID-19 has delayed the first achievements of the 100 000- Housing Programme. The 200 housing units in the delivery phase on the Bambilor site, with a maximum unit value of CFA12 million (US$21 690), expected in the second quarter of 2021, have been delayed until the end of 2021. This is because the remaining measures to contain COVID-19 would make it difficult for tenant households residing in Dakar, particularly those who derive most of their income from the informal and private sectors, to meet expenses such as rent, due to the loss of income.

Based on the declared incomes of households surveyed in Senegal in 2019 by CAHF, and assuming a monthly repayment term of CFA88 627 (US$160), a household would need a minimum monthly income of CFA295 000 (US$533) to meet a maximum commitment of 30% of its income. The poorest (26%) would thus be excluded from access to housing due to insufficient resources. And if we apply the income threshold necessary to benefit from social housing, which is CFA450 000 (US$813) or less, 43% of households would be at the limit of this threshold and only 26% would have the necessary resources. Finally, the richest
6% exceed the eligibility thresholds for social housing. The cheapest newly built house in 2021 by a developer or contractor and located in an urban area is CFA16 500 000 (US$29 825) and this remains inaccessible for the majority of Senegalese.

The incentive tax system set up for developers and home buyers, and the initial results of the Housing Access Guarantee Fund (FOGALOG), among other strategies, should help to reduce the imbalance and support the affordability of housing. Furthermore, through the Social Housing Fund (SHF), home buyers with modest or informal incomes will benefit from a guarantee and subsidy system.

[1] National Agency for Statistics and Demography (2020). Summary Note No 5. Household Habitat Conditions: Lighting Elements in Pandemics linked to COVID 19. Pg. 4.

[2] MaMaison.sn. Houses for rent. https://www.mamaison.sn/maisons-a-louer/plateau/2-chambres (Accessed 2 September 2020).

[3] ANSD (2020). Monthly Economic Statistics Bulletin for May 2020. Table IV.2-2 (continued), line entitled: Monthly gross rent of a hard house, insulated with internal toilets. National Agency for Statistics and Demography. https://www.ansd.sn/ressources/publications/Bulletin_mai_2020.pdf (Accessed 17 August 2020). Pg.54.

[4] Ibid. Pg. 54.

[5] ANSD (2020).Communication of the poverty results of the Harmonized Survey on household living conditions in Senegal (EHCVM 2018/2019). National Agency for Statistics and Demography. July 2020.   https://www.ansd.sn/ressources/publications/Communication_Resultats_EHCVM_Juin2020_Senegal.pdf (Accessed 26 August 2020). Pg. 1.

[7] IFC (2020. Housing Market Study in Senegal. Distribution of available supply by price range. International Finance Corporation. Pg. 54.

[8] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[9] Sénégal Housing Bank Simulator. Taking a loan of 10 million FCFA over 20 years at a rate of 7%.

https://www.bhs.sn/simulateur

Housing Supply

A difficult-to-access financial market means that few operators invest in building affordable housing in Dakar and its immediate suburbs: 80% of loan requests to the banking sector for micro, small and medium-sized enterprises are refused for lack of collateral.

Access to the property is one of the markers of successful social integration. Expenditure on housing is the second largest item of household expenditure in Senegal, after food. The low-rise house is the most common type of housing in Senegal, regardless of area. Indeed, at the national level, more than six out of 10 households live in low-rise houses. In the Dakar urban area, this proportion is 45.4%, and in other urban centres 81.9% and this compares to 70.0% for rural households. The importance, however, of multi-story houses in the Dakar urban area shows that one household out of two occupies this type of dwelling and that 3.6% of households occupy an apartment in a building, while 24.0% of rural households live in huts.

Despite continuing efforts of the State, the housing deficit is chronic, judging by the proliferation of informal settlements and the steady rise in rents and land prices. A large number of irregular settlements, the absence of urban planning and land titles, the multitude of small plots and irregular buildings, narrow streets, and sandy roads are the main characteristics of precarious neighborhoods in the Dakar area. These neighborhoods are frequently located in flood-prone areas.

Two public developers exist in Senegal: SNHLM and SICAP. These institutions have made a major contribution to the development of housing in Senegal, and in Dakar in particular, and they enjoy the population’s trust. However, it seems that the State’s support for these developers has considerably decreased. In addition, they are facing strong competition from new players seeking efficiency, such as the Institut de Prévoyance Retraite du Sénégal (IPRES) and the Caisse des Dépôts et Consignations through its real estate subsidiary CGIS SA. This explains the annual production of barely 600 housing units for the two public developers combined.

The strategy adopted by the authorities to reduce the housing deficit and to stimulate the production of housing is evinced by the state project of 100 000 housing units. However, this programme is slow to gain momentum, though progress has been made in terms of technical and administrative structuring.

The urban centre of Daga Kholpa, located next to the new town of Diamniadio, plays a key role in this new strategy. It provides for the construction of 61 000 housing units over a surface area of 12 000ha intended for housing. Of the 12 000ha, 60% is dedicated to social housing and 40% to high-end housing projects. This centre, which benefits from the support of a development company, SAFRU SA, will also serve as a solution for the strong demand of the Senegalese diaspora for developed land and finished property. For the time being, 50ha has been mobilised on a site in the commune of Bambilor to erect the “diaspora city,” an integral part of the 100 000-Housing Programme. The housing program is attracting the interest of foreign investors and developers. Indeed, to make up for the delay in the results of this program, the Emirates Gate Investment Group (EGI) is committed to building 50 00018 homes in two years.

[1] ANSD (2020). Summary Note No. 5. Household Habitat Conditions: Lighting Elements in Pandemics linked to COVID 19. National Agency for Statistics and Demography Pg. 2.

[2] Ministry of Housing and Public Hygiene (2016 and 2020). Law No. 2016-31 of 8 November 2016, establishing the rules for the organisation and operation of the Social Housing Fund (FHS).

[3] Ministry of Housing and Public Hygiene (2020). Sector Review Report. Appendix 2. June 2020. Pg. 54.

Property Markets

Real estate is undoubtedly one of the most dynamic sectors in Senegal, with housing activity generating more than CFA200 billion (US$362 million) per year. The sector’s dynamism has faded somewhat with COVID-19, illustrated by the decrease in salaried employment in the sector, from 1 156 in the second quarter of 2020 to 880 in the fourth quarter of the same year.19 However, activity should be bolstered by the start of the accelerated phase of the 100 000 Housing Programme on the Bambilor site, the ongoing construction of 28 000 housing units on the outskirts of Dakar and in the interior of the country, the continuation of the development of the Diamniadio urban centre, as well as social housing programmes (imminent start-up of the Daga Kholpa urban centre), and
the revitalisation of public housing production instruments (SNHLM, SICAP SA). This development push is supported by a more optimistic residential market.

In 2021, demand will remain higher than supply in the real estate market. The Ministry of Urban Planning, Housing and Public Hygiene (MULHP) has stated that there is a deficit of 325 000 housing units, which should increase by 10% each year.

In Senegal, more than seven out of 10 households own their home: 39% are owners with title and 31.8% are owners without a title. Tenants represent 17.8% of households. On the other hand, a fraction of households are housed free of charge either by relatives or friends (7.3%) or by their employer (0.4%). The Dakar housing market is one of the most restrictive for the urban poor, who are excluded from the “right to the city”. Indeed, the average monthly rent in a newly built apartment is CFA139 308 (US$251) in the first five months of 2021. The increase is clearer if we look at longer periods of time: a property that was rented
at CFA150 000 (US$271) per month in 2014 is now rented at CFA350 000 (US$632). This is also due to the interests of wealthy investors from the subregion buying land in Senegal due to the country’s political stability.

The constant and exponential increase in the price of a square metre is an aggravating factor in the inaccessibility of housing for the majority. Indeed, the price in the urban areas of Ndiakhirate, Diass and Thiès Mont-rolland is respectively CFA17 000/m2 (US$30/m2), CFA14 000/m2 (US$25/m2), and CFA3 333/m2 (US$6/m2).

Due to outdated legal frameworks and costly administrative procedures, most people cannot obtain property titles. Even in urban areas where the legal framework may have been changed by the 2011 Land Ownership Act, cumbersome administrative procedures remain, meaning that few property titles have been issued (about 150 000 in 2014). The Property and Land Law Offices play a fundamental role in the implementation of property registration services: 74926 property titles were created by the Ngor Almadies service between January and August 2021. The many structures involved in the process of issuing property titles make land registration difficult. However, the establishment of a local government office within the Ministry of Finance (with the mission of helping municipalities manage their land and promote their financial autonomy) and the existence of a national multi-stakeholder platform on land governance, demonstrate the willingness of the State of Senegal to address this issue. In addition, the Project for the Improvement of the Cadastre and Land Tenure in Senegal (PROCASEF), financed by the World Bank to the tune of US$80 million for the period 2021-2026, will eventually modernise Senegal’s rural and peri-urban land sector.

These elements explain an improvement in Senegal’s position in the Doing Business report on registering property (41 days, below the average of 51.6 days in sub-Saharan Africa). Knowing that countries like Niger, Togo, and Cote d’Ivoire are doing much better than Senegal will spur the country on to greater efforts in reforming this area.

[1] This is the average calculated as follows: SICAP (CFA10.5 million for an area of 64m² or CFA195 313 m²⁾ SNHM (CFA12 million for 41m² or CFA292 683 m²), GETRAN Immo (CFA18 million for 79m², or CFA227 848m²). This gives an average of CFA238 618m².

[2] Direct interview with Mr. Babacar Faye, Chairman of the Senegal Private Real Estate Developers’ Association, 11 August 11 2020.

[3] IFC (2020). Housing Market Study in Senegal. International Finance Corporation. Pg. 23.

[4] The Pikine office is currently one of the largest in Senegal for land transactions because it covers the territory with the most coveted land reserves for housing, as well as the departments of Rufisque and Mbour.

[5] Direct interview on 11 August 2020 with Mr Kasse, Head of Office.

[6] Word Bank (2020). Doing Business 2020. Senegal. Pg. 21.

Policy and Regulations

In addition to self-build, which accounts for 80%27 of the housing stock, it is the parastatal real estate companies, private developers, and housing cooperatives that produce housing in Senegal. The State does not build housing but limits itself to a role of impetus, orientation, supervision, and regulation of the sector.

From 1980 onwards, Senegal’s political decision-makers set up specific instruments for social housing. Important reforms on housing financing were introduced with the creation of the Fund for the Improvement of Housing and Urban Development (FAHU) in 1977 and the BHS in 1979, the main purpose of which was to finance housing.

Today, with the new strategic orientation of housing policy, the intervention of the State is limited and concerns certain aspects related to land, financing, and taxation.

The creation of the Société d’Aménagement Foncier et de Rénovation Urbaine (SAFRU), the Fonds de l’Habitat Social, FONGIP/FOGALOG, are more than ever public instruments, created to support the State’s willingness to offer social and economic housing to the Senegalese people.

The implementation in July 2021 of a one-stop shop under the Minister of Urban Planning, Housing, and Public Health truly complements the existing system. This tool will considerably relieve the administrative procedures and formalities decried by users of the public service due to their complexity and red tape, especially inland and tax matters. Moreover, the reform of the Urban Planning and Construction Code, launched in February 2021 will naturally integrate and take.
into account the presidential directives for better implementation of the housing
policy.

Opportunities

According to the Doing Business 2020 report, Senegal is one of the Sub-Saharan African countries that have made the most progress in improving the business environment (123rd in 2020 against 141st in 2019).

The urban centres and the policy of modernisation of cities represent an opportunity to improve housing quality and supply. With strong support from the state, developers and investors should explore the rental housing market.

The latter is a necessity for young adults and low-income or informal households. Indeed, formal rental housing offers an opportunity to provide affordable housing for all. However, the government could and should develop a well-articulated, stable, and enforceable regulatory framework that would make the rental market much more attractive to institutional and private investors.

The provision by the State of serviced land plots, encouraging self-construction, would be an opportunity to be explored, given the interest of the population in being the architects of their own housing. Still considering the importance of self-construction, it would be relevant to open up the State’s mechanisms (for example, within the framework of the 100 000-Housing Units Programme) to non-profit social developers. In addition, it is appropriate to support the housing microfinance sector and other “non-formal” forms of financing.

[1] Ministry of Town Planning, Housing and Public Hygiene (2020). Zero Slum Programme. Presentation given on 13 August 2020 at the Presidential Meeting on Housing. E-mail correspondance with Dr Serigne Matar KA, Technical Advisor to the Director General for Housing and Construction, 24 August 2020.

[2]  Ibid. Pg. 16.

Availability of data in housing finance

Insufficient and inaccurate market information is a major constraint that slows down the production of large numbers of housing units and, in turn, makes lenders reluctant to undertake large-scale construction projects. In Senegal, data are available from several national and international institutions.

The ANSD, the major data provider in the country, collects and publishes its data through reports on censuses, household surveys, and monographic studies. It is followed by the administrative structures of urban planning, construction and housing, the land registry, and finance, as well as private institutions such as the BHS (which collects its data from developers and loan clients), investment companies, and property developers.

WAEMU, with a view to supporting policies at the national level, as well as the implementation of social housing production projects and urban land development for the urban poor, has set up a Centre of Excellence for Housing. This will function as a dynamic platform for the production and exchange of housing data and will allow the production of national housing reports on a regular basis (every 2-3 years).

Urban Informality

Senegal will be 49% urbanised by 2021, with a population growth rate of around 3% in 2020. Urban sprawl, aggravated by the housing shortage, strong land pressure, particularly in the Dakar region, and anarchic development of the territory leads to urban informality: 30% of the Senegalese population lives in informal or precarious neighborhoods. Although significant efforts have been made, access to drinking water and sanitation is not yet widespread. Access is almost universal in the urban area of Dakar (97.0%) and to a lesser extent in the other regions (82.0%).

Senegal has undertaken several reforms to facilitate access to housing through a transformation of the urban landscape: the “Zero Slums Programme”, which has been running since 2018, is an intersectoral and multi-institutional programme that aims to improve the living environment and conditions of more than 4 million people, of which more than 500 000 households are living in slums, before 2035.

[1]Ministry of Economy, Planning and Cooperation (2020). Economic and Social Resilience Program. National and international mobilization to abound the COVID-19 Pandemic Response and Solidarity Fund. April 2020. https://www.ipar.sn/IMG/pdf/plan_re_silience_-_ministere_de_l_economie.pdf. Pg. 19.

[2] Ibid. Pgs. 15, 18 and 19.

[3] Ministry of Economy, Planning and Cooperation. (2020). Economic and Social Resilience Program. National and international mobilisation to abound the COVID-19 Response and Solidarity Fund. Pgs. 15-17.

[4]Ibid. Pg. 19.

Websites

National Agency for Statistics and Demography (ANSD) www.ansd.sn
Central Bank of West African States (BCEAO) www.bceao.int
Direction de la Prévision et des Études Économiques www.dpee.sn
Directorate of Regulation and Supervision of Decentralized Financial Systems
(DRS-SFD) www.drs.sfd.gouv.sn
Microfinance Directorate www.microfinance.sn
Priority Investment Guarantee Fund www.fongip.sn
Société d’Aménagement Foncier et de Rénovation Urbaine www.safru.sn

Additional Sources

Decree No. 2018-89 setting the terms and conditions for the provision of plots
of land for the urban centre of Daga Kholpa
Support and advice to the Daga Kholpa development operation, diagnostic
report and action plan.