Housing Finance in Somalia


This profile is also available in French here.

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

The Federal Republic of Somalia is located in East Africa, forming part of what is referred to as the Horn of Africa. It is bordered by Kenya to the southwest, Ethiopia to the west and Djibouti to the northwest. Somalia’s population growth has decreased from 3.4 percent to 2.9 percent over the past two decades and the population is estimated at approximately 14.3 million people currently, of which 40 percent reside in urban areas.

According to the United Nations and World Health Organization, Somalia is
facing a “triple-threat” of floods, drought and the COVID-19 pandemic. In February this year, government declared a national emergency due to a locust outbreak, which was deemed the worst in 25 years, threatening food supply and worsened by the flooding. And as of 16 September 2020, there were 488 active COVID -19 cases and 98 confirmed deaths.

The Somali economy is heavily dependent on remittances which accounts for about 31 percent of gross domestic product (GDP). However, remittances have declined by 50 percent during the COVID-19 period, which local Somalis (40% of the population) are dependent on – adversely affecting income. According to USAID,COVID-19-related airport closures, airline route suspensions, and quarantines prevented the transfer of banknotes into Somalia, further affecting banks’ liquidity. The COVID-19 pandemic intensified an already high unemployment rate (only 38 percent of the total population are employed) and stalled the economy generally, worsening housing affordability.

There are six banks licensed and operating in the country, and three of these offer housing/real estate/land and construction financing. According to Making Finance Work for Africa – 2018, key challenges the financial sector in Somalia faces include trust and information deficits, a lack of capacity and financial infrastructure, unfavourable terms and conditions, and insufficient collateral for the majority of the public. On the housing demand side, key challenges include short repayment periods due to risk of liquidity, down payment value requirements, the high Murabaha rate, limited real estate developers, and the high costs of residential property.

Evictions pose a real threat in Somalia, with 48 000 people evicted from places of residence in the first quarter of 2020 and 268 000 in 2019. To mitigate this, the National Eviction Guidelines have been drafted ultimately to protect the right to adequate housing and to protect human rights. According to the NDP (2020-2024), the Somali government signed the Kampala Agreement, which outlines the states commitment towards protecting IDPs which is relevant to the housing backlog in these communities.

Somalia’s NDP 2020-2024, identifies housing as an essential service and prioritises housing and urban development in many regions. Its strategy includes promoting the market for low cost housing through tax incentives to the market for affordable; quality housing for the poor; starting to improve security of land tenure, with a particular emphasis on durable solutions for displaced persons; establishing an accessible system of financing that helps the less well-off buy their homes; improving construction sector skills; strengthening building standards; and supporting urban planning and infrastructure development. For the first time ever, a national survey, the Somali Health and Demographic Survey (SHDS) 2020 was taken to monitor and track the respective priority sectors identified in the National Development Plan (NDP). According to the SHDS, approximately 32 percent of households are headed by women and the average household size is 6.2 persons.

National elections in Somalia are set to take place in November this year, which is a political milestone for Somalia. However, this may be delayed because of the COVID-19 pandemic, locust infestation, as well as security and technical issues affecting preparations.

Find out more information on the housing finance sector of Somalia, 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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