Africa's housing finance markets in 2018

This article is excerpted from the 2018 edition of CAHF’s Housing Finance in Africa Yearbook.

Cities are complex systems, and across Africa, are growing at a rapid rate unprecedented in urban history.  While the scale and pressure of urbanisation is overwhelming, this agglomeration of activity offers an incredible opportunity for development. At the same time, the confluence of efforts to promote financial inclusion, urban development, infrastructure investment, and macro-economic policy attention create a uniquely enabling environment for the growth of housing in particular.  As government, the private sector and households and communities themselves find their places in the housing ecosystem, innovation is being found along each link in the housing value chain.

Lenders, investors, builders and suppliers are getting much better at identifying and targeting niche markets.  If not yet a move away from the attraction of large-scale, massive developments, we can see increasing attention towards the notion of “massive small”: the opportunity to be found in the connected results of many small projects and initiatives at the local level that together add up to something big.[1]  From a recognition of backyard rental and inner city refurbishment as viable housing supply streams, to the development of underwriting standards for borrowers in the informal economy, to the financing of incremental housing construction at scale, to the use of blockchain technology to improve titling efficiencies, innovation along the value chain and at the local level is making headway and creating precedent that is bankable.

Innovation along the value chain

CAHF has been exploring the housing value chain across Africa for years, making the point that the chain is only as strong as its weakest link and highlighting the challenges as they arise along the chain. Standing out this year, across the continent, and in specific local contexts, is evidence of innovation along the value chain in virtually every link.

Land assembly / acquisition

In most countries, the assembly and acquisition of well-located land is a key factor in the feasibility of affordable housing development. Comparing “standard” house prices across 15 countries, CAHF found that in Kampala, Uganda, and Dakar, Senegal, land comprises more than 25 percent of the purchase price of a “standard” 55m²home on a 120m²plot of land.[2]  The comparative cost of the land was found to be highest in Nairobi, at US$15 229 for 120m²in a 20-unit development, comprising 23 percent of the overall house price.  Land costs include the registration costs, planning approval costs, and overall land purchase price, whether traditional or freehold tenure.  In Nairobi, the major cost was the land itself.  In Dakar, the cost of registration comprised nine percent of the overall land cost.  In Kampala, planning approval comprised five percent of overall land costs. In Douala, Cameroon, where the price of a 120m²plot of land in a 20 unit development was relatively low at US$4 316, registration costs comprised 43 percent of the total land cost.

In Maputo, Mozambique, Casa Minha has addressed the question of land acquisition by working with a centrally-located low income settlement.  Residents have existing land rights (DUATs, in Mozambique) but their homes are of very poor quality and in some cases, are only shacks.  Using a “land readjustment” approach, Casa Minha has negotiated with local residents in the settlement to build two formal, 2-3 storey houses on each plot.  In terms of the arrangement, Casa Minha then sells the one house on the open market, targeting entry-level hospital workers, labourers, etc.  The other house is sold for a much reduced price to the original DUAT holder, free of the land cost and leveraged by the proceeds from the sale of the other half of their land that went into the development of the open market house.  Residents have the option to participate in the scheme or not, as Casa Minha develops on a plot-by-plot basis, densifying and formalising the inner city suburb.[3]

Other examples of a form of “land readjustment” involve the development of backyard rental accommodation.  In Kenya, Letshego Kenya Limited finances incremental construction of rental accommodation as a microenterprise loan, on the back of a future rental income stream.[4]  In South Africa, Indlu[5], iBuild Home Loans[6], and uMaStandi[7]provide finance and other support towards the construction of formal rental accommodation in the backyards of their borrower’s properties.  In all cases, local landowners are actively leveraging existing, well-located land in support of improved housing affordability and housing investment opportunities.

Title / tenure

A related but distinct challenge relates to land titling and secure tenure arrangements that are acceptable to lenders.  Mortgage markets across Africa are small because without having been formally titled, land cannot be secured, or because the land registration process is cumbersome and time consuming.  In Ghana, for example, anecdotes suggest that the land titling and registration process takes between one and three years to complete.[8]  A key problem, also in other countries, is the existence of multiple ownership claims on land plots.  In other countries, administrative bottlenecks (South Africa) or overlapping jurisdictions (Mauritania) further delay the awarding of title deeds.  The insecurity this creates can cause formal builders and housing finance institutions to withdraw their participation from such areas.

The development of blockchain technology is being considered in the creation of digital land registries, with initiatives in Ghana, Kenya, Zambia and Rwanda already underway, and further considerations being given to Tanzania, Nigeria, and Ethiopia.[9]  In Ghana, Bitland[10]is working towards mapping the entire country on a distributed digital ledger, formally documenting customary land rights. In Zambia, Overstock’s Medici Land Governance[11]has partnered with the land ministry to build a blockchain land titling programme.  In both cases, the hope is that once tenure is formally noted and legally recognised, banks will be able to grant loans and issue mortgages against the property.

Bulk infrastructure

Moving along the value chain, the availability of bulk and connector infrastructure for new residential developments is a critical component, the absence of which very often undermines the affordability of housing delivered.  When municipalities cannot deliver the water, sanitation, transport and energy requirements for a development, developers either wait, or deliver this themselves, costing their investment into the eventual price of the unit.  In a case in Zimbabwe, original costings which did not anticipate the Harare municipality’s inability to deliver on infrastructure meant that the developer had to decrease the number of units delivered, thereby increasing the unit price.  Inaccessible land then meant that the developer had to build a US$3.4 million road to make the project work.[12] Similarly, in Kenya, developers often have to provide infrastructure themselves and this limits the affordability of the end-product.  In Angola, lack of infrastructure is a serious factor in deterring developers from engaging in low-cost housing.

In some countries, public-private partnerships are successfully addressing the problem.  In Zimbabwe, Old Mutual and local lender CABS have supported the development of 1 082 serviced stands in a public-private partnership with the Bulawayo local authority.  Recognising the fiscal constraints of the government, the private sector financed the servicing of the stands provided by the city, and then offered these for sale on terms to households who were registered with the City Council for access to affordable housing.[13]A small initiative, this nonetheless offers insights into the possibility for a pension fund to offer the long-term financial capacity for an initiative when the public sector is unable to participate.

Municipalities are also exploring various land based financing initiatives to support their capital requirements for infrastructure investment.  Interesting examples can be found in Ethiopia, Nigeria, Kenya, Côte d’Ivoire, South Africa and elsewhere, where the municipality uses its land asset and leverages the developer’s interest in the higher-value housing market, to impose development charges that finance their investment in infrastructure in lower-value areas.[14] USAID’s WASH-FIN[15]programme has been exploring other PPP arrangements in Kenya, Senegal and South Africa, focusing on a capacity-building approach to create sustainable business models that leverage public investment with private capital by reducing risk and building municipal creditworthiness.

Social and economic infrastructure

The availability of infrastructure also relates to the last link in the chain: social and economic infrastructure.  Inner city regeneration initiatives create an opportunity to leverage and build further on existing infrastructure: social, economic and engineering, while delivering new affordable housing opportunities.  Although poorly recognised in policy, the rental housing market is an important component of urban housing markets – and is already found in most inner cities. Research conducted in this past year by CAHF found that the majority of most city populations are renters, and that rental tenure makes up a significant proportion of national housing markets.[16]  This highlights an important opportunity: much of the existing rental is in areas with existing infrastructure.  This can be usefully leveraged towards improved affordable housing, that is also well-located – an opportunity to be recognised by investors.

In South Africa, TUHF Pty Ltd[17]is a commercial property financier that targets small scale landlords who refurbish existing inner city residential stock.  Underwriting mortgages on the basis of projected future rental income, TUHF can offer loans to entrepreneurs who demonstrate residential rental management capacity.  For those who lack sufficient equity to make the loan feasible, TUHF has established the Intuthuko Equity Fund which provides equity to previously disadvantaged individuals.  In TUHF’s 15 years of operation, it has financed the refurbishment and delivery of 33 037 units in 598 buildings, across 128 inner city areas in South Africa, working with 350 entrepreneurs of whom 52 percent are previously disadvantaged individuals.  TUHF’s loan book of R 2 767 billion (US$190 million) achieved a 15 percent return on its investment in 2018.

Housing construction

In most countries across the continent, the housing construction process is constrained by limited capacity in the development sector, and the absence or high cost of developer finance.  This results in small housing projects, financed with up-front cash payments that limit affordability.  The Affordable Housing Fund in Rwanda seeks to address this, by providing a guarantee facility for developers, producers of local construction materials and other investors in housing targeted at middle and low income earners.  The Rwf206 billion (US$232.8 million) fund was established in July 2017, and according to some reports, seeks to halve the cost of housing for the target market.[18]

A Real Estate Investment Trust (REIT) is another construction financing and rental investment mechanism that has been growing across the continent.  Research undertaken by CAHF found 36 REITs in five countries.[19]  Of these, eleven had a residential portfolio with two being residential-only REITs. These REITs manage a combined property value of US$ 22.7 billion.  In Ghana, the HFC REIT has a diversified portfolio that includes residential, with a value of US$1.8 million.  In Nigeria, Union Homes Hybrid REIT focuses explicitly on residential property, while Skye Shelter Fund, Sun Trust Hybrid, and UPDC are all diversified REITs that include residential components. Watumishi Housing Company is a residential-only REIT in Tanzania, focusing on the development of housing for civil servants. Of the 29 REITs in South Africa, five include residential as part of their diversified portfolios.  In 2016, Transcend was established a specialised REIT focused on expanding a portfolio of strategic residential properties.  The REIT is listed on the AltX Board of the Johannesburg Stock Exchange, and includes a portfolio of 2 472 units across South Africa.  As it and other REITs report into the market, they are establishing a track record that will catch the attention of investors looking for new opportunities.

Another constraint relating to housing construction is the cost of the units once built – often too expensive for the majority of households, even when they have some affordability for credit.  Increasingly, however, developers are more deliberate in their targeting, recognising and responding to affordability constraints with the development of innovative products.  A 16m²unit developed by Suraya in Nairobi, Kenya, is targeted at the entry-level market of young professionals and sells for KSh1.155 million (US$11 170).[20]  Another example from Kenya is being explored by Global Property Advice plc, which has developed a semi-detached, 38m²one bedroom unit for US$10 000, excluding the land cost.[21]  GPA offers a minimum delivery of 50 units, and can deliver within four weeks.  The product is targeted at the housing cooperative sector where land and servicing may already have been secured.  In Rwanda, Skat Consulting has designed 43m²two-bedroomed housing units at a cost of Rwf8 million (US$9 042).[22]

Annually, CAHF asks the contributing authors to this Yearbook to identify the cheapest newly built house by a private developer in their country.  The price they identify defines where the market is currently targeted – that is, what is currently being built – rather than what is possible.  From this rough view of the market, it appears as though more and more developers are improving their targeting and building lower-cost, smaller properties.

No matter how promising, however, such developments are still few and far between.  Even more conventional developments, which might start with entry-level housing at about US$20 000, are scarce.   As a result, most households still build their housing themselves.  To this end, Zambian Home Loans (ZHL) has an interesting product, supporting households who have embarked on their own, independent housing construction process and run out of cash.  Recognising that households often build their homes incrementally, ZHL offers a construction mortgage to finance construction increments.[23]   With this, they hope to leverage the existing housing investments made by middle income households, achieving lower loan-to-value ratios and accelerating the housing construction process.

Maintenance and ongoing improvements

Given its prevalence among both low and higher income markets, incremental is an important form of housing provision that is increasingly being recognised and supported with innovative products. To date, the challenge has been in realising scale from what are essentially individual-unit, slowly constructed developments.  Again, new technologies offer interesting opportunities.  With pilots in Kenya and South Africa, and intentions to expand into Nigeria and Zambia in the short term, iBuild Global[24]aggregates scale through an app that households and suppliers can access on their cellphones.  Backed up with a database of small-scale contractors, building material suppliers, and other service providers in the incremental housing sector, the app allows households to issue calls for quotation, receive multiple proposals, and evaluate these on the basis of both price and contractor track record. Holding all of this activity on a single platform, the iBuild database can assess both demand and supply, so that investors and financiers can scope the market and identify opportunities for engagement.  For lenders, the app provides a payment gateway that ensures their loans are used for housing purposes. In South Africa, Yomane[25]also offers a payment gateway that enables closed-loop payments.

Another interesting niche impacting on the housing construction, maintenance, and ongoing improvements links in the chain is “green”.  LafargeHolcim has been working hard in this space, and, in Zambia, partnered with BancABC and Zambia National Building Society to disburse housing microfinance loans towards the construction of green housing, using Habiterra blocks. The programme aligns with ILO Zambia Green Jobs Programme.[26]  LafargeHolcim has also entered into a joint venture with CDC to establish 14Trees, an initiative to create environmentally-friendly, affordable green building solutions.  Behind the name is Lafarge’s Durabric brick, which is produced from a mixture of earth and cement, compressed in a mould, and left to cure without firing.  It is estimated that by avoiding the firing process of traditional brick-making, the Durabric brick saves up to 14 trees per house.[27]  In Malawi, 14Trees has sold about one million Durabric bricks since 2016.  Increasingly, it is likely that investment capital will come with a green requirement. At the same time, the Durabric uses less cement than is used in traditional cement blocks – an important consideration given how expensive cement is in some countries.

Sales and transfer

Once the house is built, it becomes part of a market in which houses are assets that can be sold and bought, appreciating (or depreciating, as the case may be) in value, stimulating household level investment and creating a diversity of supply that is highly responsive to personal demand.  The sales and transfer link in the value chain relies critically on the availability of end-user finance – whether mortgage or non-mortgage.  In many countries, access to housing finance is constrained by macroeconomic factors which contribute towards high interest rates, and short payment terms.  In Malawi, for example, the mortgage rate sits at 25.5 percent, repayable over ten years. In most countries, interest rates are over 10 percent per annum.  An analysis of high interest rates across various jurisdictions found four determining factors: high policy interest rates (where the “risk free” rate on short term government borrowing sets a benchmark for mortgage rates); high maturity premiums due to the unwillingness of lenders to issue long term loans; high credit risk premiums which reflect weaknesses in the legal, regulatory and institutional environment; and limited utilisation of the collateral value by real estate, reflecting new, slow-churn residential property markets.[28]

In an effort to support the wider policy and institutional transformation necessary to enable mortgage market development, the World Bank has been working with Central Banks in Egypt, Tanzania, Nigeria and West Africa to create mortgage liquidity facilities.  These institutions seek to increase the availability of long-term funding so that lenders become confident to lend over longer terms.  By creating a standardised mortgage approach, and drawing lenders in as shareholders together with the government, they reduce the unknowns and help investors better assess and manage risk. This is expected to reduce the cost of funding, which then contributes to a reduced lending rate, making housing loans more affordable.  Having been in existence for over 10 years (Egypt’s facility was established in 2006; the most recent facility is the Nigeria Mortgage Refinance Company, established in 2013), the track record of these existing four facilities has varied, and highlights the complexities in making affordable housing finance work.

There are plans underway to launch a Kenya Mortgage Refinance Company (KMRC) in 2019.[29]  According to the World Bank, a key focus of this facility will be on the savings and credit cooperative (SACCO) lending market.  In reviewing the Kenyan housing finance market, the World Bank found that less than ten percent of all housing credit in Kenya comes in the form of mortgages from the banking sector, with the remainder coming from SACCOs and housing cooperatives.[30]  Kenya’s SACCO and housing cooperative sector offers useful insights into how the savings of low and moderate-income households might be aggregated in support of a capital base that can then be leveraged to support housing lending.  Already, housing cooperatives such as NACHU have established developer expertise and strong relationships with their members in the delivery of affordable housing.  A key challenge, however, will be to strengthen SACCOs themselves so that they can sustainably receive and manage the liquidity that will enable their members to borrow funds for housing.[31]

Of course, mortgage liquidity facilities are not a panacea – and it is clear that they will only serve a minority of the population needing finance for housing.  For this, the establishment of the EMRC[32], TMRC[33], NMRC[34], CRRH[35]and now the pending KMRC, might appear to be a rather expensive effort – unless it is leveraged beyond its target to stimulate the entire affordable housing sector, enabling conversation at the policy and regulatory levels while creating market certainty around which the private sector can then innovate.  This does appear to be the case in Tanzania, where the Central Bank has actively engaged in the impact of its activities more broadly on the housing sector, and new attention has been drawn to the need for construction finance to create the supply that would lead to demand for mortgages that the TMRC would then fund.  Similarly in Nigeria, the establishment of the NMRC appears to have stimulated a much wider array of interventions that is not limited to the delivery of mortgage loans.

In South Africa, a key constraint to mortgage lending at the bottom end of the market has been household affordability – only an estimated 34 percent of the urban population can afford what is the cheapest newly built house by a private developer (about US$24 000). This assumes, however, that a household would have equity for a deposit – an unlikely possibility given South Africa’s savings rate and the likelihood that entry-market households are first time homebuyers.  Lenders are therefore beginning to explore supply in the resale market of government-subsidised housing.[36]  These are tiny mortgages: sometimes as small as US$7 000, but they create an entry to the property market for a low income household, and critically, realise the asset value of government-subsidised housing by creating equity for the seller of the house they purchase.  In this, the lender is thinking more broadly about a ladder of connected property transactions where the bottom rungs are what make activity higher up possible, rather than about a more simple collection of disparate transactions.  To enable this approach, lenders are having to reconsider the lending criteria and what constitutes mortgageable stock.  The market is no longer plain vanilla.  Its products therefore demand an equivalent diversity.

The same applies to the diversity of the borrower, and here too, lenders are innovating to expand their reach.  Given the nature of labour markets across the continent, many prospective borrowers have informal incomes.  While they may have affordability to repay a mortgage, the source of their income, or the frequency of its payment contradicts standard underwriting requirements.  To address this, the Nigeria Mortgage Refinance Company has developed uniform mortgage underwriting standards for the informal sector in Nigeria.[37]  The standards determine that informal sector borrowers are “self-employed professionals, self-employed non-professionals, and Owner/Managers and employees of small and micro enterprises without formal records.” Credit worthiness is proven with evidence of consistent, good payment – such as for utility bills and school fees; as well as with letters of reference; and a demonstration of affordability given payment patterns.  The participation of co-borrowers is governed by a set of rules and the maximum loan amount is set at N50 million (US$138 000).  The loan requires significant borrower equity: properties valued at above N2 million (US$5000) require a 35 percent deposit.

In Sierra Leone, the problem has been somewhat different: it is not just that borrowers are informally employed – but they are still unbanked.  Only twenty percent of the Sierra Leone population is banked, and there is only one credit bureau representing about one percent of the population.  This makes lending virtually impossible – and yet, there is clearly demand for housing that must somehow be financed.  To overcome the gap, blockchain technology is being used to stimulate financial inclusion with the creation of a national ID system.[38]  The system will provide both a formal identification system, as well as a mechanism for capturing credit histories, which together will make more households targetable for lenders seeking to extend their loan product range into housing.

Each of these innovations is identifying a market niche and then working with the opportunities provided by new technologies, adaptive experience, and entrepreneurial curiosity to develop real products and services that are essentially creating brand new markets. In South Africa, for example, the recognition that government-subsidised housing stock older than 8 years might form part of housing supply, creates the possibility for an estimated 21 860 new mortgage clients in the major metros per annum.[39]Already, South Africa’s housing construction sector accounts for an estimated 2 percent of GDP (including intermediate inputs). Enabling a resale market that builds a lower rung on the housing ladder will stimulate new build supply one rung up, adding further to the impact on GDP.  As market participants innovate, they create new markets, and stimulate more opportunity.  The logic applies more generally as well: if US$20 000 units were available for sale across Africa, this would create the potential of 7.3 million more clients than if the entry level housing unit were US$30 000.  And if the Suraya bedsitter unit being delivered for approximately US$11 500 in Kenya were available across Africa, this could create 15 million more clients who couldn’t afford a US$20 000 unit.  This would still leave another 26.7 million potential borrowers who could afford more than US$5 000 but not quite US$11 500 – a potential market for housing microfinance, or incremental construction.  And so on.  The opportunity in niche market targeting is the creation of new markets.

Policy and political will

Governments are increasingly becoming aware of this opportunity.  The impact of housing on the economy – on macroeconomic growth and job creation, as well as on the potential for financial intermediation and the ongoing sustainability of cities – is as significant as the very clear need to address the poor housing and slum conditions that persist for the majority of urban residents.

In Kenya, housing has become part of the current President’s “Big Four” plan for his term of office.  President Kenyatta has committed to increasing housing supply, with a promise of 500 000 affordable housing units by 2022.  To achieve this, government departments are actively engaging in policy and fiscal reform in support of more effective and affordable housing delivery.  Their efforts are mirrored in the private sector, where the Kenya Property Developers Association has set up an Affordable Housing Task Force to compile its members’ advocacy positions for government.[40]  These efforts will no doubt streamline Kenya’s housing delivery value chain and improve the prospects for affordable housing delivery.  At the same time, they provide hope that spreads beyond Kenya’s borders: that affordable housing is a possibility – a viable investment opportunity. Similar attention is being given to housing by governments in South Africa, Tanzania, Ethiopia, Nigeria, Côte d’Ivoire – indeed, in very many governments, housing is becoming a subject of attention not just by the housing department, but by the Central Bank.

The World Bank Group’s Doing Business Indicators offer a useful proxy for policy attention in the housing space, in their annual review of registering property.  While not explicitly about residential property (the indicator considers the transfer of a small warehouse), comparing national scores between 2012 and 2018 show welcome progress in a number of countries.  Rwanda, Morocco, Burundi, Côte d’Ivoire, Lesotho, Guinea-Bissau, Senegal, Sierra Leone, and to a lesser extent Kenya, Guinea, Egypt and Togo, all show an improvement in the number of days it takes to register a commercial property in 2018 vs. the number of days it took in 2012.  Costs have come down in Rwanda, Mauritius, Comores, Côte d’Ivoire, Niger, Chad, Guinea, Guinea-Bissau, Congo Republic, Senegal, Nigeria (Lagos), Benin, and Togo.  However, in Somalia, Gabon, Namibia, South Sudan and Botswana, the registration of property has become more expensive or more time-consuming.

Another interesting indicator for an enabling environment is the cost of a standard 50kg bag of cement.  Where cement is imported, high cement costs reflect high foreign exchange rates, or poor macroeconomic fundamentals. The high cost of a bag of cement might also highlight a poor roads infrastructure, a potential warning sign for the prospects of affordable housing.  Wide fluctuations in price, such as in South Sudan, Burundi, Eritrea, might reflect policy uncertainty or instability.

Investor responsiveness

Still, there is progress.  Investors have been watching the emerging innovation, noting this moment of political and policy will, and responding with efforts of their own to maximise the opportunities as they emerge.  The housing value chain intersects with the housing financing chain on the basis of market certainty – as innovation appears in each link along the chain, investors look for ways to leverage that success in terms of their own strategies up the financing chain.  Policy-makers can direct investor attention to specific niches by creating certainty in the policy and economic context. and by taking steps to highlight and publicise those opportunities.

CAHF has found that in the past ten years, the top twenty investments committed into housing in the SADC region was more than US$ 8 819 million. Development Finance Institutions (DFIs) play an important role in facilitating these investments into the markets: the largest investor by far has been the African Development Bank, with a 14 percent share of the total invested.[41]  Beyond that, however, the diversity of investors is interesting.  Government employee pension funds have been increasing their participation, and while international investors (notably the Chinese, but also European) are prevalent, there has also been a growing number of private sector local investors, suggesting a domestic appetite for housing investments.

Table: Top 20 Investors in Housing and Housing Finance in the SADC region, by US$ millions invested

Source: CAHF Research

Investments in the SADC region are primarily equity (47.55 percent) and debt (50.14 percent). The top equity investment focus (36 percent of all equity investments in housing in the SADC region) is housing construction, followed by housing microlending (30 percent), housing finance (23 percent) and support for the financial sector (11 percent).  The majority of debt allocations are for housing microlending (35 percent), followed by support for the financial sector (20 percent), housing construction (16 percent), housing finance (15 percent), infrastructure (12 percent), and slum upgrading (2 percent). The primary focus of technical assistance allocations is on slum upgrading (49 percent).

It is all still rather opaque, however.  CAHF has worked hard to extract housing investment data from the portfolios of investors – banks, microfinance institutions, pension funds, private equity investors, DFIs, governments, and so on – and for the SADC region has identified 327 separate investments.  We are also currently working on a similar tracker for North and West Africa, and for East and Central Africa.  The data is drawn from annual reports, websites, interviews, and news reports; there is no single source.  This has the effect of each investment being a singular event.  Without the benefit of trends analysis, investors’ ability to understand and quantify risk is therefore undermined, and return expectations get amplified to accommodate the uncertainty.

Perhaps the most critical intervention that governments, as well as DFIs, can make in support of greater investment in affordable housing, therefore, is in data.  Governments can use their regulatory function to require focused reporting on loan origination, performance and impact; on investment targets, use of funds and investment performance; on market performance of housing once delivered, and so on.  In Kenya and Tanzania, the Central Bank regularly reports on mortgage market development.[42]  This should be a standard practice of all Central Banks and a key part of their regulatory function.  Capital markets authorities should similarly report on the progress of investments in residential real estate, segmenting by target market, to assist investors in making their decisions.  DFIs and other impact investors who seek to promote the development of the affordable housing sector should explicitly track the progress of their investments, and use their investments to insist on transparency so that the key fundamentals are well-known and understood in the investment community.   Supply-side tracking is also important: the nature and progress of incremental housing construction, the size and structure of the rental market, the structure and performance of public private partnerships, and so on.  This will be a primary effort of CAHF as we move forward into the next phase of our work.

Innovation along the housing value chain is clearly evident, expressed in local niche markets and across the continent.  We can leverage this experience and replicate it in other contexts if we track it, creating baseline information that highlights new opportunities for the investor interest that is clearly there.  This is a job for the entire housing sector.

[1]“Massive Small” is an idea promoted by Kelvin Campbell, an architect and urban designer based in London, UK.  The Massive Small Collective “believes that incremental bottom-up initiative supported by an enabling top-down policy and intervention provides our best chance at creating thriving cities.” See https://www.massivesmall.org(Accessed 13 Oct 2018)

[2]In 2015 and 2016, CAHF undertook a benchmarking study to consider comparative costs involved in constructing a “standard” 55m²house in fifteen countries.  CAHF put together a generic Bill of Quantities, including almost 400 separate cost items across five main cost elements: land, infrastructure, compliance, construction (including labour) and other development costs.  This was shared with Quantity Surveyors in 15 countries, who were invited to develop a quotation for constructing 20 such units in a greenfields project in two cities in their country.  It must be noted that the “standard” house is not representative of what is available in each market, but is rather used as a mechanism for comparing cost differences across markets.  The final price ranged widely, from $63 241 in Nairobi, Kenya, through to US$26 750 in Dar es Salaam, Tanzania.  See the data on our dashboard: CAHF (2017) Benchmarking Housing Construction Costs in Africa. http:///housingfinanceafrica.org/dashboards/benchmarking-housing-construction-costs-africa/(Accessed 10 Oct 2018).

[3]See Casa Minha’s website https://www.casaminha.cofor an overview of the project. (Accessed 10 Oct 2018).

[4]See Kasaine, Adam (2018) Letshego Kenya Limited.  Presentation to the Habitat for Humanity and Terwilliger Centre for Innovation in Shelter, Housing Finance Forum, in Uganda, 11-12 July 2018. https://www.habitat.org/sites/default/files/documents/Letshego.pdf(Accessed 10 Oct 2018).

[5]See Melana Housing Partnerships (2017) Video https://www.youtube.com/watch?v=Jipj4XbwrMIfor an overview of their model.  Also see Indlu (2018) https://www.indluliving.com(Both accessed on 10 Oct 2018).

[6]See iBuild Home Loan’s website: http://www.ibuildhomeloans.com(Accessed 14 Oct 2018).

[7]See uMaStandi’s website: https://umastandi.co.za(Accessed 10 Oct 2018).

[8]CAHF (2018). Africa Housing Finance Yearbook 2018: Ghana.

[9]Mwanza, K and H Wilkins (2018). African startups bet on blockchain to tackle land fraud. Reuters. 16 Feb 2018. https://www.reuters.com/article/us-africa-landrights-blockchain/african-startups-bet-on-blockchain-to-tackle-land-fraud-idUSKCN1G00YK(Accessed 10 Oct 2018).

[10]See Bitland’s website for an overview: http://bitlandglobal.com(Accessed 10 Oct 2018).

[11]Kanali, N (2018). Zambia announces plans to build a blockchain land titling program. 9 Aug 2018. https://africabusinesscommunities.com/tech/tech-news/zambia-announces-plans-to-build-a-blockchain-land-titling-program/(Accessed 10 Oct 2018).

[12]Gorelick, J (2018). Making Cities Work: Accessing Finance from a Variety of Funding Sources for Infrastructure Expansion and Upgrades: Water, Sanitation & Hygiene Finance (WASH-FIN). http://www.marcusevansdocs.com/Doc/events/24435/Jeremey%20Gorelick.pdf(Accessed 10 Oct 2018).

[13]Kazunga, O (2018). Old Mutual unveils 1082 serviced stands.  Chronicle. 9 Mar 2018. https://www.chronicle.co.zw/old-mutual-unveils-1-082-serviced-stands/(Accessed 10 Oct 2018).

[14]Graham, N (2016) Financing Infrastructure for Housing Developments: Case studies from Sub-Saharan Africa. Case Study Series 4. February 2016. http:///housingfinanceafrica.org/app/uploads/CAHF-Case-Study-4_Infrastructure-Financing.pdf(Accessed 15 Oct 2018).

[15]The Water, Sanitation, and Hygiene Finance (WASH-FIN) programme of USAID is run by Tetra Tech.  See http://www.tetratech.com/en/projects/water-sanitation-and-hygiene-finance-wash-fin(Accessed 12 Oct 2018).

[16]See focus notes on the rental markets in Senegal, Uganda, Tanzania and Côte d’Ivoire on http:///housingfinanceafrica.org/projects/rental-housing-in-africa/(Accessed 13 Oct 2018).

[17]See TUHF’s website: http://www.tuhf.co.za(Accessed 10 Oct 2018).

[18]Tumwebaze, P (2018). Why more real estate developers have embraced affordable housing. The New Times. 20 March 2018. https://www.newtimes.co.rw/section/read/231190(Accessed 12 Oct 2018).

[19]See CAHF’s dashboard with data on REITs in five countries: http:///housingfinanceafrica.org/dashboards/residential-real-estate-investment-trusts-in-africa-findings-in-5-countries/(Accessed 12 Oct 2018).

[20]Suraya’s Encasa@Mombasa Rd project includes 85 bedsitter units (Encasa 1) for KSh 1.155 million and 120 studio apartments of 20m²(Encasa 2) for KSh 1.76 million.  See http://www.suraya.co.ke/wp-content/uploads/2015/03/Encasa@Mombasa-Rd-Price-List-March-2018.pdf(Accessed 12 Oct 2018).

[21]Shah, S (2018). CAHF Benchmarking Research: How can we use CAHF study to spur Kenyan housing sector?  Presentation given on 30 August 2018. http:///housingfinanceafrica.org/app/uploads/Seeta-Shah-CAHF-Presentation-Aug-2018-v3.pdf(Accessed 12 Oct 2018).

[22]See Skat (undated). Modern Brick Construction Systems: A catalogue of affordable solutions made in Rwanda. Third edition. http://madeingreatlakes.com/wp-content/uploads/2017/07/CAT-MODERN-BRICK-SOLUTIONS-Draft-Third-Edition-Beta-Version2.pdf(Accessed 12 Oct 2018).  It appears that the Rwf 8 million price does not include land.

[23]See Zambian Home Loans website: http://www.zambianhomeloans.com/solutions/construction-mortgage/Accessed 12 Oct 2018).

[24]See iBuild’s website: https://www.ibuild.global(Accessed 12 Oct 2018).

[25]See Yomane’s website: https://www.yomane.com(Accessed 12 Oct 2018).

[26]CAHF (2018) Yearbook: Zambia profile.

[27]See Durabric’s website: https://www.durabric.com(Accessed 12 Oct 2018).

[28]Fuchs, M (2018). Working Paper: Lowering the high interest rate cost of housing finance in Africa. http:///housingfinanceafrica.org/documents/working-paper-lowering-the-high-interest-rate-cost-of-housing-finance-in-africa/(Accessed 12 Oct 2018).

[29]Speech by the Mr Henry Rotich, EGH, Cabinet Secretary for the National Treasury and Ministry of Planning: Stakeholder Engagement on the Formation of the Kenya Mortgage Refinance Company (KMRC).  4 April 2018 at Hotel Intercontinental. http://www.treasury.go.ke/phocadownload/speeches2018/LSPEECH%20CS%20STAKEHOLER%20ENGAGEMENT%20ON%20KENYA%20MORTGAGE%20%20REFINANCE%20COMPANY.pdf(Accessed 12 Oct 2018).

[30]World Bank Group (2017). Kenya Economic Update, April 2018, No. 17: Policy Options to Advance the Big 4. World Bank, Nairobi. https://openknowledge.worldbank.org/handle/10986/29676(Accessed 12 Oct 2018).

[31]Wood, D (2018). The Role of Savings and Credit Cooperatives in Kenya’s housing finance sector. http:///housingfinanceafrica.org/app/uploads/case-study-NO-12-formated.pdf(Accessed 12 Oct 2018).

[32]See the Egyptian Mortgage Refinance Company’s website: http://www.emrc-online.com(Accessed 12 Oct 2018).

[33]See the Tanzania Mortgage Refinance Company’s website: http://www.tmrc.co.tz(Accessed 12 Oct 2018).

[34]See the Nigeria Mortgage Refinance Company’s website: http://nmrc.com.ng(Accessed 12 Oct 2018).

[35]See the Caisse Régionale de Refinancement Hypothécaire’s website: http://crrhuemoa.org(Accessed 12 Oct 2018).

[36]South Africa has a national housing subsidy scheme that is targeted at households earning less than R3500 (US$242) per month.  To date, it is estimated that upwards of 2.95 million such houses have been built. Qualifying beneficiaries receive freehold title to a basic, entry-level subsidised house for free.  In terms of the Housing Act, subsidised houses cannot be sold on the open market for the first eight years following transfer.  With 1.9 million subsidised houses having been formally transferred to qualifying beneficiaries since the programme started in 1994 (the remainder form part of what is known as the “titling backlog”), a sizeable proportion of this stock is now available for trade in the resale market.

[37]NMRC (2018). Uniform Mortgage Underwriting Standards for the Informal Sector. Published January 2018. http://nmrc.com.ng/wp-content/uploads/2018/03/uniform_underwriting_standards_for_the_informal_sector_0318_1.pdf(Accessed 13 Oct 2018).

[38]Jones, M (2018). UN & Kiva launch blockchain-based ID system for citizen loans in Sierra Leone. The Block. Blockchain Technology News. 28 Sept 2018. https://www.blockchaintechnology-news.com/2018/09/28/un-kiva-launch-blockchain-based-id-system-for-citizen-loans-in-sierra-leone/(Accessed 10 Oct 2018).

[39]This assumes a churn of 2.58 percent per annum: the SA deeds registry includes an estimated 1.9 million government-subsidised houses.  Of these, 951 850 are in the major metros, and of these, 847 292 are older than eight years, making them eligible for trade on the resale market.  The average churn rate for the entire residential property market in SA is 2.58 percent.  Applying this to eligible government-subsidised stock in the major metros suggests the potential for 21 860 new mortgage loans (and in all likelihood, customers) per annum.  (Data sourced from Lightstone at end December 2017).

[40]CAHF (2018). Yearbook: Kenya profile.

[41]Wood, D (2018) The Housing Investment Landscape in the Southern African Development Community.  www.housingfinanceafrica.org(forthcoming).

[42]The Central Bank of Kenya conducts an annual Residential Mortgage Market Survey and reports on this in its annual bank supervision report.  See  https://www.centralbank.go.ke/uploads/banking_sector_annual_reports/873911276_2017%20Annual%20Report.pdf.  The Bank of Tanzania produces quarterly mortgage market updates in cooperation with the Tanzania Mortgage Refinance Company.  See https://www.bot.go.tz/Adverts/Tanzania%20Mortgage%20Market%20Update%2030%20June%2018%20-Revised%20Draft.pdf(Both accessed 14 Oct 2018).