The last decade was, no doubt, impressive and encouraging for the economic and social development in Africa.

Commodities boom, real estate growth including housing construction, IT advancement and financial sector reforms have combined to spur the economic growth and help to lift many people from abject poverty.

African middle class is growing, creating one of the most important pillars for the future social progress and the promotion of democratic values for a better Africa.
Middle class is an aspiration and an economic reality in many African countries.

One of its attributes is the ability to own or rent a house which is the most important economic and social asset.
So far, the circle that permits the middle class to own a house is not fully working due to many constraints.

Many reforms on the housing policies need to be carried out to unlock the potential for a growing housing sector in Africa in order to add the two to three percentage points to economic growth.

This will take Africa to a new level of average economic growth around seven to eight per cent per annum.
This requires strong leadership in housing and other related sectors including the financial sector, building materials, infrastructure and land.

The impact of the housing sector on all sectors and especially on poverty alleviation requires more investments and support from the international development finance institutions for the policy formulation and mortgage development.

The best investment that the Government with the support of international development finance institutions can do is to make the right choice for policies.
It would appear simple but in reality this is the most difficult task for public management.

It requires leadership, vision, planning and ability to implement over many years with a periodic assessment and corrections.

A quick review of Sub Saharan housing sector excluding South Africa has revealed that only a few countries have made some progress on housing policies.
These include Kenya, Senegal, Mali, Tanzania, Namibia and Rwanda although the level of mastery of housing policies varies from one country to another.

The new dimension of urbanisation in Africa (30 to 50 per cent of Africans live in towns) calls for the creation of a Ministry for Housing and Urban development.
This is a way to maximise the benefits of public policies and will help better financial and intellectual allocation of resources.

Failing to do so means weak leadership in this sector and likely weakness in global leadership on the social aspects.
Housing is next to food. No social progress or social cohesion within a country can be achieved without a decent shelter for the citizens.

Low productivity

So far, the ministries in charge of housing and land have low productivity and the whole process is long and bureaucratic.

The cost of low quality of service is one of the high hidden costs for housing deliveries.

The mortgage industry in Africa is at its infancy, except South Africa.

Mortgage loans in South Africa represent more than 30 per cent of GDP while Kenya has the best ratio in Sub Saharan African which is two per cent of GDP.
This means, beyond the gap, there are ample opportunities to grow this sector.

The inflation is decreasing everywhere permitting the lowering of interest rate.

Shelter Afrique and some specialised financial institutions like Housing Finance in Kenya, Savings and Loans, and Banque de l’Habitat du Senegal are the key players for the construction loan in order to facilitate mortgage lending.
The expansion of banking in Africa has a big potential especially for mortgage, if the right policies are implemented.

Take advantage

To take advantage of the new context for the mortgage industry, the potential borrowers should improve their saving habit.

This will require some behavioural adjustments and the promotion of more cooperatives for housing and saving instruments.

One of the biggest but not well known challenges is the profile of the housing estate developers.

In many African countries, the developers are few and with limited financial and technical resources.

This translates into small projects in developing estates with lack of economies of scale. The cost of inefficiency is paid by the buyers.

The pricing model is based on cost plus margin due to the lack of competition between developers.
In general, the housing sector is capital intensive and requires good corporate governance.

No quick progress will be obtained without the support to developers in order to engage them on massive housing project creating the optimal size and reducing the cost of construction per sqm.

The economic and financial size of the developers is a limiting factor for the supply of houses.

In this context it’s not surprising to see the banks very reluctant to avail the construction finance to developers.
Housing is very demanding in terms of the level of government involvement, the interaction with the financial sector, the production of building materials and land management.

Fortunately, there are good examples in Africa. To name a few, for the Government involvement, the best examples are Mali and Namibia.
The level of subsidies for housing is very high and well targeted.

With regard to the efficiency of the capital markets to support the housing development, Kenya is leading.
Rwanda tops East African countries for doing business in real estate.

Other African countries should emulate these good examples and study the successful models of Tunisia and Morocco.

The latter country is the most improved housing sector for the middle income and slum upgrading over the last decade.

Mr Ba is the MD, Shelter Afrique.