Excerpt from Africa Housing Finance Yearbook 2014


Ghana has experienced strong and broadly inclusive growth over the past two decades. The country has outperformed regional peers in reducing poverty and improving social indicators. Robust democratic credentials and a highly-rated business climate have helped attract significant foreign direct investment (FDI), supporting a strong growth record and graduation to lower-middle income status.

However, short-term vulnerabilities have risen significantly amid high fiscal and current account deficits. The country’s international reserve position has weakened alongside mounting public debt. High interest rates and a depreciating currency have begun to weaken private sector activity. Economic growth is slowing from previously high levels. According to the EIU (2014), high inflation and a sliding currency, coupled with ongoing power and water shortages, are likely to reduce local confidence and depress private consumption. Gold sector investment and production will be adversely affected by lower prices, and oil production constrained by delays in completion. As a result, real GDP growth is expected to slow to 5.7 percent in 2014, far below the government’s projection of 8 percent.

Ghana’s sovereign rating has been recently

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Excerpt from Africa Housing Finance Yearbook 2014


Ghana has experienced strong and broadly inclusive growth over the past two decades. The country has outperformed regional peers in reducing poverty and improving social indicators. Robust democratic credentials and a highly-rated business climate have helped attract significant foreign direct investment (FDI), supporting a strong growth record and graduation to lower-middle income status.

However, short-term vulnerabilities have risen significantly amid high fiscal and current account deficits. The country’s international reserve position has weakened alongside mounting public debt. High interest rates and a depreciating currency have begun to weaken private sector activity. Economic growth is slowing from previously high levels. According to the EIU (2014), high inflation and a sliding currency, coupled with ongoing power and water shortages, are likely to reduce local confidence and depress private consumption. Gold sector investment and production will be adversely affected by lower prices, and oil production constrained by delays in completion. As a result, real GDP growth is expected to slow to 5.7 percent in 2014, far below the government’s projection of 8 percent.

Ghana’s sovereign rating has been recently downgraded. In October 2013, Ghana’s credit rating outlook was lowered for a second time that year by Fitch Ratings after a severe deterioration in the country’s budget deficit, higher-than-expected arrears, expenditure carry over from 2012, as well as poor expenditure control. Furthermore in December 2013, Moody’s, S&P and IHS downgraded Ghana’s government bond outlook to ‘negative’ from ‘stable’. The downgrade was mainly attributed to the country’s ongoing weak fiscal position, resulting in a sharp drop in its debt and debt-servicing ratios despite rapid economic growth. On 8 August 2014, the IMF Management received a formal request from the Ghanaian authorities to initiate discussions on an economic programme that could be supported by the IMF. It is expected that IMF will send a team to Ghana in 2014 to initiate discussions on a programme. Investors are awaiting the outcome of these important deliberations as they will have a direct impact on the market and investor appetites for further investment in the country.

In February 2014, the Bank of Ghana (BoG) began enforcing a number of foreign exchange controls to curb the depreciation of the cedi and promote the internal use of the currency. The country and its residents have enjoyed a relatively liberal exchange policy that was promoting the dual use of the cedi and dollar within the economy. The enforcement of existing foreign exchange controls are aimed at limiting the use of dollars by Ghanaians within the country. Going forward, all Ghanaian parties who are transacting with each other within the country are required to use cedis only.

According to the IMF (2014), the financial sector is adequately capitalised and liquid, but increasing exposures will need to be monitored closely. Stress tests conducted by the BoG suggest that buffers are adequate in most banks and the system in aggregate. Nevertheless, the weaker macroeconomic outlook and currency depreciation expose the financial sector to currency and credit risks, warranting a strengthening of crisis prevention and management capabilities.


Access to finance

Over the past years, Ghana’s financial system has undergone intensive regulatory reform and restructuring, which has resulted in an increase in credit offered by commercial banks. The financial sector has 26 banks, seven of which are listed on the Ghana Stock Exchange. According to the World Bank’s 2014 Doing Business Report, in the ‘ease of getting credit’ category, Ghana was ranked 28th out of 189 countries. The International Monetary Fund’s Financial Access Survey (2014) indicates that there are six commercial bank branches per 100 000 adults and 5.7 ATMs per 1 000 km2. In 2012, the World Bank launched the Global Financial Inclusion Database (Global Findex) to explore levels of financial inclusion around the world. According to Global Findex, 26.2 percent of rural, and 52.5 percent of urban Ghanaians over 15 years of age have an account with a formal financial institution. The use of credit is fairly common – 39.2 percent of adults over 25 years of age report that they had a loan. However, the majority of these loans were from family or friends. Only 7.5 percent of adults had a loan from a financial institution and only 3.8 percent had a loan from a private lender. Very few Ghanaians have an outstanding loan to purchase a home: 1.9 percent of the top 60 percent of income earners and 3.1 percent of the bottom 40 percent of income earners. Loans for home construction are more prevalent: 8.9 percent of the top 60 percent of income earners had one, and 5.2 percent of the bottom 40 percent of income earners.

Only four of Ghana’s twenty-six banks officially offer home loans as a product (namely HFC Bank, Fidelity Bank, CalBank (CalMortgage) and Stanbic Bank). In addition, Ghana Home Loans (GHL) also offers mortgages and is the country’s only residential mortgage specialist. Less than three percent of loans granted by banks in Ghana go into housing finance. Most banks neglect the home loans market and focus instead on short-term lending and investment such as risk-free government bonds and trade finance facilities that can offer higher returns while consuming less capital. The total home loans book in Ghana is around US$180 million and the number of borrowers just under 6 000. Ghana’s housing finance system (as a share of GDP) is 0.5 percent compared with the African average of 15.7 percent of GDP, making it one of the lowest in the world.

According to Teye et al (2013), most banks in Ghana are not able to supply mortgage loans because their capital size is small. The initial capital to operate a bank in Ghana is GH¢60 million (US$30 million). Though some of the major banks have more than the initial capital, they still do not have adequate money to finance mortgage loans. For instance, the HFC bank, which is the major provider of mortgage loans in Ghana, has managed to increase its capital (total equity) from GH¢32 million in 2009 to GH¢74 million in 2011. Assuming that the HFC Bank will use all its equity to grant mortgage loans for the purchasing of an average house with the price of GH¢140 000 (US$70 000), it could give mortgage loans to purchase only about 500 houses. In the past, banks have used the stock exchange to raise funds for mortgage lending. For example, HFC Bank has issued and listed six corporate bonds since 1996. Furthermore, Ghana’s pension industry is small with only nine percent of the labour force contributing.

Each of the four banks and GHL offers various loan products, which can all be categorised into four main loan categories. The first is the Home Purchase Mortgage, which is used for purchasing new houses. The borrower is normally expected to make a minimum 20 percent or 25 percent down payment of the value of the property, while the bank provides a loan equivalent to cover the value of the property. The loan term is usually for 15 years, and the interest rates are always variable. The second product is the Home Improvement Mortgage, which is intended for renovation of already acquired property. Another product is the Home Completion Mortgage, which can be used to complete a house under construction. The last product is the Home Equity Mortgage, which is used for realising equity locked up in a property. The Home Purchase Mortgage dominates the market.

A unique feature of the current Ghanaian mortgage market is that it is segmented into two different categories as far as loan pricing and payment conditions are concerned. In principle, there is a separate arrangement for resident Ghanaians who pay in the domestic currency (i.e. the cedi) and another one for non-resident Ghanaians who pay in foreign currency (usually the US dollar). There are also variations in the interest rates charged for both categories. While interest rate on cedi loans is about 30 percent, that of dollar loans is 13.5 percent variable. In recent years, Ghana has moved towards what can be termed ‘dollarisation of loans’, whereby both resident Ghanaians and non-residents pay the cedi equivalent of loans specified in US dollars. At this stage it is unclear how the BoG’s enforcement of foreign exchange controls will affect this trend.

In Ghana, home loan providers are faced with many challenges such as inadequate property supplies, unsophisticated underwriting techniques due to a lack of well-developed and resourced credit reporting systems, and delays in title registrations. There is also no reliable database for vital personal information such as date of birth and residential address. Further, there is no proper address system, making it very difficult to establish the credit worthiness of potential borrowers. The country also suffers from difficulties in collateral enforcement. Even where people have standard property that can be used for collateral, land registration systems in Ghana are so bad that people have no documents to prove ownership of their property. These problems are exacerbated by a lack of government incentives such as mortgage tax relief or first-time home purchase subsidies, and by a lack of long term capital in the capital market.

In late 2012, the MasterCard Foundation and Habitat for Humanity International jointly launched a five-year pilot project in Ghana to promote the growth of the housing microfinance and incremental housing construction sectors. The US$2.2 million initiative is engaging with three microfinance companies in Ghana, providing technical support in the development of housing microloan products, which should lead to the disbursement of over 20 000 housing microloans to low income earners, mostly in rural areas.

However, housing financing from microfinance institutions is more expensive and does not provide a significant improvement in the access to financing. According to Anwayo et al. (2014) neither the commercial banks with microfinance programmes nor the 150+ member Ghana Microfinance Institutions Network provide affordable financing. Interest rates on housing microfinance loans range from 22-48 percent per annum. But annual percentage rates comprising interests, fees and insurance can be as high as 50-100 percent.

Mortgage lenders, such as GHL, have reported that despite the difficult operating terrain, the demand for home loans is very strong and most borrowers are firmly committed to meeting their loan obligations. Growth in the housing sector has put pressure on mortgage lenders who have struggled to raise the funding to meet the demand. Ghana’s first mortgage backed security was approved by the Securities and Exchange Commission (SEC) in 2013. GHL is considering launching a cedi-denominated bond that plans to sell US$100 million in tranches over a two to three year period. The first sale is expected before the end of 2014.

Furthermore, the home loans market environment has recently seen signs of significant improvement. These include the introduction of credit bureaus that give lenders access to the credit history of borrowers within seconds; legislation to speed up the foreclosure process (from 18 months to 90 days); and a new collateral management regime that allows for the immediate online registration of collateral at the Bank of Ghana. In 2012, Ghana Union Assurance launched the first collateral policy to provide cover to finance houses on construction. The collateral replacement indemnity (CRI) targets borrowers in the lower to middle income mortgage market (with incomes below GH¢4 400, or (US$2 058) who do not have the deposit required by mortgage lenders, but who have the capacity to pay if the debt is spread over a period of time. Working with the support of Home Finance Guarantors Africa Reinsurance Limited, the CRI enables borrowers to access a 100 percent loan.   There has also been a gradual extension of local-currency bond tenors (from five to seven years), while the government and regulatory institutions have prioritised the development of a viable bond market. Additionally, pension reform has granted the private sector access to pension fund management (previously a state monopoly) thereby creating a new pool of long-term commercially investible funds.

Finally, the development of a secondary property market in Ghana (currently impeded by the fact that many homeowners see their properties as purely for accommodation rather than as an investment), will be required to fuel the growth of the home loans market and enable home loans to achieve scale.



Most formal housing units are beyond the affordability level of the majority of the population and even of the middle class. Analysts have indicated that only three percent of households can afford monthly mortgage payments. A 66m2 house on a 167m2 plot of land costs about US$25 000 (GH¢53 473), which is still too expensive for even the formally employed in Ghana. For a house of this size, the monthly mortgage payment will be about US$250 (GH¢534), and require that the prospective mortgagor be earning about US$750 (GH¢1 603) a month to qualify. Salaries range from US$200 (GH¢428) to U$2 000 (GH¢4,275) a month for those who are formally employed, with the average salary at about US$485 (GH¢1 036) a month. In Ghana, the mean urban household income is GH¢2 745. Using a housing cost-to-income ratio of three, the GH¢2 745 mean urban household income gives a housing affordability of GH¢8 235 (US$5 882). There are few homes are on the housing market for that price.

Financing a new house is an additional problem. The required mortgage down payments are high, with UN-HABITAT estimating that an upfront payment of at least US$27 500 is required for a mortgage of US$120 000 (this amounts to approximately 23 percent). Furthermore, the housing commodity is produced either in advance of the sale, or commences following a contract ratification. Outright purchase or four tranches of progress payments (each at 25 percent of the house price), with the final payment due on completion of the construction, are the requirement for purchasing houses. Such upfront payments preclude the vast majority of households from owning houses.

In urban areas, renting is the most common form of accommodation. However, constraints in supply have led to exploitative practices, and it is common for tenants to have to pay two to three years of rental in advance. As a result, households who cannot afford these high upfront payments end up overcrowding. According to the census, almost one third of Ghanaians do not own a dwelling or pay rent of any kind. In the cities, overcrowding has become intolerable and many end up sleeping outside. A CHF study undertaken in Accra in 2010 found over 3 000 people sleeping outside in an area less than one fifth of a square kilometre.


Housing supply

A recent study by UN-Habitat estimates that 5.7 million new rooms (2 011 711 dwellings) are needed to address the accumulated housing deficit and meet the housing needs of additional households in Ghana from 2010 to 2020. If these are to be successfully supplied, 3.8 new rooms must be completed every minute of the working day for ten years. That required production rate of 574 000 rooms (200 000 new dwellings) a year is quadruple the current rates of housing production in urban Ghana. 61 percent of households in the capital city, Accra (with an average size of 3.8 persons), occupy single bedrooms, and another 25 percent occupy two bedrooms.

A parliamentary debate in July 2013 estimated the current housing deficit in Ghana to be 1.6 million houses. The annual housing demand of about 100 000 units is not being met, with only about 40 000 housing units currently being delivered per annum. The Housing Minister estimates that about US$117.5 million is needed to complete the existing affordable housing projects across Ghana.

As much as 90 percent of Ghana’s housing stock is produced between home owners who have already acquired land and small scale contractors (typically led by masons). By adopting these strategies of incremental building/ financial spreading, completion times range from 4-15 years. In addition, land and construction materials are expensive because as much as 80 percent of these materials need to be imported. As a result of this, as well as the money spent on building the necessary infrastructure, even modest homes can cost around US$300 per square foot to build. Therefore, even in the face of payment flexibility in this sector, the relatively low home ownership rate of 27-32 percent underscores the problem of housing affordability.

There is some delivery of housing by the government. Players include the Social Security and National Insurance Trust and the State Housing Company (SHC). Homebuyers can buy housing from SHC in cash or with an instalment sale scheme managed by the company, or with a mortgage from HFC Bank, GHL or First Ghana Building Society. Housing developments driven by the state which primarily target the public service, have, however, been unable to make any significant dent in the demand. Over the 10-year period from 1991 to 2000, state housing institutions produced less than 40 000 mortgageable units.

Despite the enormous demand for housing, a recent debate in parliament noted that unfinished developments are visibly evident in urban areas. In 2012, a high profile development being driven by Korean construction firm STX, and which promised the delivery of 200 000 units, fell through due to difficulties in contracting arrangements. Other initiatives targeted at the affordable housing market also ran into difficulties, including capital constraints. Recently, a Brazilian firm announced the intention to construct 5 000 affordable houses; and in February 2014, the Moroccan construction company, the Addoha group, committed to constructing 10 000 affordable housing units in Ghana.

Shack/Slum Dwellers International (SDI) has partnered with the Ghana Homeless People’s Federation to find solutions towards improving human settlements and shelter conditions. The federation has two programmes under way: the Amui Dzor Housing project and the Citywide slum upgrading project. The Amui Dzor Housing project is a collaboration with UN-Habitat’s Slum Upgrading Facility, while the Citywide slum upgrading project is a collaboration with SDI and the municipality. Working with People’s Dialogue on Human Settlements, these Ghanaian partners have focused on a Land, Services and Citizenship (LSC) programme- a three-year project targeting mobilisation of savings groups, community infrastructure, profiling, mapping and organisation of city-wide forums. Under the first phase of LSC 18 slum settlements have been mapped and profiled in two cities and a memorandum of understanding signed with Ashaiman Municipal Assembly. A Project Implementation Team has been set to jointly oversee the implementation of project activities. Municipal Assembly staff provide technical assistance to anchor the profiling and mapping activities. It is through such projects that interactions with city governments have been changed from undertaking once-off projects where communities simply participate to carrying out partnership projects with enduring results that alter relations and increase the scope for going to scale.  Furthermore, the Tema Ashaiman Municipal Slum Upgrading Fund provides useful lessons for slum upgrading and integrated development for the poor. Funded in part by UN-Habitat, the project is driven by the Ministry of Local Government in Ghana, and two municipalities. UN-Habitat provided a grant of US$400 000 as a capital enhancement, and a further US$100 000 for administration and development. An additional US$400 000 capital enhancement grant is expected.

Development in the upper income market remains vibrant, as developers scale up on the need for high end expatriate accommodation. Companies such as Taysec and Clifton Homes offer housing in the US$100 000 to US$600 000 and above price range – this covers two-bedroom apartments to four- to five-bedroom homes.

In 2014, a standard 50kg bag of cement cost US$10.94, while a standard sheet of corrugated iron for roofing cost $7.81 (1.117×2.438, width – 0.4 mm).


Property markets

According to the World Bank’s 2014 Doing Business Report, registering property in Ghana requires five procedures, takes 34 days and costs 1.2 percent of the property value. Ghana was ranked 49th of 189 countries for this indicator in 2014. The capacity to register a property remains limited to major centres – Accra, Kumasi and a few smaller towns – and the process through the Lands Commission remains quite manual and is fraught with administrative limitations. Furthermore, the land tenure system contributes to the property ownership crisis. Lands are owned by traditional rulers and families. In most cases, the same piece of land may be sold to different developers by different members of the family.

With the growth of the oil and gas industry in Ghana, private sector development of upmarket homes is rampant and almost all selling off-plan; their prices range from between US$300 000 to more than US$1 million. Property rentals in the middle to upper sector range between US$2 500 and US$8 000 a month.

Both HFC Bank and GHL have established subsidiaries to capitalise upon and facilitate the growing residential property market. HFC Realty is wholly owned by HFC Bank Ghana, and began operations in 2006 with a mission to hold, develop and manage real estate in the country. It operates as a developer, property manager, valuer and real estate broker in the industry. GHL established the online Ghana Home Loans Online Realty, an online database of properties available in the Ghanaian market.


Policy and regulation

As mentioned previously, a sample survey and census suggest only 27 percent and 32 percent of households in Accra respectively live in owner-occupied housing. The analysis highlights that housing in the country has never been a significant component of national economic planning, but has been seen rather as part of its welfare sector. In 2010 the National Housing Policy was crafted to incentivise the private sector to provide housing for all income brackets, notably through tax holidays and financial guarantees for real estate developers or zero tax on equipment and machinery imported for housing construction. Furthermore, in 2014 a national housing policy has been drafted by the Ministry of Water Resources, Works and Housing. The policy focuses on six thematic areas, which are: a national housing vision, goals and objectives; land for housing, housing finance, housing design and construction, institutional reforms and a housing governance. The long term effect of these policies remains to be seen since private real estate developers provide only 10 percent of the new housing supply.

In 2012, the Ghana Housing Finance Association announced that it was working with stakeholders to draft a Condominium Property Bill to enable the development of units for ownership, constructed in buildings rather than free standing on plots. Similar to sectional title legislation in other countries, the regulations would set out the requirements for management of common areas and the title definitions for ownership in this context.



The housing sector prospects in Ghana look positive, although special focus on improved access for the majority of low income earners who cannot afford privately delivered housing is needed. With greater awareness and acceptance of mortgage products in the country and finalisation of reforms to the land administration system, the mortgage industry has room for more players. The already established microfinance industry that has branched into housing provides an additional area of housing finance opportunity, one that has the potential to cater for many more Ghanaians at more sustainable and affordable rates.

Furthermore, housing extensions are an important housing supply mechanism in urban Ghana and should be viewed as important opportunity for policy makers and investors. Proposed strategies for enabling housing transformations are: housing finance for both producers and consumers; entrepreneurial skills training for contractors; permissive planning that supports proscriptive rather than prescriptive housing standards; as well as new housing designs that take account of the likely expansion of housing on site over decades, and larger and wider plots rather than smaller and narrower plots (Anwayo et al.).



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