Russia-Africa summit: Key conclusions on developing housing construction market in Africa Updated for 2021

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Updated: March 1, 2021

The Russia-Africa summit in Sochi has come to an end with a sea of African leaders and the Russian elite, including President Vladimir Putin in attendance.

Below are the key takeaways by top Russian stakeholders from the first ever Russia-Africa summit.

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Current Objectives in Developing the Housing Construction Market on the African Continent

KEY CONCLUSIONS

African countries are short of housing  

“There is a sizeable deficit, we are about 2 million buildings short. We have masses of people moving from the rural areas into urban ones, so renovation is an enormous challenge for Ghana. <…> We need to provide decent living conditions for the people coming from the rural areas,” – Hon. Samuel Atta Akyea, Minister of Works and Housing of the Republic of Ghana.

 “91 thousand people need housing. We are short about 300 thousand houses that still need to be built,” – Peya Mushelenga, Minister of Urban and Rural Development of the Republic of Namibia.

Russian companies are interested in developing the African real estate market

 “I know that the majority of my colleagues here lack experienced construction companies that are ready to build quality real estate. From my end, I would like to state that the Russian companies are interested in Africa. We need to work on the governmental level to create the necessary environment so that the Russian companies could share their competences and enter the markets on simple and transparent terms,” – Vladimir Yakushev, Minister of Construction, Housing and Utilities of the Russian Federation.

“Russian partners and investors should be more courageous investing in our countries because there is a market and there is a future. We are talking about a billion and two hundred million people on the continent,” – H.E. Ousmane Mey Alamine, Minister of Economy, Planning and Regional Development of the Republic of Cameroon.

PROBLEMS

Underdeveloped legislature

“One of the major present problems in Africa today is the question of land cession. <…> We are talking about tens and hundreds of thousands of acres. In order to invest in construction, these legal issues must be resolved. We are at a stage of trying to figure it out on a national level. We are working out cession procedures and legal framework,” – Ibrahima Kourouma, Minister of Urban Affairs and Spatial Planning of the Republic of Guinea.

“Our biggest obstacle in the housing situation is the lengthy registration process in order to build something on the land and extremely low income of the people that need the housing,” – Peya Mushelenga, Minister of Urban and Rural Development of the Republic of Namibia.

Immature financial system and high mortgage rates

 “Current mortgage rates in Ghana are close to commercial rates. We are talking 35%, sometimes you can get 25% to 30%. We are trying to bring it down to 10% and we are trying to facilitate the mortgage payoff throughout an extended period of time,” – Hon. Samuel Atta Akyea, Minister of Works and Housing of the Republic of Ghana.

 “Creating new financial instruments, including banking ones, is happening in Cameroon right now. However, we can only count on short-term resources. It illustrates imperfections of the system that hinders our economic development,” – H.E. Ousmane Mey Alamine, Minister of Economy, Planning and Regional Development of the Republic of Cameroon.

SOLUTIONS

Protecting investor rights

“Governmental structures from both the Russian Federation and our partners present here today, need to figure out investment protection mechanisms. We need to work out a framework that will protect our investors that will work outside the boundaries of the Russian Federation and come into the markets of our partners. The investor needs to return the investment and make something on top,” – Vladimir Yakushev, Minister of Construction, Housing and Utilities of the Russian Federation.

“There is a financing problem. There are 50 construction companies that are interested in building in Ghana, and all of them want guarantees. <…> We are currently looking for ways to provide those guarantees, we want to help. We have an agreement, a certain list of conditions, a payment plan. There also is another model. <…> It is a model where we give the construction company the funds, and they find the people who will buy those houses, and they will pay over a period of time. <…> We are starting with USD 5 billion: 10 thousand houses over a 5-year period,” – Hon. Samuel Atta Akyea, Minister of Works and Housing of the Republic of Ghana.

“One of the areas we managed to be successful is guarantees. It allowed us to create funds that guarantee the buildings will be finished on time and the construction process will be profitable to the investors. It allows us to create the guarantees investors need,” – Ibrahima Kourouma, Minister of Urban Affairs and Spatial Planning of the Republic of Guinea.

Fulfilling an all-encompassing state policy in housing

 “We have a national housing policy designed in 2009. It aims to provide everyone with access to cheap housing. The government adopted the mass housing programme. It has a few elements to it. First is land registration. Then mortgage, sanitary infrastructure in rural areas, and updates of the unregistered settlements. In order to get this done, among other things we have designed financing models by local and international organizations, as well as private-public partnerships,” – Peya Mushelenga, Minister of Urban and Rural Development of the Republic of Namibia.

Lowering mortgage rates and supporting low income population

“In our country, an average mortgage rate without any state assistance is around 9.2%. On the new construction market, we saw a great precedent of lowering the interest rate by just 1 percentage point: it led to the demand spiking by nearly a quarter. It is a lot, especially when the rates go from double to single digits. It stimulates the demand, thus improving the quality of the housing,” – Nikita Stasishin, Deputy Minister of Construction, Housing and Utilities of the Russian Federation

 “We support them [low income citizens – Ed.] by producing the funds from the low-income cooperative. They put their own money there. USD 10 million goes towards this every year,” – Peya Mushelenga, Minister of Urban and Rural Development of the Republic of Namibia.

 “We signed a convention between the Central Bank of Guinea, the professional banking association, the government, and the developers. It is done so that the population and especially the state employees who do not make all that much will have access to reduced mortgage rates,” – Ibrahima Kourouma, Minister of Urban Affairs and Spatial Planning of the Republic of Guinea. 

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