Abuja, September 14, 2016
Africa’s chronic housing crisis: challenges and opportunities Growing demand from countries and commitments for reform Large impact on Growing slum employment and growth Low & informal incomes population 5 jobs created per 62% 70% housing unit built live on less than $2 per day Growing middle class of SSA urban residents live in number of people slums, and 2x High construction costs consuming $4 to $20 per growing day, from 1980 to 2010 $700 per m 2 of affordable 128 million households by 2020 housing in SSA, vs. $350/m 2 in India, $250/m 2 in China Tenure Ample room to improve Insecurity access to finance with no access 94% 70% Rapid urbanization to formal housing finance products of urban land in countries in SSA will double 25 Cameroon their urban populations Housing contributes to wealth is held without in less than 20 years title 50% of all tangible assets in housing 2
Dynamics in housing sector create opportunities but also face challenges Growing demand from countries and commitments for reform Growth of Cities Growing middle class Growing slum population 3 1,393 consumers expected to join 863 global middle class by 2030 urban residents live in bringing it to 5 billion cities of 500k+ billion slums, and growing million population in 2030 564 cities in 1990 Large impact on growth and Housing Needs employment Contribution 96,150 housing units per day 5 jobs created per to wealth required through 2030 housing unit built 50% Ample room to improve Low & informal incomes of tangible access to finance assets in 74% in low-income countries live 93% of adults have no access housing on less than $2 per day to formal housing finance Tenure Insecurity High GHG impact 70% of land in emerging 19 of the world’s greenhouse economies unregistered gas emissions from buildings. Housing represents 3/4 of all new buildings % 3
Affordable Housing is a Global Economic Opportunity High Shortage and market attractiveness Developed market, redevelopment opportunity Value of affordable housing shortage, 2012, $ Billions Other emerging market opportunity Source: McKinsey Analysis 4
Affordable housing: challenges and opportunities Value of accumulated affordable housing shortage (2012) Russia Turkey Top 16 markets $23b Mexico Iran $43b account for ~35 million $55b China units, representing $122b an effective and Iraq $55b Egypt realizable formal $12b Pakistan market $7b $27b Saudi Vietnam Brazil Arabia of $600-700 billion Nigeria $36b $19b India $28b $57b South Philippines Africa $67b $12b Argentina $69b $25b 5 Source: McKinsey Global Institute Analysis
Background – estimated growth of middle class, in mio. people (from 2009 to 2030) Europe North America 680 664 Asia-Pacific 322 338 North Africa and Middle East 2030 3,228 2009 234 105 525 Central and South America Sub-Saharan Africa 107 181 313 32 6 Source: UN, World Bank, Brookings Institutions, FT
The opportunity – current trends in housing finance Increasing urbanization Rising housing Growing populations consumption Growing middle-class • More pollution and congestion in cities • More green house gas emissions • More disasters • Rise in informal settlements 7
The overall approach: reform and invest across housing value chain Menu of Vital to reform structures and catalyze markets to achieve goals WBG interventions Improve city planning, 1 building regulations, and Boost housing demand access to land Reduce formal upper through access to finance housing costs incom Invest in basic pro-poor Sector interventions 2 e Enhance access to infrastructure and slum in regulations, mortgages, construction upgrading planning, finance construction and land Strengthen residential 3 middl rental markets Enhance access e to microfinance incom Strengthen local construction & building e 4 materials sectors; support private housing development lower Promote affordable housing income Expand access to 5 housing finance 8
A comprehensive value-chain approach Infrastructure End-user City Planning & Subsidies & Services Finance Building Regulations Access Construction & Developer to Land Building Materials Finance Sectors The WBG is uniquely positioned to reach across the value chain Urban Finance & Markets IFC 9
Housing Finance Programmatic Strategy Approach 1. Technical 2. Investment Assistance and Information Building Building Viable Housing Finance Markets in African Economies Builders, constr. materials
The Housing Value Chain Supply Side Demand Side Primary Secondary Land and Materials Construction financing financing Infrastructure markets markets GOVERNMENT CONSTRUCTION BUILDERS BANKS CAPITAL DEV. PARTNERS MATERIALS BANKS MFiS MARKETS Building Affordable and Increasing Access to Decent Quality Housing Affordable Housing Units Finance
COUNTRY HOUSING MARKET ASSESSMENT FRAMEWORK
Suppl Supply and nd Demand nd an anal alysi sis Housing Supply analysis • Current housing production modes • Current Housing volumes • Cost Structure • Construction material partners – Which countries is Lafarge working in? • Market situation • Near to medium term opportunities
Suppl Supply and nd Demand nd an anal alysi sis Housing Demand analysis • Affordability - Household income data • How many households can make payment on a $25k or $35k unit • How many households can make payment on a micro loan for $500 to $3,500 • Rental market data analysis • Informal Construction market – Evaluate incremental construction market • Production modes & volumes • Cost Structure • Market Situation • Near to medium term opportunities
Leg egal en environmen ent a t and Fi Financing • Housing legal environment • Analysis of title & mortgage registration: existence and adequacy • Doing business tables/updates • Local analyst reports • Assessment of Contract enforcement practices: courts • Financing Capabilities and options • Map lenders: Active/Pipeline/Interested • Potential employers/development sponsors • Map MFIs with capital, larger client base, already doing Housing Microfinance • Assess potential pipeline investments (Equity, Debt)
REMOVE HOUSING MARKET CONSTRAINTS Legal and Regulatory reforms Market Structure Support Financial Market Assistance
REMOVE HOUSING MARKET CONSTRAINTS Legal and Regulatory reforms • Rationalizing the formalization process of customary rights to facilitate access to land • Enhancing the capacity of the land administration, starting with the support of its computerization. In exchange for this assistance, registration charges could be lowered • Enhancing title & mortgage registration processes: tenure, property and pledge registries automation and transparency • Training the judiciary, and particularly the new commercial courts, to create awareness of the importance of a well-functioning mortgage enforcement mechanism. • Enacting a Condominium and sectional title law to encourage multi-family homes • Strengthen debt recovery and enforcement laws (foreclosure and eviction regulations on loans secured by real estate)
REMOVE HOUSING MARKET CONSTRAINTS Market Structure Support • Strengthen the developers’ industry, including land developers • Support the construction materials industry • Organize Real Estate Agents around a federation • Reinforce Appraisers valuation capabilities and standards • Provide and publish databases of house sales prices, and valuations
REMOVE HOUSING MARKET CONSTRAINTS Financial Market Assistance • Structure guarantee schemes for the informal sector households • Strengthen and encourage MFIs to enter the housing finance space • Leverage regional bond issuance to build a yield curve to price against • Work with the Central Bank to monitor the effective implementation of Basel1, and progress towards Basel2 • Support the reduction of capital requirements for mortgages • Reinforce Banks’ asset/liability management (ALM) • Create enabling regulations for secondary markets
Invest in construction, building materials & private housing development § Lower the cost and price of affordable housing § Scale up local industries, improve techniques Current IFC Partners Builders in Nigeria and Kenya construct up to 350 units at time, compared to 2,000 o to 5,000 in China, India, Mexico Industrial production methods are faster, cheaper, higher quality o Invest in local builders, projects, team them with efficient international firms o Climate change : invest in low energy building materials & methods o § Support private developers and large scale housing projects As scale increases, builders better able to move down market o § Reduce the cost of materials Material costs are very high in Africa compared to China, India, Turkey or CIS: 35% o premium on structural steel, up to 400% on cement Invest in local producers to reduce supply & demand gaps, improve efficiency of local o production Huge impact for low income incremental self-builders o 20
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