PROPERTY DEMAND IN AFRICA

Transcription

1 OFF PLAN SALES: IS IT AN ELIXIR FOR PROPERTY FINANCING IN EMERGING MARKETS? XXV FIG Congrss 2014, Jun 2014, Kuala Lumpur, Malaysia Engaging th Challngs, Enhancing th Rlvanc Collins KOWUOR, Knya 20 Jun 2014 PROPERTY DEMAND IN AFRICA Urbanization rat p.a. 3.5% past two dcads Africa citis fastst growing in mrging markts About 40% of hr 1B pop liv in citis & towns Som citis will may hav ovr 85% of thir country population in nxt two dcads Dmand for housing, offic and othr proprty uss to grow 1

2 MORTAGE MARKETS Emrging and xpanding Rality of affordability offrs opportunity Avrag housing pric USD 31,000 No opportunity at this pric! Innovation ncssary (off plan sals?) Majority at lowr nd of incom pyramid Disruptiv businss modl Affordability and Dlivry Nxus MORTGAGES AS A PERCENT OF GDP , ,85 P r c n t ,88 0,07 0,38 Knya CAR Nigria Namibia Morocco Country 2

3 CHEAPEST HOUSE PRICE PSM (USD) P r i c / M i n S i z Pric(USD) Siz (SM) Knya CAR Nigria Namibia Morocco Country GNI PER CAPITA TO CHEAPEST HSE PRICE P r i c a n d I n c o m Pric (USD) GNIPC (USD) Knya CAR Nigria Namibia Morocco Country 3

4 POPULATION AND INCOME LEVEL 40,0 36,5 35,0 P r c n t a g 30,0 25,0 20,0 15, , ,0 Population (%) Incom Pr Day (USD) o f 10,0 10,8 9,9 9 5, Population \ 3 2 CENTRAL AFRICA REPUBLIC CASE Chapst nw built hous 24,000 USD Lss than 1% of population can afford Urban population about 39.35% About 80% liv on lss than 60USD pr month 4

5 THE CASE IN MOROCCO About 57% liv in urban About 14% liv on lss than 60USD pr month Govrnmnt subsidy support dlivry of housing Chapst nw hous is 16,600 USD Buyr would arn about 425USD pr month to afford a 20 yar mortgag at a 6% fixd intrst THE CASE IN NAMIBIA About 39% liv in urban About 51% liv on lss than 60USD pr month 87% ligibl for stat subsidy Stat dlivry insufficint Houshold arning undr 1,000 USD pr month would afford a 20 yars mortgag at 11% 5

6 THE CASE IN KENYA About 24% liv in urban About 67% liv on lss than 60 USD pr month Chapst nw hous is 13,000 USD Houshold nd to arn 677 USD pr month to afford th hous with 20 yar mortgag at 19% aftr dposit of 10% THE CASE IN NIGERIA About 58% liv in urban About 78% liv on lss than 60 USD pr month Minimum wag of 116 USD pr month would only afford to borrow 4,685 USD Chapst nw hous is 16,700 USD, almost for tims what minimum wag can afford 6

7 WHY INNOVATE? Rality of housing affordability across Africa Only small fraction of population in ach country can afford chapst nwly built hous Dmand for affordabl housing is significant Building for th markt rquir innovation COULD OFF PLAN SALES BE ONE WAY? OFF PLAN SALES 7

8 OFF PLAN PROPERTIES Som advrts proprtis not in xistnc yt Dvlopr has land but dvlopmnt nds hug capital outlay or has lss mony Has to borrow from financirs to dvlop. OFF PLAN PROPERTIES Cost of financ too high to mak pric of th housing units comptitiv. Dvlopr thn slls to a buyr a proprty bfor that proprty is built or compltd. Buyr purchasing th right to a compltd proprty in th futur. 8

9 HOW DOES IT WORK? Prpars a concpt of th dvlopmnt with nic documntations 3D drawings with sit, floor and unit plans. Provid dtaild information on financing trms, projctd rntals, tc HOW DOES IT WORK? Plans approvd by th approving authority Offr th yt to b dvlopd units for sal. Dvlopr thrfor raiss nough funds for starting construction. Construction don in phass to sync with installmnt paymnts upon stag valuation. Dvlopr may diffrntiat discount rats in lin with stag of th dvlopmnt. Th narr th dvlopmnt is to compltion, th lss th discount givn and th mor xpnsiv th units bcom. 9

10 BENEFITS OF OFF PLAN SALES Lockd in a pric still paying th discountd pric for th proprty vn if incrasd. Low initial capital outlay Most dvloprs rquir only 10% dposit to scur th proprty.full amount paid whn hous built. Valu apprciation Dpnds on markt trnds, th hom bought off th plan may incras in valu whn you mak ntir paymnt two or thr yars latr. Purchasing th bst units- arlist opportunity to buy most sought aftr proprtis and location.i.. pnthous. WHAT TO CONSIDER! Th dvlopr: On must gt as much information as possibl about th dvlopr. How long hav thy bn in businss? How many dvlopmnts hav thy succssfully compltd? Proprty typ: Ar you for invstmnt or hom or hybrid proprty? Do you prfr stand alon or gatd community? 10

11 ALSO CONSIDER THESE! Location: Vry important considration, as it will affct futur valu of th unit and ara around th dvlopmnt. Is th ncssary infrastructur such as utilitis and roads in plac? Contract: Mak sur that trms and conditions of contract with th dvlopr ar clar nough and watr tight. Th dvil is in th dtail THE RISKS!! Unfulfilld xpctations Final quality and standards may diffr from what you imagind or saw in display hous Pric fall. No guarant that th pric will go up May find yourslf paying too much for th hous if th markt falls during construction. 11

12 THE RISKS CONTINUED!! High intrst rats Banks may incras intrst rats bfor you sttl on th proprty and this can mak things hard for you if you ar planning to fix th trm of th loan at th currnt intrst rat. Non compltion Th constructor may go out of businss bfor construction of th proprty is compltd and th buyr may not b abl to rcovr th monis advancd. CONCLUSION This is an innovation to addrss th opportunity in mrging markts Off plan invstmnts can offr vry imprssiv rturns. But th highr rwards rquirs that you b xtra vigilant and do your homwork wll. Simply ask a lot of qustions, s many things and us th right popl. Govrnmnts, rlvant institutions and profssionals nd to tak this forward 12

13 ASANTE SANA Popl who say it cannot b don should not intrrupt thos who ar doing it. Gorg Brnard Shaw 13