What do we need to be able to lend to the breadth of the affordable market?

Transcription

1 Financing affordable housing approaches at scale What do we need to be able to lend to the breadth of the affordable market? Michael K. Mugabi, Executive Director Housing Finance Bank

2 Content The Macro-environment Housing Affordability Challenges and Possible Remedies

3 Macroenvironment Population of 1.21 billion Growth by 42 million per annum Over 500 million live in urban areas Over 700 million need affordable housing

4 Macroenvironment High population growth rate and increasing urbanization translate into a high housing gap. However, low income levels do not support access to formal housing. 3 to 4 Bedroom houses are in the range of US$ 40,000 to US$ 200, percent of the population cannot afford such houses.

5 Macroenvironment Opportunities Huge housing deficit; - High Demand for Housing- Real Estate Sector especially affordable housing. - Low supply Few large scale developers, Low rates of Titled Land, Low levels of housing Infrastructure, focus is on cities and towns Inadequate Private Credit/Savings - Limited sources of credit outside the banking system Credit Reference Bureau Computerization- Lands Threats Increased Fraud- including forgery of documents, signatures Consumer activism & litigation; many cases from customers in the recent years claiming banks took advantage, flawed recovery procedures, illiteracy rates. Corruption facilitation

6 Inadequate supply of affordable housing finance has translated into the growth of informal settlements Over 200 million Africans live in slums Cities accommodate 72% of slum dwellers across Africa Data sources: UN-Habitat 6

7 Client Loans and Advances (June 17) Manufacturing 16% Real Estate 28% Uganda: Sector-wise Credit Personal Loans 20% Trade 24% Agriculture 12% Source : BoU

8 Regional Perspective Ghana, Western Africa Malawi, Southern Africa Sector-wise Credit Distribution Sector-wise Credit Distribution Construction 10% Manufacturin g 8% Mining 2% Agriculture 3% Miscellaneou s 9% Services 19% Hotel 2% Transport 8% Financial Services 13% Real Estate Others 1% 3% Agriculture 22% Utilities 15% Trade 25% Transport 9% Community 13% Wholesale and Retail 23% Manufacturin g 15% Bank of Ghana Reserve Bank of Malawi

9 Housing Finance Solutions Home Loans Single Household Financing up to 20 years Plot Purchase Urban plot Financing Title acquisition Financing Commercial Multi-units Multiple units construction for sale or rent 10 year financing

10 Housing Finance Bank Affordable Housing

11 Africa s Housing Landscape

12 Affordability Dynamics Loan Payment to Income Ratio 80% Loan to Asset Value Ratio 50% 35% 35% LTV 80% Source: HFB PTI Salary Business Rent 0% 50% 100% Upcountry Urban Residential Purchase

13 Lending Dynamics: Credit Evaluation Vs. Affordability Client determinants Willingness Ability Character Amount Ability Margin/ contribution Repayment Security To Pay CRB Income Liquidity Operating costs Cost of funds (Capital) Available Credit Interest rate Risk factor (NPL ratio) Internal determinants

14 Challenges and Possible Remedies

15 Lending to the breadth of affordable market Housing Units Mass production of affordable housing Collateral Improvements in title processing Bank Deposits Boost in levels of bank deposits Funding Costs Loan To Value Reduction in funding costs Arrangements to increase funding to above 80%; e.g CRI.

16 Thank you