Interview: Karim Ibrahim
How has the economic slowdown impacted demand for property in Ghana?
KARIM IBRAHIM: The economic slowdown of 2015 and 2016 had a strong effect on the real estate market, and many projects have faced delays. Nevertheless, as the main economic variables such as inflation, interest rates and exchange rates stabilise and show signs of consistency, all sectors of the economy are starting to benefit from a wave of increased confidence. This should be more visible by the end of 2018, and some economic players that are still cautious will be pleasantly surprised by the results. Real estate is an economic backbone and one of the most visible sectors of a developing country.
In the case of Ghana, this growth will initially be driven by foreign investors’ interest in West Africa, and will likely be coming from places like China, Japan, Western Europe and the US, as well as Ghanaians living abroad. In Ghana they will continue to find a degree of predictability, stability and physical security that stands out in the region, in addition to an improved business environment. On the supply side, we have also witnessed better conditions when it comes to the availability of cement and construction materials – both from local suppliers and from international representative offices – as well as expertise accumulated in recent years. These factors position the country favourably in terms of the ability of the construction sector to deliver at a faster pace.
Where do you expect to see the greatest increases in demand in the coming years?
IBRAHIM: As new businesses come to the country and sentiment improves, the office market will be one of the first areas to benefit from that renewed confidence. Even though changing or moving an office is not always the first priority of a company, if a substantial expansion in business activity occurs, it will be inevitable. Once businesses are on-track, it could also positively impact the residential sector, both for moving purposes and as an investment vehicle. However, this growth will be closely linked to the effective implementation of incentives in and the overall improvement of the financial sector when it comes to access to and the cost of borrowing. The initial steps taken regarding interest rates have been adequate, although borrowing has not fully recovered, and rates are still high.
In terms of the geographic scope of real estate expansion, most developments tend to be concentrated in main urban areas, and linked to developments such as ports and airports. The growth of cities like Accra has accelerated in the last 10 years, and the level of activity is expected to drive more urbanisation. Nevertheless, there are also many opportunities to increase housing developments in areas further away from the main urban centres, as well as developments that are linked to industrial areas where the main goal is encouraging economic activity and boosting employment.
How big of an issue is access to land for developers?
IBRAHIM: Although it might seem like there is a large amount of empty land in cities like Accra, once a private individual seeks to acquire it, they are likely to encounter many hassles. Finding land that is free of duties and old property claims is very rare. The land ownership issue is a very complex one and has been a problem for many years, as it brings added uncertainty to the risks inherent in building a long-term business.
The solution is properly identifying land ownership by analysing cities area by area and zone by zone, and giving a time-defined notice to potential owners to make their claims – if they have any – and prove them. The government has an important role to play in resolving things and has taken some steps towards improving the situation. The concern over land ownership is not an issue that is limited to one single sector; it affects the whole economy, from agriculture and industry, to real estate, and its successful resolution should include contributions from both the private and public sectors.
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