How Côte d'Ivoire is addressing the housing deficit

 

Although construction of a wide range of commercial units and high-value projects have been completed since 2011, there is a housing shortage of 400, 000-600,000 units across the country, with around 200,000 of these in Abidjan alone. As the population and urbanisation rates grow, demand for housing is rising by an estimated 40,000-50,000 units per year.

Sector Performance

Since 2011 real estate demand has risen dramatically due to a growing middle class, an influx of expatriates and the return of Ivorian nationals from overseas. The relocation of the African Development Bank headquarters from Tunis to Abidjan in 2014 also contributed to a rise in demand, especially for high-end housing. “There has been a boom of investment in real estate, with many construction projects ongoing, ranging from residential units to offices and commercial centres,” Mariam Mahama, strategic development director at Abidjan-based developer and real estate agency Kalimba, told OBG. “Building quality has also increased compared to the first decade of the 2000s, which has been in line with popular demand.”

Structure & Oversight

With rising demand and investment, the number of real estate agencies in the market has grown, too. “Competition has surged, and there are increasingly more real estate agencies,” Mahama said. “However, some are operating informally. While this is a clear sign of the excitement in the market, it is also a concern since it could harm confidence in the sector.” Supported by the government’s goal to increase social housing supply, the number of property developers has risen as well. “The government set an ambitious target for the development of social housing, which subsequently saw the number of firms operating in the sector increase from 15 to approximately 50,” Jean-François Moreau, director-general of real estate developer Promogim, told OBG.

Attracted by the housing segment’s potential, several domestic and foreign firms signed construction deals in 2019. Marylis BTP, a subsidiary of Snedai Groupe, signed an agreement with Chinese company Henan Guoji in December to build 10,000 units – part of a larger plan to build 30,000 low-cost and mid-range units. Earlier, in April 2019, local company Opes Holding signed an agreement with the Ministry of Construction, Housing and Urban Planning (Ministère de la Construction du Logement et de l’Urbanisme, MCLU) to build 40,000 units under a hire purchase scheme over 15-25 years.

Regulation

While interest in the real estate sector has been increasing from foreign and local players alike, a number of difficulties need to be addressed to enable further growth. One of these is land acquisition.

A July 2013 land acquisition order was intended to simplify the acquisition and registration processes, but unclear land classification requirements continue to create complications. “A number of issues need to be solved in terms of access to property, such as land ownership, land availability and the sometimes high cost of land, especially in Abidjan and its surroundings,” Cheick Sanankoua, managing partner at HC Capital Properties, told OBG. Indeed, it is estimated that four-fifths of construction projects are carried out in violation of the requirements of building permits and security standards, according to data from the MCLU. To help address this, the government issued the Construction and Housing Code in 2019, which is structured to allow developers to acquire a building permit under more transparent conditions, and makes it easier to secure land for projects of public interest.

This follows other moves to simplify bureaucratic processes, starting with the creation of a one-stop shop for construction permits in 2018. In 2019 transferring property became easier, too, when the authorities made it possible to pay registration fees at the Land Registry. This has helped Côte d’Ivoire improve its rank in the registering property category of the World Bank’s “Doing Business” report, in which it ranked 112th out of 190 countries in 2020, compared to 120th of 189 countries in 2015. The cost of registration currently stands at 7.1% of the property value – lower than the sub-Saharan Africa average of 7.3%, but higher than the OECD high-income average of 4.2%.

While steps taken since 2015 to digitise the land registry system have contributed to the improved ranking within the registering-property metric, some elements of the system are still paper-based or not fully digitised. For example, past and newly issued cadastral plans are kept on paper. “Digitalisation is a great way to improve how the cadastre works,” Williams Bella, managing director of Property Kro, told OBG. “Currently, there are many cases where several landlords claim the same plot of land, which could be avoided by implementing digital tools in the real estate sector.”

In 2016 the government introduced a tax on the import of construction materials, as well as a housing tax on salary, with the aim of creating a special fund to serve as a guarantee for banks financing projects. However, these taxes have yet to be fully implemented. In another effort to find solutions to the limited social housing supply, the government reactivated the Approval Commission of Real Estate Developers in June 2018 to improve practices in the sector by requiring stricter procedures when selecting developers for projects. Efforts to bolster the regulatory framework are seen as necessary for continued market growth. “Given the rapid increase in demand for housing over the past 10 years, the sector had to face a correction period. In the coming years, the previous bullish run will ensue,” Fawzi Darwich, general manager at housing equipment firm Fadco, told OBG.

Rental Trends

More than two-thirds of people in Côte d’Ivoire rent their homes, and with demand growing, prices have increased. In 2019 monthly rental prices in Abidjan ranged from CFA125,000 ($215) to CFA200,000 ($344) for a studio apartment, according to the “Housing Finance in Africa” 2019 report by the Centre for Affordable Housing Finance in Africa (CAHF). In neighbourhoods like Koumassi, where there is little urban infrastructure, room rents range from CFA35,000 ($60.16) to CFA75,000 ($129). “Prices have risen in Cocody because it is closer to international schools,” Mahama told OBG. “As calm and security have returned to the city, restrictions on employees have been lifted. In Zone 4, prices dropped as supply exceeded demand.”

Social Housing

In 2010 President Alassane Ouattara announced a landmark plan to build 60,000 housing units during his first term in office. Three years later, the government launched the Presidential Housing Plan with the aim to build as many as 150,000 units by 2020, with 60% of them to be social housing.

As of March 2019, however, only 12,000 units had been built, according to Bruno Koné, minister of construction, housing and urban planning. The CAHF suggests that hurdles of the programme result from the lack of funds to compensate traditional landowners, a lack of financial and technical competence of some local developers, and under-estimated sale prices for social housing units. While experienced companies have successfully completed social housing projects, developers that were new to the market found themselves facing difficulties, Moreau said. To further incentivise development, in 2017 the state introduced tax breaks for companies that dedicate at least 60% of their production to social housing. The new rules also fixed the prices of units built under the programme, at CFA12.5m ($21,500) for social housing and CFA23m ($39,500) in the business segment. Another challenge the programme has faced has been delays in connecting basic utilities such as water and electricity to the national grids, leaving a number of finished units uninhabited.

In March 2019 Koné said that the government needed to hire international operators with the financial ability and technical know-how to increase the scale of production to a rate of 10,000-20,000 units per year. In addition, the minister revealed the government’s intent to facilitate access to mortgage loans and to design a long-term social housing financing mechanism.

Housing Finance

Four banking institutions are involved in residential real estate financing: the National Investment Bank, the Support Fund for Housing, the Urban Land Account and the Housing Mobilisation Account. Despite the existence of these funds, access to mortgages remains a challenge as commercial banks are risk-averse and remain cautious, especially when it comes to financing for the low-income housing segment. However, there have been some encouraging signs of late, with average mortgage interest rates falling steadily from 8.82% in July 2016 to 6.79% in February 2020. Furthermore, as part of its efforts to improve affordability, in 2018 the government negotiated a 5.5% interest rate for social housing loans with the banks, down from 9.5% previously. Also, in May 2019, domestic lender La Banque de l’Habitat de Côte d’Ivoire – in which Canada’s Westbridge Mortgage real estate investment trust acquired a majority stake in November 2019 – launched a three-month programme offering mortgages spanning a maximum of 20 years with an interest rate of 6% for loans under CFA100m ($171,000).

Retail Market

At the same time, rapid economic expansion and a growing middle class has sparked interest from commercial real estate developers. In December 2018 shopping mall Cosmos Yopougon, which comprises international brands such as Burger King and Carrefour, opened in the largest neighbourhood of Abidjan. As the city’s eighth shopping mall, the $30m facility was funded and constructed by the UK’s HC Capital Properties and Lebanon’s Sarada Group. This opening was notable since it was the first mall to be opened in a lower-middle-income area, with the city’s other shopping centres located in high-end neighbourhoods like Cocody and Marcory.

Office Market

According to Knight Frank, Abidjan has become one of the fastest-growing office markets in Africa. In 2016 the leasing of a Cocody building called Green Buro to international companies including General Electric, Pfizer and ExxonMobil set a new benchmark for Abidjan’s prime rents at $32 per sq metre per month, up from $28 in 2015. Co-working and office space provider Regus has opened three locations in Abidjan, and the CFA40bn ($68.8m) Renaissance Plaza, which has been under construction since 2017, will provide a new commercial and business centre in the central business district. “The country’s economic attractiveness benefits the real estate sector. While companies are looking for offices, their employees are searching for houses or apartments,” Mahama said.

Outlook

With a population growth rate of 2.5% and an urbanisation rate of 3.5%, the housing market is likely to maintain rapid expansion in the coming years. Sustained periods of high economic growth also suggest that the retail and office segments have a strong future, as incomes grow and companies set up shop. As with all sectors of the economy, the global Covid-19 pandemic is set to affect the performance of the property market to some degree, with developers and buyers likely to adopt a wait-and-see approach in the short term. Since the government is increasingly looking to private funding to realise its construction and real estate ambitions, if the virus delays investment in the sector, this might slow progression on targets in 2020.

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