The Centre for Affordable Housing Finance in Africa (CAHF) released its 6th Edition of the Housing Finance in Africa Yearbook late last year. Covering 48 countries and five regions across the continent, the Yearbook covers a broad overview of the housing and housing finance markets in these regions.
According to data in the Yearbook, Mozambique, with 68.8% of its population living in rural areas, is urbanising rapidly at a rate of 3.28% per annum. Behind this dynamic is strong economic growth and sustained high levels of foreign direct investment (FDI).
“These capitals flows tend to typically pass through the capital, Maputo, which is the locus of political power and the city out of which most businesses operate. Yet, Mozambique continues to have high levels of poverty—at 55% of the population—and an average GDP per capita of only US$ 619 between 2010 and 2014; the country ranks 178th out of 187 countries on the United Nations Development Programme's (UNDP) Human Development Report 2014. It is hoped that if the country's economic growth continues, driven by its National Strategy for Development, launched in 2015, its ranking would improve, and access to housing finance will simultaneously increase,” the report states.
Housing finance in the country is limited, with only three percent of the population able to access formal credit and over 90% of the population without a bank account. Those with bank accounts likely use any of the five biggest banks, which account for 87% of the financial sector, out of the 19 banks that are registered.
Though many of these banks offer mortgages, mortgage loans are equivalent to only 0.6 percent of GDP. UN Habitat believes that banks mortgage portfolios account for 8.3% of total loans to individuals and 2.24% of total outstanding loans. Conditions for mortgage loans are generally rigorous, with loan-to-value ratio typically 70%. Mortgages have a maturity of 12 to 25 years, and only, approximately, 15% of residential properties with mortgages have legal titles. For construction loans, banks request another property or fixed assets as collateral, at least until the construction is 80% completed.
Banks also offer unsecured construction and renovation loans, for three to five years, at higher interest rates. For some of these loans, the lender requires a guarantee or other form of collateral. Some banks, to make home loans more accessible, offer leasing or rent-to-buy schemes, in which the property is made available on a rental basis to a tenant who has an option to buy the property at the end of the lease.
There is also the arrangement the Fund for Housing Promotion (FFH) has with several banks to make mortgage loans accessible for beneficiaries of FHH projects. Developer finance is limited and expensive, with rates of up to 23%.
According to the World Bank's Doing Business Indicators, Mozambique ranks fourteenth among African countries in terms of ease of doing business. Though it is first among African countries in terms of getting a construction permit, Mozambique places twelfth in terms of registering a property. It takes six procedures and 40 days to register property, at a cost of 9.9% of the property value. Comparatively, it's cheaper to register a property in neighbouring South Africa and Tanzania, at 6.2% and 4.4% respectively.
The report also finds that current developments in Mozambique’s housing markets are not affordable for the majority of urban households, and prices for newly built houses remain high. Despite these factors, CAHF believes there are opportunities for investors in the country.
CAHF will be presenting at the upcoming Seminar on Housing Finance in Mozambique. The seminar, hosted by the African Union for Housing Finance (AUHF), in co-operation with Financial Sector Deepening Mozambique (FSDMoç) will be held in Maputo on 28 April 2016.