What is being done to boost real estate ownership in Ghana?

Ghana’s real estate sector has experienced robust growth since 2018 and presents significant opportunities for investment. Increased activity in the midto high-end residential segment, higher transaction volumes – the majority of which occur in Accra and Kumasi – and the arrival of more expatriates have spurred expansion. Sector growth has been facilitated by multiple government initiatives designed to create a more stable, fair and attractive regulatory environment for investors and homebuyers. Through those initiatives, the authorities aim to boost the sector’s contribution to GDP and address serious social issues, such as a shortage of affordable housing and a lack of accessible housing finance options, both of which are made more pressing by the country’s young and expanding population.

The Covid-19 pandemic has impacted the property market’s various subsectors to differing degrees (see analysis), and reactive government interventions have been required in order to minimise negative effects. Among said interventions were the absorption of utility bills for households and businesses throughout 2020, and a number of relief measures and loan-repayment moratoriums aimed at stabilising the financial sector and protecting citizens’ household budgets (see Banking chapter).

Government Oversight & Policy

The Ministry of Works and Housing (MoWH) is the government body responsible for regulating Ghana’s property market. Recent focus has been on both supplying more affordable homes in an effort to reduce Ghana’s housing deficit, which stands at some 1.7m units, and formalising house construction. Dwellings constructed by informal developers account for a high proportion of houses built in Ghana, their relative affordability proving attractive to homebuyers despite lengthy building periods.

In September 2021 Francis Asenso-Boakye, the minister of works and housing, assembled a nine-member board at the State Housing Corporation, the government enterprise mandated to provide housing as a social service. The board’s prime directive is to formulate policies and partnerships that will accelerate the provision of affordable housing. The 2015 National Housing Policy remains the core regulatory framework for housing developments and emphasises the need for private sector engagement in bridging the country’s housing gap, while the National Housing and Mortgage Fund (NHMF) was created in 2018 to collaborate with the country’s financial institutions on mortgage products that are more in line with citizens’ needs.

Legal Efforts

Rent control legislation has been in the drafting stage since 2019, with the latest iteration submitted to the Cabinet for approval in the first half of 2021. Additionally, work on the Condominium Property Bill – which is designed to regulate shared public spaces devoted to multi-household developments – has been ongoing since 2012, with the MoWH aiming to include mandatory homeowner insurance as a legal requirement.

Together, these regulations are intended to make the housing market more accessible as it has long been characterised by unaffordable and unsustainable rental and purchase models that offer little protection for tenants and homebuyers. For example, tenants can be required to provide payment of up to two years’ rent at the beginning of a contract, which prices most Ghanaians out of the market or seriously impedes the quality of life of those who enter into such agreements. However, according to property consultant Broll, it was common for the terms of existing leases to be renegotiated from advance payments of six to 12 months to three to six months during the height of the pandemic in 2020.

A significant development at the regional level is the activation of the African Continental Free Trade Area, which enables the free movement of people, capital, goods and services. Greater cross-border trade and migration as a result of the 54-country agreement is expected to present significant opportunities for real estate operators in Ghana, further propelling sector growth.

Performance & Size

The real estate sector contributed nearly GHS11bn ($1.9bn), or 2.9%, to GDP at current market prices in 2020, up from GHS9bn ($1.5bn), or 2.5%, in 2019. This represents growth of 22%, which, although robust, marks a notable slowdown from the 44% growth witnessed between 2018 and 2019. Continuing the real estate sector’s annual expansion since 2013 – when it was valued at GHS1.2bn ($205.2m) – is a feat given the Covid-19 pandemic and global oil price fluctuations, to which Ghana’s economy is highly sensitive. Various nationwide initiatives aimed at diversifying the country’s economic activity in order to make it less dependent on taxes and natural resources has supported the housing and property market, but there are concerns that Ghana’s continuing significant investment in oil-related activities could have negative, long-term repercussions given the global drive to transition to renewable energies.

Residential

Housing sale and rental prices are often listed in US dollars, making them sensitive to inflation and depreciation. In response, the government has put in place measures to stabilise the Ghanaian cedi. Recent moves in 2021 included the Bank of Ghana’s adoption of the foreign exchange forward auction programme, through which it sought to inject $300m into the economy by the end of the year; the introduction of a local gold purchase programme; and the allocation of a $1bn special drawing rights fund from the IMF. Despite these efforts, however, the cedi depreciated by about 9% on the retail market and by 3.93% against the US dollar at the end of 2021, weighing on consumer confidence and stifling demand in the country’s housing market. Inflation, meanwhile, fluctuated throughout 2020 and 2021, peaking at 11.4% in July 2020 before easing to 7.8% – comfortably inside the target range of 6-10% – in June 2021 as pandemic-induced price hikes and supply chain disruptions eased.

Mid- to high-end rental prices have reflected the stresses of the pandemic, with the average cost of a high-end two-bedroom apartment falling from $2500-$3500 per month in 2019 to $2200-$2700 in the second half of 2020, stabilising there through to mid-2021. The average house purchase price varies markedly among Ghana’s major cities. In December 2021 real estate website Ghana Property Centre stated that average house prices in Accra, Kumasi and Tema were GHS800,000 ($136,800), GHS270,000 ($46,170) and GHS450,000 ($76,950), respectively. Prior to the pandemic, increased activity in the mid- to high-end housing market had been driven by the country’s expanding middle class, a strong tourism sector and healthy corporate demand for serviced apartments, therefore any recovery depends heavily on the return of international visitors and in-person business interactions.

Mortgages

Ghana’s mortgage system is at an early stage of development. In light of the country’s low mortgage-to-GDP ratio of 0.5% in 2020, the government is working with financial institutions to make home financing more widely accessible. The low mortgage penetration rate is underpinned by the country’s low level of financial inclusion and participation: indeed, as of 2017 just 10.2% of adults had entered into formal borrowing agreements, according to a 2021 report by affordable housing investor Reall and the Centre for Affordable Housing Finance in Africa. Furthermore, as of 2020 just 0.8% of homeowners in Ghana funded their purchases with mortgage products, with many opting to utilise personal loans and other finance options.

Ghana’s top-six mortgage providers are Stanbic Bank, Absa Bank Ghana, Cal Bank, Republic Bank, First National Bank and Ecobank Ghana. They offer a range of products that span property construction, property purchases, property improvements, mortgage refinancing and land purchases. Until recently, mortgage repayments were spread over a maximum of 15 years, with interest rates starting at 24%. In addition, an average down payment of 20% was required. These conditions deterred many potential mortgage customers, as monthly repayments consume an average of 45% of net household income. Indeed, the IMF deemed this model fundamentally unaffordable for most Ghanaians.

In order to address this, in 2019 the NHMF, through its partner banks, created a number of new financing schemes for homes of up to three bedrooms, with interest rates ranging between 11.9% and 12.5%. The NHMF also collaborated with Ghana Commercial Bank Securities to launch the Affordable Housing Real Estate Investment Trust (REIT) in late 2019, making affordable housing available for public sector workers on a rent-to-buy basis. Under the scheme, qualifying persons are able to rent apartments for 15-20 years before paying a residual fee to assume ownership of the home. Pricing for the above products is set in Ghanaian cedis. Following a favourable public response to the offerings, August 2021 brought the announcement that the national blanket interest rate for mortgages would be lowered by up to 60% (to between 10% and 12%), and that the maximum mortgage repayment term would rise substantially to 40 years. As the country’s median age is just over 21 years, these developments are expected to help young adults onto the property ladder.

In September 2021 Republic Bank announced two new mortgage products that feature flexible repayment schemes devised in accordance with customers’ salary level and structure. One of the schemes gives customers the opportunity to repay their mortgages early, paying up to 40% less interest over the course of the loan.

Affordable Housing

A home that costs between GHS100,000 ($17,100) and GHS200,000 ($34,200) is considered an affordable unit in Ghana. While the mortgage system is making progress on ensuring housing finance is more widely accessible, annual production of affordable units – which currently stands at between 35,000 and 40,000 units – must be more than doubled if the required rate of 100,000 units per year is to be achieved. Following the passage into law of the Public Private Partnership (PPP) Act of 2020, the government is aiming to attract additional private investment into housing construction to meet this target. However, even before the establishment of the 2020 act, PPPs were proving viable funding platforms for housing projects, with the government signing one such agreement with Hungarian firm Solin in 2019 for the construction of 10,000 affordable homes across Ghana. For its part, in August 2021 the Ministry of Finance pledged to inject additional funding into unfinished housing developments to boost the national supply.

Upcoming projects in this area include the Shai Hills community, a Ghanaian–Chinese cooperation venture. It is a 20,000-unit development offering two- and three-bedroom apartments in a multipurpose compound, complete with recreational, health, education, commercial and transport facilities in the Greater Accra Region. Meanwhile, the UN Office for Project Service is financing a $5.3bn nationwide affordable housing programme. As part of its drive to construct 800,000 homes in selected developing nations across Africa, Asia and the Caribbean, the office has pledged to build 100,000 affordable housing units in Ghana. The first development of the programme kicked off in August 2021 in Amasaman, also in the Greater Accra Region, and is slated to yield 6500 earthquake-resistant homes, all of which will utilise renewable energy.

Land Considerations

Private, foreign investment in land and property in Ghana is permitted by law, but outright ownership is not. Rather, 50-year leaseholds – with the option to renew – are offered to interested parties, and an entity is considered foreign if its ownership is more than 40% non-Ghanaian. Multiple complications such as tenure insecurity, land encroachment, repeated unauthorised sales of the same land, undefined land boundaries and unapproved construction have historically proven a deterrent to foreign investment. Indeed, about half of all court cases in Ghana relate to land disputes.

Inadequate administration has contributed significantly to the above issues, prompting the government to establish the Land Act 2020. The new law seeks to streamline the country’s land ownership procedures and has heralded the launch of a digital land registration database, accessible only by select legal practitioners, to clarify matters and attract higher inflows of private investment.

Land in Ghana is divided into five classifications: state, vested, family, private and customary. Engagement of both a lawyer and a real estate agent is a legal requirement in first identifying the classification and ownership of specific land and then successfully acquiring it. Authentication and processing is carried out by the Ghana Lands Commission. As of 2021, the documentation process can take between 90 and 140 days to complete, although the commission is working to shorten this period to 30 days.

In January 2022 Meqasa.com, Ghana’s largest property website, listed more than 25,000 plots of land for sale across the country. Prices ranged between GHS21,000 ($3590) and GHS967m ($28.3m), with an average of GHS965,121 ($165,000). Ready-built commercial premises listed by Meqasa.com carried an average cost of GHS12.8m ($2.2m), ranging from GHS20,808 ($3560) to GHS244.8m ($41.9m).

Outlook

The numerous new regulations that have been introduced in recent years and the investment opportunities they open up is expected to enable continued growth for Ghana’s real estate sector. In particular, the provision of sufficient volumes of affordable housing units in the areas they are most needed represents a long-term challenge that cannot be achieved with state funds alone. However, the new PPP Act of 2020, if implemented correctly, provides a solid foundation upon which the government can work to achieve its investment targets for affordable housing and other developments.