Abuja, September 14, 2016 · § Other solutions for informal/lower income HH o Rental finance,...
Transcript of Abuja, September 14, 2016 · § Other solutions for informal/lower income HH o Rental finance,...
Abuja,September14,2016
Africa’s chronic housing crisis: challenges and opportunities
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Low&informalincomes
live on less than $2 per day70%
Ampleroomtoimproveaccesstofinance
with no access to formal housing finance products94%Rapidurbanization
countries in SSA will double their urban populations in less than 20 years25
Growingmiddleclassnumber of people consuming $4 to $20 per day, from 1980 to 20102x
128 million households by 2020
TenureInsecurity
of urban land in Cameroon
is held without title
70%
Largeimpactonemploymentandgrowth
jobs created per housing unit built5
Growingslumpopulation
of SSA urban residents live in
slums, and growing
62%
Highconstructioncostsper m2 of affordable housing in SSA, vs.
$350/m2 in India, $250/m2 in China$700
Housingcontributestowealth
of all tangible assets in housing50%
Growingdemandfromcountriesandcommitmentsforreform
Dynamics in housing sector create opportunities but also face challenges
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Growingdemandfromcountriesandcommitmentsforreform
GrowthofCities
cities of 500k+ population in 2030564 cities in 1990
1,393
Ampleroomtoimproveaccesstofinance
of adults have no access to formal housing finance93%
Largeimpactongrowthandemployment
jobs created per housing unit built5
Contributiontowealth
of tangible assets in housing
50%
Growingmiddleclassconsumers expected to join global middle class by 2030 bringing it to 5 billion
3billion
HighGHGimpact
of the world’s greenhouse gas emissions from buildings. 19
%Housing represents 3/4 of all new buildings
Low&informalincomes
in low-income countries live on less than $2 per day74%
TenureInsecurityof land in emerging economies unregistered70%
Growingslumpopulation
urban residents live in slums, and growing
863million
HousingNeedshousing units per day required through 203096,150
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Source:McKinseyAnalysis
Valueofaffordablehousingshortage,2012,$Billions
HighShortageandmarketattractiveness
Developedmarket,redevelopmentopportunity
Otheremergingmarketopportunity
Affordable Housing is a Global Economic Opportunity
Mexico$122b
South Africa
$69b
India$67b
Brazil$57b
Iran$55b China
$55b
Turkey$43b
Saudi Arabia
$36bNigeria$28b
Egypt$27b
Argentina$25b
Russia$23b
Vietnam$19b
Iraq$12b
Philippines$12b
Pakistan$7b
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Value of accumulated affordable housing shortage (2012)
Source: McKinsey Global Institute Analysis
Top16marketsaccountfor~35millionunits,representinganeffectiveandrealizableformal
marketof$600-700billion
Affordable housing: challenges and opportunities
Background– estimatedgrowthofmiddleclass,inmio.people(from2009to2030)
664
322
181 313
680
338
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525
3,228
105
107
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NorthAmerica
CentralandSouthAmerica Sub-SaharanAfrica
NorthAfricaandMiddleEast
Europe
Asia-Pacific
20092030
Source:UN,WorldBank,BrookingsInstitutions,FT 6
Theopportunity– currenttrendsinhousingfinance
Risinghousingconsumption
Increasingurbanization
Growingmiddle-class
Growingpopulations
• Morepollutionandcongestionincities• Moregreenhousegasemissions• Moredisasters• Riseininformalsettlements
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upperincom
e
lower income
middle
income
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The overall approach: reform and invest across housing value chain
Menu of WBG interventionsVitaltoreformstructuresandcatalyzemarketstoachievegoals
Improve city planning, building regulations, and access to land
Expand access to housing finance
Invest in basic pro-poor infrastructure and slum upgrading
Strengthen residential rental markets
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Promote affordable housing
Enhance access to microfinance
Enhance access to mortgages, construction finance
Boost housing demand through access to finance
Reduce formalhousing costs
Sector interventionsin regulations,
planning, construction
and land
Strengthen local construction & building materials sectors; support private housing development
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City Planning & Building
Regulations
Access to Land
Infrastructure & Services
End-user Finance
Construction & Building Materials
Sectors
Subsidies
Developer Finance
UrbanFinance & Markets
IFC
A comprehensive value-chain approach
The WBG is uniquely positioned to reach across the value chain
Housing Finance Programmatic Strategy Approach
Building Viable Housing Finance Markets in African Economies
2. Investment 1. Technical Assistance
and Information
Building
Builders,constr.materials
TheHousingValueChain
Supply Side Demand Side
Building Affordable and Decent Quality Housing
Units
Increasing Access to Affordable Housing
Finance
LandandInfrastructure Construction
Primaryfinancingmarkets
Secondaryfinancingmarkets
GOVERNMENTDEV.PARTNERS
BUILDERSBANKS
BANKSMFiS
CAPITALMARKETS
CONSTRUCTIONMATERIALS
Materials
COUNTRYHOUSINGMARKETASSESSMENTFRAMEWORK
SupplyandDemandanalysis
HousingSupplyanalysis
• Currenthousingproductionmodes• CurrentHousingvolumes• CostStructure• Constructionmaterialpartners– WhichcountriesisLafargeworkingin?
• Marketsituation• Neartomediumtermopportunities
SupplyandDemandanalysis
HousingDemandanalysis• Affordability- Householdincomedata
• Howmanyhouseholdscanmakepaymentona$25kor$35kunit
• Howmanyhouseholdscanmakepaymentonamicroloanfor$500to$3,500
• Rentalmarketdataanalysis• InformalConstructionmarket– Evaluateincrementalconstructionmarket
• Productionmodes&volumes• CostStructure• MarketSituation• Neartomediumtermopportunities
LegalenvironmentandFinancing• Housinglegalenvironment
• Analysisoftitle&mortgageregistration:existenceandadequacy• Doingbusinesstables/updates• Localanalystreports
• AssessmentofContractenforcementpractices:courts
• FinancingCapabilitiesandoptions• Maplenders:Active/Pipeline/Interested• Potentialemployers/developmentsponsors• MapMFIswithcapital,largerclientbase,alreadydoingHousingMicrofinance
• Assesspotentialpipelineinvestments(Equity,Debt)
REMOVEHOUSINGMARKETCONSTRAINTS
LegalandRegulatoryreforms
MarketStructureSupport
FinancialMarketAssistance
REMOVEHOUSINGMARKETCONSTRAINTSLegalandRegulatoryreforms
• Rationalizingtheformalizationprocessofcustomaryrightstofacilitateaccesstoland
• Enhancingthecapacityofthelandadministration,startingwiththesupportofitscomputerization.Inexchangeforthisassistance,registrationchargescouldbelowered
• Enhancingtitle&mortgageregistration processes:tenure,propertyandpledgeregistriesautomationandtransparency
• Trainingthejudiciary,andparticularlythenewcommercialcourts,tocreateawarenessoftheimportanceofawell-functioningmortgageenforcementmechanism.
• EnactingaCondominiumandsectionaltitlelawtoencouragemulti-familyhomes• Strengthendebtrecoveryandenforcementlaws (foreclosureandevictionregulationsonloanssecuredbyrealestate)
REMOVEHOUSINGMARKETCONSTRAINTS
MarketStructureSupport• Strengthenthedevelopers’industry,includinglanddevelopers• Supporttheconstructionmaterials industry• OrganizeRealEstateAgents aroundafederation• ReinforceAppraisers valuationcapabilitiesandstandards• Provideandpublishdatabases ofhousesalesprices,andvaluations
REMOVEHOUSINGMARKETCONSTRAINTS
FinancialMarketAssistance• Structureguarantee schemesfortheinformalsectorhouseholds• StrengthenandencourageMFIs toenterthehousingfinancespace• Leverageregionalbondissuance tobuildayieldcurvetopriceagainst• WorkwiththeCentralBanktomonitortheeffectiveimplementationofBasel1,andprogresstowardsBasel2
• Supportthereductionofcapitalrequirements formortgages• ReinforceBanks’asset/liabilitymanagement(ALM)• Createenablingregulationsforsecondarymarkets
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§ Lowerthecostandpriceofaffordablehousing
§ Scaleuplocalindustries,improvetechniqueso BuildersinNigeriaandKenyaconstructupto350unitsattime,comparedto2,000
to5,000inChina,India,Mexicoo Industrialproductionmethodsarefaster,cheaper,higherqualityo Investinlocalbuilders,projects,teamthemwithefficientinternationalfirmso Climatechange:investinlowenergybuildingmaterials&methods
§ Supportprivatedevelopersandlargescalehousingprojects
o Asscaleincreases,buildersbetterabletomovedownmarket
§ Reducethecostofmaterialso MaterialcostsareveryhighinAfricacomparedtoChina,India,TurkeyorCIS:35%
premiumonstructuralsteel,upto400%oncemento Investinlocalproducerstoreducesupply&demandgaps,improveefficiencyoflocal
productiono Hugeimpactforlowincomeincrementalself-builders
Invest in construction, building materials & private housing development
Current IFC Partners
§ Makemortgagemarkets affordableo WBimprovesthelegal®ulatoryframeworko IFCprovidesrefinancingtobanks(Kenya,Rwanda,Uganda)o IFCinvestsequityinnewlenderso Advisoryservices(ex:IFCmortgagetoolkit)o Climatechange:financingforenergyefficiencyhousing(EDGE)
§ ExpandHousingMicrofinanceo Smallloansforhomeimprovementandself-construction:potentialscalingup
throughMFIs,savingscooperativeso IFCinvestments,AdvisoryServices(e.g.,MoU withLafarge)o WBsupporttoHMFFunds,regulatoryreforms
§ Expandcapitalmarketso WBsupportsliquidityfacilitieswhichissuebonds(Nigeria,Tanz.)o IFCTreasurysupportsbondmarketswithlocalcurrencyissueso Future:risk-sharingguarantees,enhancementtoprivatebonds
§ Othersolutionsforinformal/lowerincomeHHo Rentalfinance,creditrisksharing,contractualsavings,rent-to-buy
§ Refocusgovernmentinterventionso Restructurefailinghousingbanks/funds/agencieso Consolidateafewsuccesses(BHSSenegal,NHCTanzania)o Supportappropriateandtargetedsubsidypolicies
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Expand Access to Housing Finance
Current WBG Partners
ExamplesofhowIFChelpedlenderstogrowinsustainableandprofitablemanner
• Afghanistan• Morocco• India• Albania
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• LoanAmount:$200- $4000
• LoanDuration: 6to24Months
• InterestRate: 2.08%permonth,declining
• ProductEligibility:• Businessman/women–employees
• Collateral:• Personalguarantor
FirstMicrofinanceBankofAfghanistan– featuresofhousingloanproduct
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Morocco: another example of successful WBG interventions
üReleasedpublicland
üUnifiedbuildingcode,relaxedplanningregulations
üModernizedrentallaw(toreducevacancies)
ü Incentivizedprivatedevelopersintoaffordablehousing
üBoostedretailmortgagemarkets:competitive,affordable
üPublicguaranteefund:>100,000informalincomehouseholdshaveaccessedresidentialmortgagefinance
üMicro-financeinstitutionsauthorizedtolendforhousing
üSlumupgradingprogram(VSB),financedwithataxoncement,includingcostsharingandcitycontracts 24
Aadhar HousingFinanceCompany,India.Aleaderinadvancingaccessofaffordablesegmenttohousing
• AadharHousingFinanceLtd.isspecializedhousingfinancelender• Focusoncustomerswithlowsalariesorself-employedwithinformal
incomes• FocusonbusinessoperationsinpoorerstatesofIndia
Source:Aadhar
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Aadhar hasoutperformedmarketsincestartofitsbusinessoperationsin2010duetospecializationonaffordablesegmentandrigorousunderwritingandservicingprocess
Aadhar MarketCAGR 184% 120%ROE 15% 21%GrossNPA 0.50% 0.73%
PerformancecomparisonFY2016
• Aadhar operatesin13statesandservesabout29,000customers• Loanportfoliooutstanding(03/2016):$273.5m• Averageloansizeis$13,380• Customersearnbetween$900- $3,600annually.
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IFCinitiatedmarketforenergyefficiency(EE)loansinAlbania
• 2MicrofinanceInstitutionsand2banksjoinedtheprogram
• Continuousadherencetoloanstandardshascontributedtolownon-performingloanratios(NPL):1.6%forEEloansversus8%forconsumerloans
• SurgeindemandforEEloans:4,900loansworth$20m(June2015)
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Annex– ToolsIFCAdvisoryServices
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IFC’sGlobalMortgageToolkit:focusonallareasofthevaluelendingchaininhousingfinance
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IFC’sHousingMicrofinance(HMF)Toolkit– guideforproductdevelopmentandoperations
StructureofHMFToolkit:
• Marketassessmentplan
• Strategyformulationandbusinessplanpreparation
• Product(includingshariah-compliantHMFproducts)
• Salesandoutreach
• ProcessingandservicingofHMFloans
• Constructiontechnicalassistanceprogram
• Riskmanagementandfunding
• Trainingprogramsforstaffandmanagers30
Conclusion:HousingandHousingFinanceinAfricaoffersnumerousopportunitiesforinvestment
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Source:Charlottine’s Pics
• Currentconditionsinmanyemergingmarketscreateunrivalledopportunities
• Thisisgoodforhouseholds,constructionindustry,financialsectorandeconomy
• Housingfinanceislong-termcommitment&enablingenvironmentiskey
• Criticalismixofinvestmentandadvisoryservicestoachievesustainableoperationsandincreaseaffordability
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IFCHousingFinanceInvestingFor
Impact!www.ifc.org/housing
Thierno-HabibHANNSeniorHousingFinanceRegionalLeadSub-SaharanAfricaFinancialInstitutionsGroupInternationalFinanceCorporationwww.ifc.org
Tel.+12027259805+254712803459
E-mail:[email protected] 32