Ghana is still grappling with the perennial housing deficit due to the excess of demand over supply of the housing stock. With the fiasco of the STX deal, it appears that the only hope now is the private sector developers, who also have their peculiar challenges to confront. What are we to do now? Effah Amponsah asks.

For almost two decades, governments of Ghana have made significant strides in stabilising and advancing the Ghanaian economy to better the lots of its people. Although, significant gains have been made in overturning Ghana’s economy, some areas in the economy, such as the housing sector, have borne the brunt of receiving inadequate attention. The housing situation is dire and the country needs an urgent answer, which is likely to require the concerted responsibility of all stakeholders.

At year-end 2010, the slum population of Ghana as a result of the shelter dearth had hit 5.8 million, nearly a quarter of the national population. According to survey findings, an estimated average of 8.7 people share a house in urban areas owing not only to population increase, but also to the rural-urban drift. At the moment, the majority of Ghana’s 25 million people are living in sub-standard homes. This dire situation has enabled landlords of rental units to charge exorbitant and inflexible rents to the displeasure of most Ghanaians.

The resultant action has been the creation of slums, shanty and illegal and indiscriminate constructions in waterways, flood-prone areas and project-designated areas. The poor planning of many neighbourhoods have enabled them to serve as safe havens for hoodlums and other social deviants. Year after year, the housing deficit keeps gravitating towards ominous dimensions, with the
low income folks suffering  the greatest neglect.



Even though factual information on the exact magnitude of the problem is piecemeal and sometimes disputed, the gravity of the problem is widely recognised.

Ghana is estimated to have a 1.5 million housing deficit, and housing experts say that it would take not less than 15 years to meet the demand, if the real estate industry and the government as the lead player work closely together to even deliver 100, 000 housing units per annum.

Currently, the combined efforts of Public-Private Partnerships and private developers are able to deliver less than half of the annual housing demand. The question remains whether the housing industry and its related stakeholders have the capacity and the impetus to construct the number of housing units needed to overturn the situation.

It seems that the crux of the housing problem lies in the lack of conspicuous commitment and a sense of direction of past and present governments. To be sure, the Nkrumah and Rawlings governments are on record as having constructed some respectable housing units for the lower and medium-income earners.

Yet, industry analysts are of the view that Ghana has deployed predominantly direct intervention policies for the housing sector instead of a comprehensive, sustainable and transcending housing programme or policy road map to set the nation on a course to overturn the current situation. According to the Bank of Ghana (BoG) report on the Housing Market in Ghana, these direct intervention policies did not yield the needed results, neither did they provide an impetus for the sector’s development due to prevalence of adverse and unstable macroeconomic environments at the time.

The situation argues for the expeditious adoption and implementation of the long-awaited National Housing Policy, which according to sources at the Ministry of Housing, has been at the draft stage for the past seven years. At the time of going to press, the source said, the Housing Policy was still on the table of the Cabinet, and was yet to reach Parliament for deliberations. Tied to the lack of political commitment is the lack of a sense of policy direction which has bedeviled governments in the last decade. Interestingly, governments have also lacked the political will to continue programmes and projects instituted by preceding governments. A typical case in point is the abandonment in 2009, of the Affordable Housing Project commenced by the former government for reasons of lack of funding for completion, only for an eight-member committee to be constituted in April 2012, to explore ways to reactivate the projects.

Again, the absence of a transcendental national policy on housing has contributed to the situation. The Kpone flats scheme continues to lie fallow, more than three years after construction came to a standstill. The fiasco of the STX deal seems to be last straw that has broken the camel’s back, considering the huge housing deliverables it could have offered to the nation.

Reading the 2012 Budget Statement and Government’s Economic Policy before Parliament in November last year, the Minister of Finance and Economic Planning, Dr. Kwabena Duffuor, assured that; “Government will ensure that the objectives of the National Housing Policy are achieved to support the private sector to increase housing delivery in the country and to improve mortgage affordability”.

A critical analysis of the situation shows that the housing deficit is mainly at the level of lower-income homes, which is considered as requiring major government intervention. The private sector, for its part, has generally skewed its interest towards the provision of high-quality, high-value residential estates for the high-end and middle class markets, because of the high returns-on-investment.

Explaining why it is so, Dr. Alex Tweneboah, the President of the Ghana Real Estate Developers Association (GREDA), said the high input and operational costs of developing an estate with no intervention or assistance from government or the public sectors are mitigating factors that constrain private developers from venturing into the lower class end of the market. Speaking to GB&F, he attributed the low supply of rental housing units to the high cost of real estate investment and the inadequate long-term finance available to developers. With the sort of short-term financial facilities developers are able to access, their returns must be quick and high enough to justify the investment.

“Also, the level of rents that people can afford to pay in Ghana is also relatively low. Hence it does not encourage developers to go into long-term rental units. That’s why we have such a huge housing deficit at the social level. If you compare the costs of our (private developers) with that of other countries, ours is relatively low, it is not the case that our houses are expensive, but
people’s incomes are very low”, Dr. Tweneboah asserted.

One of the age-old challenges confronting the private sector is the lack of long-term loans and other financial incentives. A sharp increase in borrowing costs is taking its toll on the construction sector, pushing some developers to suspend new projects and easing the average price of middle income and high-end residential houses. Today, estate developers are becoming more cautious of rising interest rates — which are now eating into their margins while not all the additional financing costs can be passed onto the buyers.

Source: Field Survey by Research Department, BoG



The country is in a situation of arguably 1.5 million housing deficit which housing experts say, will take not less than 15 years to meet demand, if the real estate industry with government as the lead player is able to deliver 100, 000 houses per annum. …government’s solo efforts, PPPs and the private developers are able to deliver less than half of the annual housing demand.

“The problem is, many banks do not understand the real estate sector. They lend you the money and say pay back in six months, it doesn’t happen like that. That puts real estate companies under a lot of pressure, sometimes resulting in shoddy work, because they need to get the houses completed quickly in order to repay the loans”, Dr. Tweneboah told GB&F.

According to the BoG’s report on the housing market, more than 80 percent of real estate developers partly attributed the high cost of estate houses to the high cost of construction materials. According to the GREDA boss, “80 percent of the materials we use in building homes are imported”, stimulating the question as to why local materials have been largely neglected in construction. Only three out every ten estate developers deploy local construction materials for construction.

Here again the issue of lack of local content and participation rears its head. Some developers have argued that the development of core and allied construction industries in Ghana are still in their nascent stage coupled with their inability to meet the dynamic changes in the tastes and preferences of housing consumers, leading to the importation of foreign materials for construction.

Until 2011, private developers enjoyed a five-year tax holiday as an impetus to step-up their efforts at augmenting governments efforts to alleviate the housing deficit. “The policy is now being abused by some of these local real estate companies who are investing in condominiums and luxurious houses for the upper class and yet enjoy tax holidays, so we are emphasising that for any company to enjoy these tax holidays, they have to partner government. They benefit from sweat and toil of all of us because the money they [make as a result of the tax holidays] are entering into their private pockets”, said Alban Bagbin, the former Minister for Housing, giving reasons for the abolition of the tax-holiday policy.

The demise of the policy has subtly aggravated the situation since developers who import the construction materials must now bear the full financial costs of the imported materials or more likely let their clients bear the brunt of the snowball effects.

Industry experts say that issues surrounding land acquisition and procurement are a bigger headache for those wishing to buy. Ghana has a notoriously defective land tenure system.

Ownership is often unclear, the processes are bogged down by bureaucracy and there are  persistent reports of corruption whereby multiple people are allowed to sell the same land, severally depriving the legitimate owners of their property. Industry watchers say, with a wry sense of humour, that one does not buy land in Ghana; one rather buys litigation.

Building on the outskirts of major cities is the new trend in the real estate developing business. Communities within twenty-five miles of Accra, such as Oyibi, Dawhenya, Amasaman, Budumburam, Prampram, Dodowa, Pokuase, Kuntunse among others are enjoying a boom in home construction In new areas of development, the lack of infrastructure and utilities also adds to the cost of business. Often, firms have to ensure the provision of such basic infrastructure as roads, sewage and drainage, water, electricity and telecommunications. Naturally, these add to the cost of construction and eventually, the buildings on sale.

According to Housing Market in Ghana Report by the Bank of Ghana, anecdotal evidence suggests that it takes between 5 and 15 years for an individual household to build a house and this time frame increases construction cost in an unstable macroeconomic environment.

Therefore, the hope of Ghana’s housing demand is hinged on the capacity of the private sector to alleviate the housing situation. Dr. Tweneboah suggests a housing fund to cushion the financial costs incurred by private players in the real estate industry.

According to BoG’s report, empirical evidence on the housing sector suggests that governments that pursue housing policies based on the “enabling markets approach” have better results than those that pursue traditional policies based on direct public sector supply and financing of houses for low-income families.

“This ‘enabling markets approach’ relies on the private sector as the main supplier of houses and the issuer of long-term financing for households of all income levels, with the government playing a role as regulator and facilitator of housing markets. The approach minimises the direct influence of government in direct construction and financing of houses, and rather promotes government interventions on the development of private financing for housing, the facilitation of land sub-divisions for residential uses, the improvement of the construction industry and the support of affordable housing solutions for low-income households, Ghana’s housing sector remains undeveloped”, the report concludes.