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Winter 2017
HOUSING FINANCE
INTERNATIONAL
The Quarterly Journal of the International Union for Housing Finance
HomeStart Finance; a unique approach Real Estate Investment Trusts ‘REITS’ in Pakistan
to affordable home ownership
Institutional investment in the private rented
International trends in the regulation sector in the UK – coming of age
of mortgage markets
Closing the gap in affordable housing
Access to mortgages and home ownership in the Philippines
for young people; International perspectives
How does the US rank in home ownership?
Winter 2017 HOUSING FINANCE INTERNATIONAL 1
Winter 2017
International Union for Housing Finance
Housing Finance International
Housing Finance International is published four times a year by the International Union for Housing Finance
(IUHF). The views expressed by authors are their own and do not necessarily represent those of the Editor or
of the International Union.
IUHF OFFICERS:
resident:
P
Contents:
ANDREAS J. ZEHNDER,
Germany
4. . . . . . . . . Editor’s introduction
F irst Deputy President: 5. . . . . . . . . Contributors’ biographies
CAS COOVADIA,
6. . . . . . . . . I UHF Review of the Year: 2017
South Africa
Andreas J. Zehnder and Mark Weinrich
E xecutive Committee Members:
JOHANN ERTL, Austria REGIONAL NEWS ROUND-UPS
RAMON SANTELICES, Chile
JIRI SEDIVY, Czech Republic 7. . . . . . . . . A
frica
PEKKA AVERIO, Finland Kecia Rust
RENU SUD KARNAD, India 11. . . . . . . A
sia Pacific
KAPIL WADHAWAN, India Zaigham Rizvi
EARL JARRETT, Jamaica
JORGE YARZA GARRIDO, Mexico 14. . . . . . . L atin America & the Caribbean
HERBERT PFEIFFER, Slovakia Claudia Magalhães Eloy
OSCAR MGAYA, Tanzania 16. . . . . . . N
orth America
CHATCHAI SIRILAI, Thailand Alex Pollock
LYNN FISHER, United States of America
ecretary General:
S ARTICLES
MARK WEINRICH
18............ HomeStart Finance; a unique approach to affordable home
E-mail: weinrich@housingfinance.org
ownership
ublisher:
P John Oliver
MARK WEINRICH 26. . . . . . . I nternational trends in the regulation of mortgage markets
Masahiro Kobayashi
E ditor:
ANDREW HEYWOOD 32. . . . . . . A
ccess to mortgages and home ownership for young people;
International perspectives
ISSN: 2078-6328 Christine Whitehead and Peter Williams
Vol. XXXII No. 1
38. . . . . . . R
eal Estate Investment Trusts ‘REITS’ in Pakistan
Muhammad Ejaz, Faraz Arif, and Adnan Rizvi
42. . . . . . . Institutional investment in the private rented sector in the UK –
coming of age
Rob Thomas
48. . . . . . . Closing the gap in affordable housing in the Philippines
Text of a Speech by Senator Joseph Victor G. Ejercito
51. . . . . . . How does the US rank in home ownership?
Alex J. Pollock
Subscriptions:
Individual Regular Annual Rate €135;
Individual Three-Year Discounted Rate €360. International Union for Housing Finance
Institutional Regular Annual Rate €155; Rue Jacques de Lalaing 28, B 1040-Brussels – Belgium
Institutional Three-Year Discounted Rate €420. Tel: +32 2 231 03 71 – Fax: +32 2 230 82 45 – www.housingfinance.org
Secretary General: Mark Weinrich
For further details, please contact Mark Weinrich
(weinrich@housingfinance.org) Copyright © 2017 International Union for Housing Finance
Winter 2017 HOUSING FINANCE INTERNATIONAL 3Editorial Winter 2017
Housing: tackling the democratic deficit?
By Andrew Heywood
Housing is about communities and communities the flexibility to meet local needs. Just as often, Regulation of mortgage markets has tightened
are about locality. It is easy to see this statement it is also a response to the mono-culture public significantly in the wake of the Global Financial
as little more than a soundbite. Yet housing really housing estates developed in earlier years and Crisis [GFC]. There has been much discussion
should be about local communities. A particu- which frequently appear to have perpetuated or in the IUHF about the implications of regulation
lar community depends on having access to created as many social problems as they were for lender behaviour and ultimately for actual
an adequate supply of homes with a balance intended to address. Community Land Trusts have and potential homeowners. In an important
of tenures that matches the local demographic expanded rapidly in the UK, Cohousing, through article Masahiro Kobayashi analyses how the
patterns. Homes should also be sited conveni- which individuals come together to form inten- GFC and sub-prime crisis impacted on lend-
ently for where local people live and/or work. tional communities and to build or convert their ers and resulted in important (and sometimes
In addition, homes should be designed so that own housing has been successful in Denmark and unforeseen) changes in behaviour in markets
they can sustainably be maintained, repaired is expanding elsewhere. Other groups (known as as diverse as the US and China. In the article
and heated by local people using the financial self-help groups in the UK) work to bring empty immediately following, respected commenta-
and other resources at their disposal. homes back into appropriate use at affordable tors Christine Whitehead and Peter Williams
rents, while cooperatives have long aimed to team up to offer a view of how regulatory
There is an economic dimension to housing provi- provide local communities with a collective voice. change has impacted on access to home-
sion as the Kampala Declaration on affordable ownership in recent years. They highlight the
housing activity, reproduced in this issue of HFI, Nevertheless, as is implicit in the Kampala tensions inherent in striking a balance between
makes clear. Ideally, homes should use materials, Declaration and as recent studies of community- prudential regulation and promotion of oppor-
labour and construction methods that support led activity show, community-led housing is not tunities for aspiring homeowners.
local economies and employment. They should a panacea, and it will probably never on its own
attract potential workers with the skills and expe- develop the numbers of homes needed to over- Since their introduction in the USA some 40 years
rience a local economy requires. come a serious housing shortage. In Germany it ago Real Estate Investment Trusts [REITS] have
has been estimated that around one in seven new spread to many other markets and are seen
That new homes should be of durable quality and homes is developed as a result of a community-led as an important way to lever in investment for
of a design that re-enforces positive physical initiative. In the UK it is more like one in three hun- residential development. Pakistan is a recent
characteristics of a neighbourhood should be dred. Without the expertise and resources of the example and in their article Muhammad Ejaz,
a basic criterion for judging any new develop- commercial development sector and the enabling Faraz Arif and Adnan Rizvi clearly set out the
ment proposal. power of the state, local communities can find steps leading to the establishment of a Shariah
themselves powerless to promote locally generated compliant REIT in Pakistan and assesses its
Too often, however, these needs are not met. projects at scale. The challenge for policy makers structure and performance. The article goes on
Bureaucratic planning mechanisms, lack of across the globe is to ensure that community-led to discuss regulatory framework and Shariah
responsiveness by large-scale commercial activity provides a welcome countervailing force to structure for REITs, the real estate environment
developers and national policy strictures, not to counter the inflexible top-down approaches of so and the prospects facing REITs in Pakistan.
mention corruption, can result in development much commercial and state-sponsored develop-
that simply does not respond to local needs or ment without local efforts becoming a substitute Our final full-length article discusses institutional
aspirations. Too often, the criterion for success for the deployment of organised provision of proper investment in the Private Rented Sector [PRS].
in housing provision is numbers of homes on financial and material resource at a scale that can Focussing on the UK, Rob Thomas analyses the
the ground to the exclusion of almost all other really tackle chronic under-supply of housing. There extent to which institutional investors have con-
qualitative measures. There is a real need for is too often a democratic deficit relating to housing tributed to the overall growth of the PRS over the
local communities to take a lead and for lessons provision; the trick is to address this by enabling past three decades, who the principal investors
to be learned where they do so. local initiative while ensuring that the state and are and the outlook for institutional investment
the corporate sector fulfil their responsibilities. going forward.
In much of the world, communities are necessarily
involved in providing housing with important and Securing affordability is a key concern for In addition, we are pleased to offer the text of an
well-established community-led housing activity individuals and local communities. In our first important speech by Senator Joseph Victor G.
in Africa, Latin America and Asia. The USA has article in this issue, John Oliver, Chief Executive Ejercito of the Philippines on plans to improve
pioneered the use of Community Land Trusts of HomeStart discusses the contribution of this provision of affordable housing in that country.
through which representatives of communities unique organisation. Based in South Australia and We round off this issue with an amusing and inci-
plan and develop affordable housing. funded by the Government of South Australia, sive think-piece by Alex Pollock on the impact of
HomeStart is a lender specialising in a range of the GSE’s (Fannie Mae, Freddie Mac and Ginnie
The concept of community-led housing is also mortgage products for those for whom home- Mae) and other types of federal investment in
achieving a higher profile in Europe. It can be a ownership would otherwise be unaffordable. the US mortgage market.
reaction against remote and bureaucratic plan- To date it has assisted over 70,000 households,
ning processes and commercial development most of whom could not have afforded to buy a Altogether, the Winter 2017 issue of HFI should
that apparently cannot combine profitability with home using a conventional mortgage. provide some excellent seasonal reading. Enjoy!
4 HOUSING FINANCE INTERNATIONAL Winter 2017Contributors’ biographies
Contributors’ biographies
Faraz Arif is Head of Research and Marketing Planning Research [CCHPR] and a research fellow field of housing and housing finance spread over
at Arif Habib Dolmen REIT Management Limited. with the Smith Institute. He is also Editor of the more than 25 countries in Africa, the Middle-
Faraz has a Masters in Management from journal Housing Finance International. Andrew East, South-Asia, East-Asia and the Pacific. He
Hertfordshire University and a first degree in writes for a number of publications on housing has a passion for low-cost affordable housing for
Business Studies and Marketing from Middlesex and lending issues and publishes reports com- economically weaker sections of society, with a
University. He has a research background in the missioned by a wide range of clients. regional focus on Asia-Pacific and MENA.
real estate sector, has previously been Head of EMAIL: a.heywood53@btinternet.com EMAIL: zaigham2r@yahoo.com
Research at Colliers International, and Manager,
Transaction Advisory Services at Ernst & Young. Masahiro Kobayashi is the Director General at Kecia Rust is the Executive Director of the Centre
Japan Housing Finance Agency. He graduated for Affordable Housing Finance in Africa, and
Muhammad Ejaz is the founding Chief Executive from University of Tokyo in 1988 with bachelor manages the Secretariat of the African Union
of Arif Habib Dolmen REIT Management Limited, of law and joined Government Housing Loan for Housing Finance. She is a housing policy
which has launched South Asia’s first listed REIT Corporation. He worked with Overseas Economic specialist and is particularly interested in access
fund. Associated with Arif Habib Group since Cooperation Fund, Japan Bank for International to housing finance and the functioning of afford-
August 2008, he sits on the board of several Cooperation and seconded to Fannie Mae. He able property markets. Kecia holds a Masters of
group companies. Was formerly the Treasurer of Serves as Advisory Board Member for Asia Pacific Management degree (1998), earned from the
Emirates Bank in Pakistan, Regional Head of the Union for Housing Finance. He can be contacted Graduate School of Public and Development
Corporate Banking Group at Faysal Bank Pakistan, at Kobayashi.0rh@ihf.go.jp Management, University of the Witwatersrand.
and Head of Corporate and Investment Banking at She lives in Johannesburg, South Africa.
John Oliver is CEO of HomeStart Finance which
the Saudi Pak Bank. He graduated in Computer
is one of Australia’s leading providers of afford- Rob Thomas is Director of Research at Instinctif
Science from FAST ICS and did MBA in Banking
able home finance. He has over 40 years of Partners, where he writes thought leadership
and Finance from IBA, Karachi where he is a
financial industry experience, having held pre- reports on financial services and housing related
visiting faculty member. He has also conducted
vious senior executive roles with Bendigo and topics. He started his career as a macroecono-
programs at NIBAF – SBP and IBP. He is a Certified
Adelaide Bank and the Commonwealth Bank in mist at the Bank of England before moving to
Director and a Certified Financial Risk Manager.
retail and business banking. investment banking as an investment analyst.
He participates in the group’s CSR initiatives and
He led the European mortgage finance agency
is the Managing Trustee for Jinnah Foundation Alex J. Pollock is a distinguished senior fellow project in the early 2000s and developed the
Memorial Trust, which works in the fields of health at the R Street Institute in Washington DC. He blueprint for the government backed NewBuy
and education with emphasis on female literacy. was President and CEO of the Federal Home scheme which launched in 2012. He is a non-
Loan Bank of Chicago 1991-2004, and President executive Director of PfP Capital Limited.
Claudia Magalhães Eloy is a consultant on
of the International Union for Housing Finance
housing finance and subsidy policy in Brazil, who
1999-2001. Mark Weinrich holds graduate degrees in politi-
currently works for FIPE [Fundação Instituto de
cal science and economics from the University of
Pesquisas Econômicas] and has worked for the Adnan Rizvi is Head of Investments at Arif Habib Freiburg, Germany. He is the General Secretary of
World Bank [TA] and for the Brazilian Ministry Dolmen REIT Management Limited. He carries the International Union for Housing Finance and
of Cities and Companhia de Desenvolvimento out real estate investment analysis, project the manager for international public affairs at the
Urbano e Habitacional of São Paulo [CDHU]. financial appraisals and due diligence, provides Association of Private German Bausparkassen.
Claudia has also participated in the development financial advisory and guidance to clients of his
of the National Housing Plan, in the analysis company. A member of the team that launched Christine Whitehead is emeritus professor
of the Housing Finance System. She holds a Dolmen City REIT, he is a fellow member of the of housing economics at the London School of
PHD in Urban Planning at the University of São Association of Chartered Certified Accountants Economics. She works mainly in the fields of hous-
Paulo [USP], a Master in City Planning at the [FCCA] and holds an EMBA in Banking & Financial ing economics, finance and policy. She has worked
University of Pennsylvania, a Master in Public Services from the IBA, Karachi. He has more than with a wide range of international agencies as well
Administration at Bahia’s Federal University 10 years of diversified experience in Financial as regularly for the UK government and Parliament.
[UFBA] and a BA in Architecture and Urban Services industry and has worked with Arif Habib
Planning [UFBA], with a specialization in Real Investments in Equity Research and Securities Peter Williams is the former Executive Director of
Estate Finance at the Brazilian Economists Order Markets Division of SECP. Previously worked in the Intermediary Mortgage Lenders Association
[OEB]. She also attended Wharton’s International Investment Banking for Faysal Bank. and a Departmental Fellow, Department of Land
Housing Finance Program. Economy, University of Cambridge. He was
Zaigham M. Rizvi is currently serving as Secretary previously Director of the Cambridge Centre for
Andrew Heywood is an independent consultant General of the Asia-Pacific Union of Housing Housing and Planning Research, Deputy Director
specialising in research and analysis of housing Finance and is an expert consultant on housing and General of the Council of Mortgage Lenders and
and mortgage markets, regulation and policy with housing finance to international agencies including Professor of Housing at the University of Wales,
both a UK and international focus. He is a visiting the World Bank/IFC. He is a career development Cardiff. He is currently on the board of The
fellow of the Cambridge Centre for Housing and finance banker with extensive experience in the National Housing Federation.
Winter 2017 HOUSING FINANCE INTERNATIONAL 5IUHF Review of the Year: 2017
What a year for the Union!
By Andreas J. Zehnder and Mark Weinrich
As 2017 draws to a close, we can justly claim industry to these developments. There were also Four interesting issues of the journal Housing
that it was a successful year for the International debates on how mortgage finance in emerging Finance International were published in 2017,
Union for Housing Finance. This year’s outstand- markets can be enabled and the affordability underpinning its status as the leading journal
ing event was our World Congress in Washington challenge be tackled. The congress facilitated of its kind. The diverse articles provide insights
DC. More than 120 delegates from 29 countries greater understanding of the jigsaw of differ- into the world of housing finance and its cur-
joined us for what one delegate described as ent perspectives around the world and assisted rent developments which are unavailable from
“The best congress I’ve been to!” Indeed, IUHF delegates in putting these pieces together. any other information source.
was able to attract top-ranking international
speakers, which made for a highly relevant, The Mortgage Bankers Association strongly Representatives of the International Union
interesting and lively conference. Representatives supported the International Union with the organi- for Housing Finance were present at several
of the largest mortgage lenders of North and zation of the World Congress. The President of the other events around the globe; new members
South America and from around the globe Mortgage Bankers Association, David H. Stevens, joined the International Union, and on numer-
spoke to the audience along with the sharpest addressed the congress in his opening speech ous occasions the team of the Union supported
brains from the IMF, academia and the industry. and participants also had the pleasure of enjoy- members with expertise or by identifying
We can safely assert that the principal aims of the ing a splendid evening reception at the oldest information and contacts. Throughout 2017,
World Congress; namely to exchange views and residential building in Washington at the invitation the International Union for Housing Finance
experiences, and to derive key operational con- of our American friends. This was the home of clearly confirmed its role as the leading
clusions for policy makers and housing finance naval hero Stephen Decatur, and is located close networking organization for facilitating the
practitioners were successfully achieved. behind the White House. exchange of expertise and experience in hous-
ing and housing finance on a global scale.
Moreover, the World Congress created awareness The meetings of the Members’ Council and of
of the major challenges and opportunities ahead in the Executive Committee of the International We would like to thank the IUHF Executive
housing finance. Although it is now a decade since Union for Housing Finance in Washington, which Committee and the IUHF membership for their
the Global Financial Crisis hit the financial sector, preceded the World Congress, approved the trust, and we are confident that together we
many of the issues at the World Congress revolved encouraging progress of the Union. It was no will continue to contribute effectively to the
around the aftermath of the crisis, with discus- surprise that Andreas Zehnder was unanimously further development of the global housing
sions on tighter regulation, increased regulatory confirmed by the Council as president and Cas finance industry. We look forward to serving
oversight and the reaction of the housing finance Coovadia as vice-president for another turn. you in 2018.
Andreas J. Zehnder Mark Weinrich David H. Stevens
President of IUHF Secretary General of IUHF President and CEO of the Mortgage Bankers Association.
6 HOUSING FINANCE INTERNATIONAL Winter 2017Regional round up: news from around the globe
News from the African Union
for Housing Finance Africa:
Engaging the Housing Value Chain for Growth
By Kecia Rust
The African Union for Housing Finance held its The Millard Fuller Foundation is an organisation The potential is not evenly distributed across
33rd annual conference in Kampala, Uganda, based in Nigeria, that promotes the develop- all of Africa’s economies, nor is the potential
from 17-19 October 2017. Co-hosted by Housing ment of affordable housing. In the course of to deliver at the scale suggested. However, the
Finance Bank Uganda Limited, an AUHF mem- their work, they have developed an incremen- latent potential of just twelve African countries
ber, the meeting attracted 250 delegates from tal, starter house for Naira 2.4 million (about in this market for US$7500 houses exceeds
47 organisations in the public and private sec- US$7 500). A current project in Abuja consists US$10 billion in total. Six of those have latent
tors across 19 countries. The conference theme, of 400 units, including 200 studio apartments markets worth over US$30 billion.
“Engaging the Housing Value Chain for Growth”, (expandable to one-bedroom) and 200 one-bed-
focused on the key issues along the value chain Of course, this calculation also presumes the
room (expandable to two-bedroom) apartments.
that support the affordable housing finance availability of mortgages to finance the trans-
These have been bought by the Family Homes
sector. Conference presentations are available actions – a critical piece in the puzzle. Africa’s
Fund in Nigeria, and are being on-sold to quali-
on the AUHF website http://www.auhf.co.za/ mortgage markets are tiny, and, for the most part,
fying buyers through a mortgage loan scheme
conference/33rd-african-union-housing-finance- expensive. If, however, the necessary long-term
auhf-conference-agm-2017/ targeting low-income earners. The effort is worth capital to enable such borrowing were available,
considering carefully: if this house were available and assuming that the total value was mort-
The AUHF Conference was opened by Ugandan across the continent, and given our rough under- gaged at 80%, this would add over US$32 billion
Prime Minister Mr Rugunda, who delivered the standing of incomes in urban areas, it would be to Africa’s mortgage markets per annum.
President’s keynote speech. The Hon. Matia affordable to more than 50% of the population The impact that this would have on the potential
Kasaijja, Minister of Finance, Planning and in 24 countries. This latent demand is equivalent for domestic economies to intermediate, and the
Economic Development also gave a presenta- to about 52 million housing units. consequent downstream activities even in other
tion. The industry key note speaker was Ms Debra sectors that this would facilitate, could change
Erb, Managing Director of Housing Programs for A back-of-the-envelope calculation can offer a the continent’s growth prospects dramatically.
the Overseas Private Investment Corporation sense of potential. Across the continent, about
[OPIC]. Across the breadth of the presentations 52 million households could afford, at current The composition of mortgage markets, and
given, speakers focused on key issues relating financing rates in their countries, a mortgage specifically the terms at which mortgages are
to each stage in the housing delivery value chain: for that $7500 house. Delivering this entirely offered, is important. Even the $7500 house,
land, infrastructure, construction and financing. would generate almost US$400 billion of however, would be unaffordable to more than
The sessions considered both private and public economic activity just with the construction 90% of the population in eight countries. This
investment opportunities, and the financing of of that housing and its related infrastructure. is where the impact of finance becomes evi-
affordable housing approaches at scale. dent. Only 5% of the urban population in Ghana,
If we imagined a 10-year delivery programme
for example, would afford a $7500 house.
of 5 million houses per annum across the con-
A session held on the second day invited six In Ghana, the current mortgage interest rate is
tinent at this price, we could stimulate almost
would-be innovators to pitch their initiative to 33% over twenty years. Similarly, in Malawi,
US$40 billion of direct economic impact annu-
the plenary of delegates in a six minute “eleva- where the mortgage interest rate is 34%, only 3%
tor pitch” presentation. Delegates were then ally. This could unleash US$22 billion in direct of the urban population would afford the $7500.
invited to “invest” a fictional US$50 million each upstream economic activity (80% of which With an interest rate of 25% in Mozambique,
in the selection of innovations that were pre- would be in manufacturing), and US$18 billion only 3% of the urban population would afford
sented. A total of 140 investors had a $7 billion in construction sector economic value added, per the $7500 house.2
to invest, at $50 million each. Of this, delegates annum. Labour remuneration of US$6.6 billion
chose to invest $6.5 billion. The Millard Fuller per annum would stimulate and sustain over All of these issues were considered over the
Foundation received the most, with 22% of the 1.3 million jobs in Africa’s economies, in the course of the AUHF’s two days in Kampala.
vote, an investment of $1.4 billion. construction sector alone.1 The AUHF Conference ended with the Annual
1
T his calculation is based on work done to build a Housing Economic Model in South Africa. 2
T hese calculations are based on the prevailing mortgage rates and terms in each country,
See http://housingfinanceafrica.org/story-housing-economy-exploring-south-africas-hous- and household expenditure data as provided by the Canback Global Income Distribution
ing-value-chains/. While South Africa’s construction economy is not likely to be representa- Database (CGIDD). For more information see CAHF’s 2017 Housing Finance Yearbook, on
tive of what might be found in other countries, it is worth considering from a vision perspec- http://housingfinanceafrica.org/resources/yearbook/.
tive. Current work to build a Housing Economic Model for Nigeria and Tanzania is underway,
and may shed more light on the detail of the potential.
Winter 2017 HOUSING FINANCE INTERNATIONAL 7Regional round up: news from around the globe
General Meeting of the members of the AUHF. housing investments. Over the period 2000 difficult to secure for residential develop-
The members agreed on a “Kampala Declaration to 2017, only 10% of the total asset portfolio ment purposes, comprising upwards of
for Housing Finance”, which was then circu- of investors (US$ 4 billion) was allocated to 25% of the purchase price of a standard,
lated among key stakeholders and within AUHF investments that have a direct impact on the entry-level house.
member countries. The Kampala Declaration is housing and housing finance sector.
b. Title / tenure: Land registry systems are still
reproduced below.
in their infancy in many cities, and in other
3. This notwithstanding, housing is embedded
cases not yet digitised. This undermines the
Declaration of the Members of the AUHF fol- in the economy. A critical growth multiplier,
use of land as collateral for housing finance,
lowing the Annual General Meeting held in the production of housing can transform our
and stifles the development of our mort-
Kampala, Uganda on 19th October 20173 cities into productive spaces that meet the
gage markets. In some jurisdictions, poor
needs of all residents, including low income legal enforcement of mortgage rights over
We, the members of the African Union for Housing earners. Backward and forward linkages property acts as a disincentive for lenders
Finance, having met with colleagues from the grow our manufacturing and services sectors and undermines access to housing finance.
public and private sectors from twenty-four coun- and contribute towards job creation, creating
tries over the past three days, and having held our an economic stimulant and opportunities for c. Bulk infrastructure: The lack of bulk
33rd annual general meeting in Kampala, Uganda revenue generation. For most households, infrastructure is a serious constraint to the
on 19 October 2017, express our commitment to housing is their primary expenditure item delivery of affordable housing. In many cities,
promote and finance the accelerated delivery and most significant asset. The multiplier municipal governments are unable to provide
of affordable housing across Africa, engaging effects of housing thus extend benefits to our bulk services, and the developer bears this
the housing value chain for growth in each countries far beyond the provision of housing, as part of the overall development. This cost
of our countries. creating significant opportunities for stake- is passed on to the buyer in the calculation
holders in both the public and private sectors. of the purchase price. In some cities, the
cost of infrastructure can comprise up to
We note: 4. Our governments have recently committed 40% of the final purchase price.
themselves to a New Urban Agenda (NUA), d. Housing construction: The residential
1. Africa’s cities face a critical and growing need agreed at the United Nations Conference on construction sector across the continent
for affordable housing. With an urbanisa- Housing and Sustainable Urban Development is thin, with few developers having sufficient
tion rate of 3.5% over the past two decades, (Habitat III), held in Quito Equador, in October capacity to operate at the scale required,
Africa’s cities are among the fastest growing 2016. The NUA envisions cities that are given current backlog and growth figures.
in the developing world. Currently, about 40% accessible in all ways to all residents, and While there have been developments in
of the continent’s one billion people live in in which the public and private sectors work new building technologies, these are poorly
cities and towns; and it is estimated that in together to achieve this goal. To this end, the accommodated in the building standards
the next few years, some African cities will NUA includes a vision for cities and human that regulate the industry. Weak regulations
be home to as much as 85% of their coun- settlements that “meet the challenges and then further undermine the quality of the
try’s population. By 2030 it is estimated that opportunities of present and future sustained, delivery output.
the middle class in Sub-Saharan Africa will inclusive and sustainable economic growth,
more than triple, to an estimated 107 mil- leveraging urbanization for structural trans- e. Sales and transfer: High transaction costs
lion people. Housing delivery rates across formation, high productivity, value-added and slow administrative processes under-
the continent, however, are insufficient to activities and resource efficiency, harness- mine the sales and transfer of housing, and
meet this growing demand, and the hous- ing local economies and taking note of the add risk to the system. In some jurisdictions,
ing that is delivered is unaffordable to the contribution of the informal economy while sales taxes comprise a significant compo-
vast majority. As a result, the majority of supporting a sustainable transition to the nent of the overall purchase price – as much
Africa’s urban population continues to live formal economy.” as 17% of a standard, entry-level house.
in inadequate housing.
f. Maintenance and ongoing improvements:
much of Africa’s existing housing stock is in
2. In contrast to the obvious need, and the inter- We understand: poor condition and in need of investment,
ests of investors in our economies, we see
in part as a result of over-crowding or the
limited investment in affordable housing. 1. The delivery of affordable housing is highly pressures of urbanisation. This is especially
In East Africa, core deposits in the commercial
dependent on the smooth functioning of the true for rental housing, which comprises
banking sector cover only 3% of the potential
housing value chain. From land assembly more than a third of most urban housing
mortgage funding need of US$ 42,2 billion,
and acquisition, to the provision of secure stock across the continent. Further mainte-
and as a result, less than 1% of individuals
tenure and title, the installation of bulk infra- nance requirements relate to the quality of
in formal employment in the region have an
structure and the construction of housing, to urban infrastructure and its ability to accom-
outstanding mortgage. With the exception of
the sales, transfer and occupation of the unit, modate the increasing densities that are
Kenya, where the Nairobi stock exchange holds
and so on, significant challenges exist: becoming the norm in our cities.
over US$ 500 million in housing investments
the stock exchanges in Uganda, Tanzania and a. Land assembly / acquisition: In many g. Social and economic infrastructure, criti-
Rwanda together hold only US$ 63 million in cities, well located land is expensive and cal to the sustainability of our urban spaces,
3
T he African Union for Housing Finance held its 33rd Conference and Annual General Meeting in for Growth”, focused on the key issues along the value chain that support the affordable housing
Kampala, Uganda, from 17-19 October 2017. Hosted by Housing Finance Bank Uganda Limited, finance sector. Conference presentations are available on the AUHF website http://www.auhf.
an AUHF member, the meeting attracted 250 delegates from 47 organisations in the public and co.za/conference/33rd-african-union-housing-finance-auhf-conference-agm-2017/. For more
private sectors across 19 countries. The conference theme, “Engaging the Housing Value Chain information contact AUHF Coordinator Noluthando Ntshanga at auhf@housingfinanceafrica.org.
8 HOUSING FINANCE INTERNATIONAL Winter 2017Regional round up: news from around the globe
is often overlooked. To include this in the and to ongoing local governance. Governments structure can have a profound impact on both
development of the housing project adds to can effect such a prioritization through scale and affordability.
the cost of individual units and undermines
housing affordability. a. development of specific policies that 3. Address risk and uncertainty in the housing
explicitly focus on affordable housing, delivery value chain. These are key factors
2. Compounded by the issues encountered along
and outline government’s role in its support, contributing to the high cost of housing and
the value chain, Africa’s housing sector faces
the reticence of investors to fully commit to this
significant market challenges, including the b. ensuring access to land, secure title, and
segment of the economy. Governments at all
following: security and trust in our land markets
spheres of operation can impact significantly
a. Housing affordability is limited: Low wages, c. ensuring a diversity of housing finance on both of these factors by formally adopting
high unemployment, and low economic approaches, not limited to secured finance, policy and promulgating clear legislation for
growth, undermines the housing afford- supported by macro-economic, trade and the housing sector, while also developing and
ability of the majority of Africa’s residents. finance policies implementing protocols that establish clear
At the same time, formal, residential con- timeframes for the delivery of administrative
struction favours the higher end of the d. the expedited delivery of regulatory
approvals or the implementation of other regu-
market. Poor targeting creates a new risk, approvals all along the housing value chain,
lations. Focused attention to the time it takes
which, as well as high construction and land ensuring improved efficiencies in terms of
to deliver and achieve approvals, and the trust
cost, puts formal, developer-driven housing time and cost, for the regularization and
necessary for the system to work, is a key
out of reach of majority. Developers focus on titling of land, and the development of
contribution that government can make to
the high-end segments where the margins affordable housing
engaging the housing value chain for growth.
are larger. However, this has created a glut e. the development and implementation of
of properties affecting the asset quality of taxation regimes that incentivise invest-
mortgages for lenders. ment in affordable housing, whether through We commit ourselves:
b. Long term capital to support housing the provision of tax relief for specific market
investment is insufficient and expensive, segments, or other measures We, the members of the AUHF, confirm our
contributing to the high cost of mortgage commitment to the growth and development
f. enhancing access to long term finance
lending and compromising the development of affordable housing across our continent.
through measures that crowd in private
of effective mortgage markets which them- As individual housing sector practitioners, and
investment for affordable housing. This
selves would support the scale delivery of collectively as members of the African Union for
might involve pension reform, or macro-
affordable housing. Double-digit interest Housing Finance, we reiterate our commitment to
economic interventions reduce government
rates and risk-free securities make it difficult the clauses contained in the New Urban Agenda,
reliance on corporate bonds and bills issu-
for private entities to issue at competitive specifically:
ance as a revenue source, thereby improving
rates, undermining investment interest in the investment attractiveness of housing
housing finance. 46. We commit ourselves to promoting the role of
g. enabling incremental housing delivery affordable and sustainable housing and housing
c. Lack of data to support housing investment processes for which municipal planning finance, including social habitat production,
and policy making. approvals are readily available and finance in economic development, and the contribu-
3. These challenges will only be overcome with is easily accessed tion of the sector to stimulating productivity
a concerted effort on behalf of the public and in other economic sectors, recognizing that
h. a sector wide approach to subsidisation,
the private sectors, working independently housing enhances capital formation, income,
that engages with the full housing ecosys-
and together in specific initiatives at the local employment generation and savings and can
tem and identifies where the public and
level, while supporting the development of contribute to driving sustainable and inclusive
private sectors should best target their
appropriate, affordability-targeted housing economic transformation at the national, sub-
efforts. Careful attention must be given to
products, services, policies and regulations national and local levels.
the potential for unintended consequences.
at the national level.
i. promoting affordable rental as a viable hous- 140.We will support the development of appropri-
ing strategy to be delivered by a diversity of ate and affordable housing finance products
We urge governments at the national, state suppliers, including both large scale devel- and encourage the participation of a diverse
or provincial, and local sphere to actively opers and landlords, as well as households range of multilateral financial institutions,
support the vision for adequate and afford- themselves. regional development banks and devel-
able housing for all across our continent, by opment finance institutions, cooperation
j. transparent access to information relating
undertaking to do the following: agencies, private-sector lenders and inves-
to the housing delivery and property market
tors, cooperatives, moneylenders and micro
1. To prioritise and mainstream the deliv- 2. To implement measures that support the deliv- finance banks to invest in affordable and
ery of affordable housing by the private ery of housing at scale, whether through incremental housing in all its forms.
sector in all ways that government plans for large scale greenfield projects where appropri-
and regulates the built environment, from the ate, or multiple smaller scale urban upgrading
development of affordable housing-focused initiatives. Such support includes the develop- We are further committed to:
land, housing and financial sector policies, ment of measures to participate effectively as
through to the issuing of land availability partners in projects with the private sector, 1. The financing and delivery of affordable,
agreements and building plan approvals, to the providing confidence in a pipeline of activity, adequate housing for all residents of our
delivery and installation of bulk services, the while prioritizing local capacity. Government cities across the countries in which we work.
delivery of social and economic infrastructure, attention specifically on the delivery of infra- In this, we will work towards
Winter 2017 HOUSING FINANCE INTERNATIONAL 9Regional round up: news from around the globe
a. Better targeting: As banks and pension The AUHF is keen to engage with respective
funds, to think more carefully about risk governments at the national and local level on
and to price for this in the mortgage sector, both macro and micro economic issues, includ-
engaging in our pricing and underwriting ing interest rates, tax and monetary policy, and
mechanisms with the particular character- housing and land policy as it influences the
istics of low income households, how they growth and performance of housing markets.
earn their income and how they manage The AUHF and its members look forward to work-
their housing investments. ing with governments and other stakeholders,
in their respective cities, countries, and across
b. Products that address the reality of afford-
the continent, in driving investment in Africa’s
ability, not limited to mortgage finance and
housing sector so that it contributes substantially
developer-driven housing, promoting and
to Africa’s growth agenda.
engaging effectively with the savings of
the poor.
15 November 2017
c. More appropriate underwriting standards AUHF Board of Directors: Oscar Mgaya
that engage with the informal sector. We will (Chairman), Charles Inyangete (Vice Chairman),
continue to explore mechanisms to qualify Cas Coovadia (Treasurer), Omar Sarr (Secretary),
informal incomes for housing lending Femi Adewole, Ruth Odera, Reginald Motswaiso,
Joseph Chikolwa
d. Leveraging the power of technology and
innovation platforms to improve affordability
and our ability to deliver at scale Active Members of the AUH:
e. Promotion of local businesses, awarding Botswana Housing Corporation; Botswana
contracts locally. This is critical to mobilising Building Society; CRDB Bank PLC,Tanzania;
the housing investment multiplier locally. CBZ Bank,Zimbabwe; Central Africa Building
Use of local building materials and sup- Society – CABS, Zimbabwe; First National
porting housing affordability Bank - International Home Loans; FBC Building
Society, Zimbabwe; Ghana Home Loans;
f. S howcasing good practice Haggai Mortgage Bank, Nigeria; Habitat for
Humanity International; HFC Bank (Ghana) Ltd;
2. Shifting the focus of our investments HF GROUP, Kenya; Home Finance Company of
towards affordable housing in particular, the Gambia Ltd; Home Finance Guarantors Africa
making the capital markets relevant to the Reinsurance; Housing Finance Bank Uganda Ltd;
real economy enabling longer tenor loans. International Finance Corporation; First Housing
Finance Limited, Tanzania; Gauteng Partnership
3. Ethical business practice, that champions Fund, South Africa; Madison Capital Limited,
sustainable impact together with financial Zambia; National Building Society, Zimbabwe;
return. In the delivery of products and services National Housing Corporation Kenya; National
to our clients we are committed to sound and Housing Corporation Tanzania; National Housing
effective consumer education to support their Finance Corporation, South Africa; NMB Bank Plc
sustainable entry into the property market. Tanzania; Nigeria Mortgage Refinance Company;
NMB Bank, Zimbabwe; People’s Own Savings
4. Working effectively in the development of Bank, Zimbabwe; Development Bank of Rwanda;
strategic partnerships with each other, our Shelter Afrique; Select Advisors Limited; Social
governments, and the wider housing sector Security & Housing Finance Corporation,the
in our cities, countries and regions. Gambia; Swaziland Building Society; Swaziland
National Housing Board; Tanzania Mortgage
5. Tracking these commitments with clearly Refinance Company Ltd; The Banking Association
defined key performance indicators, to which South Africa; TUHF (Pty) Ltd, South Africa;
we will each contribute, and we will report Watumishi Housing Company, Tanzania; Zambian
back on these at our next AGM, to be held in Home Loans; Zambia National Building Society;
the fourth quarter of 2018. ZB Bank Limited, Zimbabwe.
10 HOUSING FINANCE INTERNATIONAL Winter 2017Regional round up: news from around the globe
Housing news from the Asia-Pacific
Union for Housing Finance
By Zaigham M. Rizvi
Housing finance in Pakistan, measured in integration, although funding remains a key prices rather than an over-supply. The cost
terms of outstanding mortgages did not see barrier in terms of further expansion. Officials of acquiring a home rose by 9.2% during the
any visible signs of improvement, since the at the National Housing Mortgage Finance first quarter from a year ago, according to
last quarter, hovering at around US$ 0. 65 bil- Corp. [NHMFC] at the NHMFC Philippine central bank data.
lion. The major share of the pie is with Islamic Housing Finance Conference 2016 estimated
banks, followed by banks in the private sector that a 5.7 million backlog for low-cost and Rodelio B. Racadio, National President at the
and the House Building Finance Co. [HBFC]. socialized housing will persist as access to Subdivision and Housing Developers Association,
The HBFC’s outstanding housing finance loan financing channels remains limited to tradi- Inc. [SHDA], said housing production should be
book stands at around US$ 0.125 billion, which tional avenues. increased to 350,000 units annually to catch
is shrinking due to more prepayment than up with the backlog, against a 15-year average
new financing. Bangko Sentral ng Pilipinas [BSP] Deputy of 180,000 units. Comprehensive government
Governor Diwa C. Guinigundo said increased subsidies and tax incentives, simpler licensing
In terms of gender, around 92% of the total demand for housing and commercial space procedures, and affordable financing schemes
outstanding borrowings were to male clients. is expected as the country moves towards for buyers would also allow the housing gap to
In terms of income source, around 60% of the Association of Southeast Asian Nations narrow, Mr. Racadio added.
the loans originated from the salaried class, [ASEAN] integrated market, which would tap a
10% from the self-employed and 30% from 630 million consumer base and amid increased (Source: Melissa Luz T. Lopez, Senior Reporter
business borrowers. domestic activity that has propped up demand. Business World Oct 07, 2017)
However, he flagged access to finance as the
The HBFC, the state-owned specialized hous- key barrier to home ownership.
ing finance institution, has completed its Thailand
financial restructuring process, under which “Despite strong demand, some developers
it is now 90% owned by the State Bank of experience tightness in financing for huge K.I. Woo
Pakistan [SBP], the central bank of the country. real estate projects. There is a need for new,
With this restructuring, the effective owner- alternative mechanisms; probably a more crea- Residential developers in Thailand remain cau-
ship of HBFC has now moved away from the tive, imaginative way of providing financing tious on additional housing investments in late
Ministry of Finance, Govt of Pakistan to the to the industry to fund long-term needs for 2017 because of low consumer confidence
SBP and SBP is now the owner as well as the real estate,” Mr. Guinigundo said during the and still tepid economic recovery.
regulator of HBFC. conference at the Makati Shangri-La Hotel.
The Real Estate Information Center [REIC]
Mr. Syed Basit Aly has recently assumed the The central bank official said that they want said that its housing developer expectation’s
role of Managing Director of HBFC. Mr. Basit banks to maintain their lending standards and index dropped from 67 to 61 in Q3 2017 due
is a seasoned banker and is well versed with continue to extend more loans to the sector to projections of weaker revenues, presales,
housing and housing finance in Pakistan. Prior with “prudence,” amid growing demand for investments, employment and new project
to joining HBFC, Mr. Basit was heading the func- housing units led by a change in preferences launches. Economic activities are expected
tion of housing and housing finance at SBP. among the working class and rapid demand to continue slowing down in Q4 while devel-
With his joining as Head of HBFC, the market for office space. opment costs are expected to increase. The
expects that HBFC will soon be geared up to REIC’s developer’s presale confidence index also
play its due role in housing finance, with a focus Philippine banks extended P1.138 trillion in dropped slightly from 53.7 to 53.1, in line with a
on low-income affordable housing. real estate loans during the first half of 2016, commensurate consumer confidence index fall.
a fifth higher than the P949.88 billion tallied a
year ago, based on BSP data. This accounted Despite the gloomy forecasts, developers
Philippine for 19.2% of banks’ total loan portfolio as of remained confident that Q3 revenues would
end-June 2016, with 75% of the credit given increase from Q2. Developers expected
Philippine housing sector to continue
to property developers and construction firms. increasing Q3 revenues because they are sell-
growth but funding remains a barrier
ing higher priced homes. The REIC report also
The Philippine housing sector is likely to con- Mr. Guinigundo said the Philippines is far said that housing developers were focusing
tinue growing due to increasing local demand from seeing an asset bubble just yet, with future developments in higher demand and
coupled with a push coming from regional robust demand for housing units driving up strong purchasing-power segments.
Winter 2017 HOUSING FINANCE INTERNATIONAL 11Regional round up: news from around the globe
Surachet Kongcheep, Associate Director of “We expect to achieve higher selling prices mercial banks is regulated by the central bank,
property consultant Colliers International if our NPLS are managed by our own asset the Reserve Bank of India [RBI], the National
Thailand, told the Bangkok Post that although management company,” he said. Housing Bank [NHB] is the regulatory agency
the Thai economy was still recovering slowly it for housing finance companies. The NHB,
was showing positive signs because of export The amended law is expected to be approved a wholly owned subsidiary of RBI, was set up on
and tourism market growth. by the National Legislative Assembly by the 9 July 1988 under the National Housing Bank
second quarter of next year. Act, 1987. NHB is an apex financial institution
“The overall economy is still sluggish. People for housing. NHB has been established with
don’t feel the economy had improved and many GH Bank’s net profit was Bt 9 billion baht an objective to operate as a principal agency
businesses especially in the retail sector are ($US272 million) as of October 16, com- to promote housing finance institutions both at
struggling.” He said office space demand has pared with this year’s total net profit target local and regional levels and to provide financial
remained strong but will be challenged by a of Bt11 billion ($333 million). and other support incidental to such institu-
large amount of new supply in the future. tions and for matters connected therewith.
Its outstanding loans increased by 4.67% from NHB registers, regulates and supervises
GH Bank expects lending growth of 8% in the end of last year, while its capital adequacy Housing Finance Companies [HFCs], keeps
2017: ratio of 14.4% exceeded the Bank of Thailand’s surveillance through On-site & Off-site mecha-
minimum requirement. nisms and co-ordinates with other Regulators.
Chatchai Sirilai, GH Bank President said that As of 17.03.2006 there were 44 registered
loan growth this year is expected to be about 8% Developers and banks offering fantastic Housing Finance Companies. Out of these,
per annum. At the same time, he expected that deals at 2017 Thai home and condo show: 22 HFCs have Registration Certificates with per-
loan growth in 2018 will only be about 3-5%. mission to accept public deposits. (Source: NHB)
To spur tepid demand, Thai housing develop-
ers and financial institutions offered fantastic
“The Bank is unlikely to maintain its 8% growth “Housing for all’ program has been launched
housing deals at this years’ Thai home and
rate in 2018 because 2017 will be a very high by the new PM Mr. Narendra Modi.
condo show in October 2017.
base-year,” he said.
Prime Minister Modi has been on a mission
The event was hosted by the Thai Real Estate to expand affordable housing in Asia’s third-
GH Bank’s expected 8% loan growth rate in
Association, Thai Condominium Association, largest economy and second in terms of
2017 will largely be attributed to numerous low
and the Housing Business Association at the population, next to China. In a country where
–interest loans that attracted new homebuyers
Queen Sirikit National Convention Center. slums sit cheek-by-jowl next to palatial luxury
and borrowers from the other lenders, he said.
For instance, the Bank recently launched its – including what has been reported as the
The Nation reported that Ananda Development world’s most expensive private home (Ambany
For Home program, that offers interest rates of Plc’s Ananda Heart Sale campaign offered
2.9% for the first two years; 4.5% for the third House in Mumbai), India’s unhoused may soon
buyers zero baht booking fees, monthly instal- become a more potent economic growth driver.
year and the minimum retail rate [MRR] minus ments of Bt1,500 ($US45) for residential units (Source: All India | © 2017 Bloomberg L.P |
1% for the remaining term for employees of priced at Bt1 million each ($US30,000), and Archana Chaudhary and Pooja Thakur Mahrotri,
companies with special loan agreements with discounts of up to Bt300,000 ($US9,090) for Bloomberg, May 09, 2017)
the Bank. GH Bank’s current MRR is 6.75%. condominium units priced between Bt1 million
and Bt2.6 million ($US30,000 and $US78,787). Prime Minister Narendra Modi’s drive to bring
The Bank’s numerous low-interest rate pro-
homes to the country’s 1.3 billion people,
grams, Chatchai said, helped boost housing The Government Housing Bank offered special together with rising incomes and the best
loan demand even though home lending in 2.90% interest rates on mortgage loans and affordability in two decades will unleash a
general was relatively thin early this year. no loan fees for the first three years of any $1.3 trillion wave of investment in housing over
loans. Home buyers signing contracts at the the next seven years, according to CLSA India
Thailand’s Government Housing Bank is event will not be required to pay transfer fees. Pvt. The firm expects 60 million new homes
expected to maintain its non-performing
to be built between 2018 and 2024, creating
loan rate at 4% in 2018. Adirek Sangsaikaew, the event’s chairman said about 2 million jobs annually and giving a tail-
that expected home sales at the event will be wind of as much as 75 basis points to India’s
Chatchai Sirilai, GH Bank president told the
between Bt4 billion and Bt8 billion ($US121 mil- gross domestic product. Under the program
Bangkok Post that the Bank’s NPL ratio is
lion and $US242 million). He estimated that the Government is supporting each potential
expected to reach 4.2% at the end of this year.
property sales will grow by about 10% in 2017,
During 2017, the Bank sold bad loans with more client for a house with a grant of Rs 120,000
because of the country’s continuing eco-
than three years of late payments of Bt 6.97 bil- from the budget. The government has granted
nomic recovery and higher purchasing power.
lion ($US 211 million) to Bangkok Commercial affordable-housing builders “infrastructure sta-
Commercial banks, he said were also beginning
Asset Management [BAM] for 55% of loan value. tus,” making them eligible for state incentives,
to relax loan qualification requirements, making
subsidies, tax benefits and institutional funding.
it easier for buyers to obtain home mortgages.
Chatchai said GH Bank’s housing NPL ratio is
higher than that of five largest commercial banks
India Malaysia
(below 3%) because of the Bank’s mission to
serve government policy and consequently it has Datuk Chung Chee Leong, Chief Executive
Indian Mortgage Finance Market:
greater risk exposure. In the future, GH Bank Officer, Cagamas Berhad
Performance Update and Outlook
is hoping to amend the existing Government
Housing Bank Act so that it could establish its India has a unique housing finance regulatory The residential property market has picked
own asset management company to sell NPLs. regime model, whereas housing finance by com- up, with total transaction value registering a
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