Abuja,September14,2016

Africa’s chronic housing crisis: challenges and opportunities

2

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

3

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

4

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

32

525

3,228

105

107

234

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

7

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

1

2

3

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

5

4

9

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&regulatoryframeworko 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:thann@ifc.org 32