Motgage Finance in Ghana

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Division of Building and Real Estate Economics School of Architecture and the Built Environment Royal Institute of Technology, Stockholm

Master of Science Thesis No 334

Residential Development and Borrowing in Ghana: A Challenge for Banks and Private estate developers

Author: Elvis Attakora-Amaniampong Stockholm 2006

Supervisors: Han-Suck Song Hans Lind

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Master of Science thesis
Title: Authors Department Residential Development and Borrowing in Ghana: A Challenge for Banks and Private estate developers Elvis Attakora-Amaniampong Department of Real Estate and Construction Management Division of Building and Real Estate Economics 334 Han-Suck Song and Professor Hans Lind Accra-Ghana, Residential development, Acquisition, Development and Construction Loans.

Master Thesis number Supervisors Keywords

DEDICATION
This work is dedicated to God, Almighty, Amen.

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ACKNOWLEGEMENT
Again, to God, be the glory! I wish to express my unreserved gratitude to Professor Hans Lind and Han-Suck Song, my supervisors, for their recommendations, advice, and reading materials for this work to be accomplished. Special debt of gratitude is owned to the following institutions for providing relevant information needed for this study; Home Finance Company Bank (Ghana) Limited (HFC), Barclays Bank of Ghana Limited, Ghana Commercial Bank Limited, Akuaba Estate Limited, Manet Housing Limited, Kenco Limited and Regimanuel Gray Limited. Also, l am very grateful to Samuel Azasu of Building and Real Estate Economic department for the useful reading materials he provided for this work. Finally, I am grateful to all my family members and friends who in their diverse ways have been helpful to this study. All errors and shortcomings are naturally my responsibility.

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ABSTRACT
Accra, which typifies the characteristics of any other Sub-Saharan African city, faces formidable housing problems. At the centre of theses problems is the issue of finance, which has been uncovered to be of one the major factors affecting residential development in Ghana. Notwithstanding this problem, 100s of houses are produced by the private sector including private estate companies. Obviously, this requires a huge sum of capital to start such undertakings. Borrowing has been very significant feature of residential development as a result of its high unit value (huge capital outlay). Unfortunately, large traditional lending institutions particularly banks and other major lenders do not give acquisition, development and construction loans (ADC loans) to these private estate developers. In other words, major banks and other financial institutions are reluctant to offer credit facilities to estate developers. This study employed literature review, questionnaire inquiries, interview, purposive sampling technique and SWOT analysis to explore why banks or major lenders refuse to give ADC loans to private estate developers, and to offer recommendations, as to, how best to channel funds into residential development in Accra. The findings include the following; high risk for housing finance, insufficient funds and low income levels, information flow problems, poor macroeconomic policies, cultural aversion to own a house through mortgage finance, and immature housing finance industry. Hence, Government’s direct investment subsidies, credit guarantees to lenders, tax rebate for developers, interest cost subsidies, affordable housing policies, more real estate financial institutions and development of capital market for access for long-term funds at competitive rates are recommended.

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TABLE OF CONTENT
Master of Science thesis...................................................................................................... 2 DEDICATION ................................................................................................................ 2 ACKNOWLEGEMENT...
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