Globally, many countries have been marooned on an island of plenteous opportunities, albeit, it might seem like a paradox of having plenty and being lonely at the same time, that’s what we are faced with. Economies are indeed on a lonely path traversing the course back to merging the archipelago of opportunities back together and consequently building a glorious edifice. More than just creating a major upset in economies, it has invariably opened a can of worms on the table of the league of extraordinary ‘gentlemen’.
We can talk figures, statistics, business closures and destruction of human lives on how bad the status quo is, just to give us some perspective on the extent of damage. The truth is, orators have flamboyantly given their take, analysts have drowned us with dizzying figures and suit-wearing political heads are bringing their best foot forward and soldering on to a point of resolution, although to this point it has relatively been more of a ‘guesswork’ due to the newness of the occurrence and not the situation.
Real Estate, a formidable sector that caters for the needs of not just institutions, corporate bodies and the government, has its essence trickling down to address the needs of the regular Joe on the street.
Ghana Real Estate in a pandemic glide
Mr. Patrick Ebo Bonful, the President of Ghana Real Estate Developers Association (GREDA) made some incisive revelations on the current state of the sector amid the COVID-19 pandemic. He explained that the real estate has been impacted rather severely since the entrance of the virus in the country as most buyers have had to review their plans to make purchases due to the pandemic.
“Sales of houses virtually dried up and also most of our workers had to be laid off as a result of that and then came in also the lockdown which made things even worse. So the COVID has affected us in every way you can think of as most of our members have had to go see their bankers to renegotiate and a lot of them are currently working below 30% capacity just to be able to see ourselves through”.
The real estate business is at a standstill now with sales of properties at a record low, servicing of mortgages deteriorating and most developers rolling back their sleeves and packing out of sites.
As a sector, real estate houses a wide spectrum of people ranging from suppliers, developers, realtors, contractors, sub-contractors, landowners, landlords and tenants. As the impact of the pandemic gradually recoils from its shell to be an exemplar of doom and tragedy, it has left a sour taste in the mouth of developer, contractors, suppliers and also a gaping hole in their pockets. Their despondency is best felt and weighed within the context of low patronage of homes, embargo on building especially during the lockdown imposition and now that the restrictions have been eased, there is still that foreboding gloom of uncertainty. Mr. Bonful said,
“they have all come to accept it (pandemic) as it is , they’ve all been hit very hard, as you can imagine, we the developers engage agents, surveyors, contractors and sub-contractors in carrying out our objectives. So we have all been impacted and quite frankly we all hope things will get better and this situation will improve so we can go back to normal”.
The crux of the pandemic has brought to bare and largely uncovered some inherent challenges in most economies although some are more conspicuous than others. The pervading problem and challenges posed by the pandemic does impact little on the groundwork and productivity inherent in real estates as it largely involves physical activities of individuals such as contractors, surveyors etc. who are readily available. And for the developers
“nothing has changed; the pandemic hasn’t changed it. If we need to start the construction of houses the same thing will be done: engineers, contractors and surveyors must be on site to construct, so … it’s a pandemic and it has just brought our work to a standstill”.
Technology to set the new pace
Challenges in their natural habitat of adversity always leaves the door ajar for the guest of solutions wrapped in innovation or perhaps adaptation to glide in. For most real estate developers, latching on to the trappings of technology has given a new lease on life to their businesses and are interestingly adapting to the “new normal”.
“Real estate as an industry has been doing a lot of catching up on technology, and this crisis is making things develop even more quickly. Real estate companies are dialed into all these new collaborative platforms to get the work done, and the progress being made is amazing. After this situation is over, these technologies which enable more efficient operation and communication will be as an essential element of a good organization.”
According to Mr. Bonful, he is privy to the dealings of developers within the association as some have engaged with their financiers and prospective buyers by keeping them updated. However quite strikingly they have incorporated an underutilized technological tool to adapt to the current times.
“We are relying more on social media to keep them informed on what’s happening with houses on the market and lands. For instance, if somebody wants to buy a house, you have to use social media to send them a view of the property or of the location. If it’s a land, you have to send them a Google view of them, and then they can view it online and be able to see real-time view of the plots of land, houses or the estates. So that’s how we are adapting to the new normal so far and we will deepen the social media marketing and sale efforts.”
Policy implementation over stimulus package
Ghana has appreciably done well in mitigating the adverse effect of the COVID-19 pandemic especially in its internal economy by cushioning businesses with stimulus packages and rebates. In spite of the brooding ambivalence of conversations regarding its criteria for disbursement, it has barely considered real estate. Mr. Bonful was quick to add that, they would rather prefer implementation of policies rather than stimulus package as the latter will cost the government an arm and a leg due to the capital intensive nature of the sector. The construction sector, of which the real estate business is a key component, accounted for 8.3 per cent of the banking sector’s loan book (GH¢45.9 billion) as of February this year.
The government in the 2019 Budget announced a GH¢ 1 billion Mortgage and Housing Finance Fund which offered the lowest rates of between 12 per cent with Stanbic Bank and 11.9 per cent at Republic Bank.
“I think that there has always been some level of engagement with government and we are still engaging government and we have sent proposals and going forward how this industry can be revamped and how the industry can grow so that we can contribute even more and immensely to the GDP.”
Mr. Bonful was of the view that their demands are on hold due to the pandemic which has slowed down efforts in government addressing their concerns.
“The Minister of finance launched a program to try and provide mortgages for civil servants who would want to acquire houses at reduced interest rates of 12% on the cedi at the maximum on a pilot basis and that has been ongoing for a while… just that the amount that was devoted to it wasn’t big, but like I said they call it a pilot.”
Housing affordability is a key issue in Ghana and a major focus of the current policy debate. With a housing deficit of about 2 million houses, 90 per cent of all housing supply in Ghana is built incrementally. According to the President of the Ghana Real Estate Developers Association (GREDA), Patrick Ebo Bonful, a new law to regulate mortgage financing is key. He said,
“Some of the proposals we sent, we highlighted a review of the mortgage law, Acts 770, 2008; we want that reviewed. We want the land administrative law also reviewed, we have also sent proposals on affordable housing and financing to be able to unravel the challenges bedeviling our housing delivery and to bring under control the housing deficit which is spiraling out of control.”
Land Administration Policy and Price hikes in houses
Land litigation has been an age-old problem in Ghana and real estate developers are bearing the sharp brunt of the lack of proper documentation of lands leading to years of litigation over the said land denying these developers of their profit. GREDA president insists that, more than thirty percent of real estate developers are embroiled in rifts over their land and implementation of land administration policy will mitigate the problem of double land sale which adversely affects the hikes in mortgages. As part of the solutions, he suggested government should relieve allodial owners of the land, register and sell to the developers without stressing these owners as the land valuation fees and other cumbersome processes dissuades proper land registration. Once these issues are addressed, the price hikes of home sales will drastically reduce.
“Our proposals spell out clearly how these issues can be resolved so that going forward… government can take ownership of lands from allodial owners across the country. And because the allodial owners don’t have the proper title it is one of the thing that causes the conflict. The review of the mortgage law will come into the sales space, like what happens elsewhere in the advanced countries and that sector becomes very attractive for investments and more banks will be willing to come back and give mortgages.”
While short-term concerns dominate most conversation, a much bigger conversation on the future of real estate, changes to their property strategy, and how the industry as a whole will come out of this pandemic quagmire will set a new trajectory of growth.