In the year 2000, the once buoyant Bank for Housing and Construction (BHC), which provided funding at affordable rates to real estate developers, was liquidated by the Central Bank following heavy losses made by the bank.
The bank’s liabilities had exceeded its assets, affecting its ability to satisfy the capital adequacy and minimum capital required under the banking law.
15 years after the collapse of BHC, and in a period many would call the ‘Golden age of banking,’ the Executive Director of the Ghana Real Estate Developers Association (GREDA), Sammy Amegayibor is advocating for the reestablishment of a real estate bank to improve the sector.
Mr Amegayibor said it was imperative due to the lack of access to affordable capital. He added that such an institution would help bridge the country’s housing gap.
A report by Housing Finance Africa (HFA) says less than three percent of loans granted by banks in Ghana go into housing finance. Most banks neglect the home loans market and focus instead on short-term lending and investment such as risk-free government bonds and trade finance that offers higher returns while consuming less capital.
Some of the banks are currently foreclosing on real estate developers who were given construction finance to develop properties that are left unsold, the report said.
The financial sector has 26 commercial banks, 443 microfinance institutions and three credit bureaus. Out of the 26 commercial banks, only seven are listed on the Ghana Stock Exchange.
According to the World Bank’s 2015 Doing Business Report, in the ‘ease of getting credit’ category, Ghana is ranked 36th out of 189 countries. In 2012, the World Bank launched the Global Financial Inclusion Database (Global Findex) to explore levels of financial inclusion around the world.
According to Global Findex, the use of credit is fairly common – 39.2 percent of adults over 25 years of age report that they had a loan. Currently in 2015, very few Ghanaians have an outstanding loan to purchase a home: 1.9 percent of the top 60 percent of income earners and 3.1 percent of the bottom 40 percent of income earners.
Only five of Ghana’s 26 banks officially offer mortgage loans as a product (namely HFC Bank, Fidelity Bank, CalBank, Stanbic Bank and UT Bank which grants mortgage on a limited basis to customers of its subsidiary UT Properties), in addition, to Ghana Home Loans (GHL) which is the country’s only residential mortgage lender, HFA said.
GREDA was one of the main beneficiaries of BHC. It had loans at low cost through the bank.
Mr Amegayibor highlighted the importance of reestablishing such an institution, adding that the real estate industry needs a combination of accessible funds as well as mortgages to thrive.
“The Bank for Housing and Construction (BHC) enabled GREDA members to borrow money at a very affordable rate to build houses,” he said.
“Together with HFC, whose original mandate then was to provide mortgages for house hunters, they created an enabling environment for the housing sector. This is because HFC provided a ready market for developers while paying the lump sum on behalf of homeowners.
“Concurrently, developers would have the requisite funds to pay back the loans obtained from BHC while BHC would be reimbursed to ensure the cycle continues,” he said.
According to Mr. Amegayibor, the bank’s resuscitation could expand the country’s housing stock, thereby reducing the housing deficit.
In the past, government supported the development of the GREDA, whose members have constructed over 1 000 000 new homes since their formation in 1988.