New players in Cote d'Ivoire's real estate sector spur competition as government works to facilitate access to home loans

As is the case throughout the region, real estate demand in Côte d’Ivoire is generally high, surpassing existing offerings in most, if not all, segments, from housing to industrial, office space and retail. The situation is particularly acute in the housing sector, with a national housing deficit of 400,000-600,000 units. The government has enacted a large-scale social housing programme, but progress has been slow. Home ownership remains an aspiration for many Ivorians who cannot afford current market prices or access housing loans. As for attracting more investment, ongoing efforts to enhance the collection and analysis of quality sector data may prove positive for this goal in the near future.

Housing Deficit

With a deficit of 400,000-600,000 housing units, half of these in Abidjan, and demand growing by 40,000-50,000 units every year, Côte d’ Ivoire is struggling to satisfy the population’s search for a decent roof. Until 1980, most housing was built or developed through state-owned institutions such as the Société de Gestion Financière de l’Habitat, Groupement Foncier de Côte d’Ivoire, and Société Ivorienne de Construction et de Gestion Immobilière (SICOGI), which together accounted for 120,000 units built before 1980. As the economy slowed in the late 1970s, the government shifted the onus of housing construction gradually towards the private sector, dropping housing subsidies in 1995. The effect was a slowdown in residential activity, with only around 26,000 units built between 1980 and 2005. A lack of incentives for the private sector, a growing population and high urbanisation rates contributed in time to a rising housing deficit. The impact on home ownership is clear. “Out of 100 requests, we are able to help 10-15 clients,” Mariam Mahama, sales director at real estate agency Kalimba, told OBG. “Sometimes, we work with other agencies in pairs so as to ensure a higher response rate.”

According to a 2015 Knight Frank study, 68% of Ivorians rent their apartments or houses. In Abidjan mid-market monthly rents are below CFA500,000 (€750), while rents in the high-income segment are in the range of CFA1.2m-1.5m (€1800-2250). However, rents in the latter segment can rise to as high as CFA3m-5m (€4500-7500) for luxury accommodations.

Increasing Supply

To address this challenge, President Alassane Dramane Ouattara promised during his 2010 campaign to build 60,000 housing units, including 50,000 in Abidjan, during his first term in office. In addition to SICOGI, which is currently overseeing the construction of 15,000 units, another 46 real estate developers, including four foreign companies – Moroccan real estate developers Addoha, Alliances Group and Palmeraie Développement and US developer African Business Development – are working on the government’s social housing programme, contributing around 36,000 units between them.

Demand for the programme is high, with more than 75,000 applications received by January 2016. Furthermore, more than five years after the election, only 5202 housing units have been built, equivalent to 10% of the government’s target. While additional housing units are ready, none have been delivered, partly due to still-pending road and utility works, which are the responsibility of the government. Other factors have made it difficult to meet the original delivery schedule, including, among other things, difficulties in acquiring land, particularly in Abidjan, and issues with mobilising funds to compensate owners and for feasibility studies, as well as an underestimation of construction costs.

Home Prices

According to a July 2015 report by Jeune Afrique, a regional weekly, housing costs are estimated at CFA5m-10m (€7500-15,000) for social housing, CFA10m-15m (€15,000-22,500) for affordable housing, CFA15m-22m (€22,500-33,000) for middle-class homes and at least CFA25M (€37,500) for high-income units and homes. Buyers are required to pay a pre-registration fee of CFA30,000 (€45), as well as an initial fee of 10% of the unit’s cost. With prices for construction materials rising, the government has had to revise the cost of state-subsidised housing units from CFA5M (€7500) to a range of CFA12m-15m (€18,000-22,500). This has led to the introduction of the affordable, economic housing model, known as lottissement à équipment modéré, whereby the government acquires land and sets up roads and basic utilities, leaving the rest for real estate developers to construct social housing units with sizes ranging from 80-102 sq metres. Despite this, affordable housing continues to represent a challenge for average Ivorians.

According to an October 2015 report by the Centre for Affordable Housing Finance in Africa (CAHF), generally only government and private sector workers (18% of the workforce) earn at least the minimum wage. Fawzi Darwich, CEO of plumbing supply firm Fadco, told OBG, “Real estate prices boomed between 2012 and 2014 due to the shortfall in supply. However, we are now moving toward equilibrium and should see the prices stabilise in the short to medium term.”

Financing

The Ivorian government seeks to provide home financing through real estate projects, including the Housing Support Fund (Fonds de Soutien à l’Habitat, FSH) and the Housing Mobilisation Account (Compte de Mobilisation pour l’Habitat, CDMH). The FSH and CDMH should enable the refinancing of commercial banks that provide credit to developers and buyers. However, given the lack of supply by the government, these funds are unable to provide the support intended. Commercial banks also provide credit for real estate activities and home purchases. However, despite high levels of liquidity, Ivorian banks find it difficult to finance mass housing construction due to limited short-term deposits and a lack of borrower transparency, according to the CAHF. Siriki Sangaré, CEO of OPES Holding and president of the National Chamber of Builders and Developers of Côte d’Ivoire, told OBG, “The primary deterrent to international investment in the housing sector is the opacity and uncertainty regarding land titles.”

To facilitate access to home financing, the government has drawn up a series of initiatives, which include negotiating with commercial banks to decrease interest rates for home loans from 9.5-12% to 5.5%, extending reimbursement to up to 25 years, more effectively applying the FSH and creating a mutual guarantee fund for prospective homeowners. Moreover, Gnamien Konan, minister of housing and social housing, announced in June 2016 that the government would be purchasing all social housing units and some affordable housing units with the support of the FSH, on the condition that the selected real estate developers sold the units as part of a bundled package that contained at least 65% social housing units.

Industrial

In terms of space for industry and manufacturing, Côte d’Ivoire has an estimated 7000 ha of industrial-zoned land, about 1800 ha of which is in the economic capital, Abidjan. Other industrial areas are located in the capital Yamoussoukro (700 ha), Bouaké (500 ha), Bonoua (500 ha), San Pedro (200 ha) and a variety of smaller sites (Abengourou, Agnibilékrou, Anyama, Daloa and Korhogo) that together account for 20 ha. Olivier Nebout, CEO of Groupement Foncier de Côte d’Ivoire, told OBG, “As there is a shortage of land in Abidjan, we expect property developments in Yamoussoukro, San Pedro and Bouaké to be significant engines of growth during the next few years. The demand is particularly high in San Pedro, where the development of the port and new cocoa-processing units entailed increased needs in high-end accommodation.”

One of the government’s most pressing priorities is to rehabilitate the industrial sector after the damage it suffered during the civil conflict, as well as to help further reduce the trade deficit and boost job creation. This has led to the establishment of new industrial areas, such as the PK 24 industrial area in northern Abidjan. Following a public auction, the government awarded the China Harbour Engineering Company (CHEC) a contract for the first stage of this 940-ha industrial area development project in September 2015. The CHEC, which worked on the extension of Abidjan’s port, will develop 200 ha of the PK 24 industrial zone, with an investment of CFA60bn (€90m). In the meantime, French firm CFAO and Dutch brewing company Heineken have agreed to build a new brewery, while Volvo partner Services Machinery Trucks is the first firm to set up shop in the area, with a 1500-sq-metre plant for vehicle maintenance and repairs. In line with its goal of developing industrial areas elsewhere, the government has added to its list of priority public-private partnerships a CFA15bn (€22.5m) project targeting the development of industrial areas in Aboisso, Adzopé, Bonoua, Bouaké, San Pedro and Yamoussoukro. As of late 2016 feasibility studies for the Bonoua and Yamoussoukro industrial areas had already been carried out.

Office & Leisure

While Plateau remains Abidjan’s central business district – hosting many ministries and state agencies – an office space shortage in the neighbourhood has seen demand grow elsewhere in the city, including Zone 4, Deux-Plateaux and Cocody, which is now accessible from Zone 4 via the Henri Konan Bédié Bridge. The search for class-A office space is driven by the country’s economic growth and, in particular, the arrival of foreign firms over the past five years. To answer this demand new office space is needed, as is the rehabilitation of existing office space areas. The US-based Hilton Hotels and Resorts Group, for instance, is set to renovate various administrative buildings in Plateau as part of larger CFA287bn (€430.5m) mixed-use project, including the construction of a new hotel. Meanwhile, in March 2015 the US-based Kaydan Group launched the first real estate investment fund in West Africa. The $100m Kaydan Real Estate fund is expected to contribute to the construction of the future Golden Tulip Hotel (see Tourism chapter).

Available office space in the country’s economic capital often fails to satisfy the conditions of incoming foreign firms. “It is sometimes difficult to meet the demand for office space rentals in Abidjan, not only due to the shortage of space itself, but also because existing spaces often do not meet the requirements of foreign firms,” Mahama told OBG. “As a result, companies find it better and more affordable to build their own office space, especially if they are establishing a regional headquarters in Abidjan.” According to Knight Frank, office rents rose in 2014 and were expected to continue doing so in 2015 and 2016. Prime rents reportedly stood at $28 per sq metre per month.

Retail

As is the case across the continent, formal retail space in Côte d’Ivoire is lacking. However, this is changing. Following an investment of CFA33bn (€49.5m), the CFAO opened a 20,000-sq-metre mall with 55 tenants on Boulevard Valéry-Giscard-d’Estaing, one of the main arteries in Abidjan. Local firm Prosuma has also developed the 20,700-sq-metre Cap Sud Mall, which is located on the same boulevard and has space for 95 tenants. The consumer base for modern malls consists of a slowly growing middle- to upper-income class, which currently represents only 8-10% of the population. However, with an estimated 8-10% GDP growth rate, Julien Garcier, founder of local firm Sagaci Research, told Jeune Afrique in December 2014, there is ample room for growth in this country of 20.3m.

Data

The lack of systematic data collection and analysis represents another obstacle to development, limiting opportunities to attract investment, especially from capital markets. Williams Bella, founding partner at ALLEB CI, a local real estate services and management company, told OBG, “There is a lack of data in the market at the moment, making it difficult for various actors, including banks, insurance companies and global funds, to make informed decisions on local real estate.”

Outlook

With unmet demand in all segments, public and private initiatives to expand real estate offerings are likely to continue in the near future. Government action on home loans can help its social housing programme pick up speed, and ultimately deliver on its 2010 campaign promise. The development of the new industrial areas will also provide space for firms to set up shop. As for retail, the arrival of new players signals increased competition both in high- and low-end distribution markets, and 8-10% growth rates in high-end distribution may provide room for more actors in the future. Nonetheless, ongoing challenges, such as compensating traditional owners and the cost of construction materials, must still be overcome.

 

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The Report: Côte d'Ivoire 2017

Construction & Real Estate chapter from The Report: Côte d'Ivoire 2017