Business News of Thursday, 3 September 2015

Source: B&FT

SEC must speed up regulation review - Developers

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Fund managers and real estate developers have called for the speedy review of the Securities and Exchange Commission’s (SEC) limitation on how much fund managers can invest in the housing sector.

SEC two years ago, owing to the housing deficit and the growing importance of the real estate sector, indicated that it was to review its existing regulations that allows only 15 percent of funds under fund manager to be invested in the sector.

While housing developers want more funds to develop various housing projects to bridge the current deficit of more than 1.7million units, investors see opportunity to maximize their returns if they invest more funds in the sector.

The Ghana Real Estate Development Association (GREDA) has been calling for the speedy review of the SEC’s regulations.

The Managing Director of UT Properties Limited said, Kojo Kwakye Owusu, said SEC need to expedite action on the review. “We need SEC to review the regulation as soon as possible to allow developers access more funds. The new pension schemes limits the amount of funds that can be committed to real estate to 15 percent. So there are funds available but SEC laws has restricted how much is to be released into our sector.”

The current housing deficit in the country is estimated at 1.7 million units, with an annual growth of 70,000 units. GREDA estimates that about 50% of Ghanaians are said to live in sub-standard housing and various unsuitable structures.

The situation has further been compounded by the depreciating local currency that has led to a significant increase in the cost of imported building materials.

With few industries in the country capable of keeping up with demand for building materials—plumbing materials, sinks, tiles, louver frames and blades—a huge chunk of the building materials used are imported. This has shot up the cost of finished housing.

Just over a year ago, workers who earned between GH¢4,000-GH¢5,000 qualified for a mortgage to purchase a house priced at US$84,000.

However, depreciation of the cedi has meant that to qualify for a mortgage on the same housing unit one has to earn between GH¢8000-GH¢9000.

Governments have over the years tried various acts to address the housing problem. In 2011 government entered into an arrangement with STX Ghana and its Korean counterparts for the construction of about 300,000 housing units to address the decade-old shortfall in the housing sector. The initiative was seen as the largest government intervention in the sector.

However, the deal fell through following STX’s boardroom wrangling involving the partners. This led to the government suspending its initial US$1.5billion sovereign guarantee.
However, local contractors have now been offered the opportunity to pool resources and take advantage of the incentives being offered by government.

“If that ratio can be increased to allow fund managers to give us enough funds, we would see a big boost in housing delivery in Ghana. The likes of UT properties is very well positioned to take advantage.