The Ghana Real Estate Developers Association (GREDA) is appealing to government, calling for a revision of the current mortgage law to include up to 30-year payment schemes for homes acquired through loans.
GREDA believes this intervention by the law will ensure the acquisition of realistic mortgages by persons who are capable.
The Association’s president, Patrick Ebo Bonful – who was speaking to the B&FT on ensuring affordability in the housing sector, said the housing and mortgage industry must implement practical policies backed by law to reduce Ghana’s current housing deficit of more than two million.
“It is for this reason that we are calling for a revision of the current Home Mortgage Finance Law 2008 (Act 770) to reflect standards in the international market,” he said
Key inputs into the proposed revised law
Apart from up to 30 years of payment, the Association is proposing that the new law makes an arrangement that when beneficiaries default for maximum three months, the property owner can file an ex parte process in court with documentary evidence and take back the property. This, it said, will whet banks’ appetite to give mortgage on a large scale while ensuring discipline of payment by mortgage recipients.
Among other suggestions, GREDA is also pitching for a reduction of the 25 percent corporate tax rate in the mortgage and real estate industry, which directly affects the price of properties.
The Association called for a special funding scheme from banks for the construction sector with a specialised interest rate lower than the current 30 percent per annum which puts developers off, adding: “Construction finance is still very expensive – the reason we need realistic mortgages that can travel up to 30 years”.
Mr. Bonful argues that a mortgage attracting payment of GH¢150 every month for 10 years, for example, will technically reduce to GH¢50 per month when given up to 30 years to pay. This intervention, he said, will make it easier for young people to own homes and have respite to pay back.
Data on mortgage in Ghana
Ghana’s banking sector attitude toward construction finance and mortgage is hostile, with almost 90 percent of banks having a zero percent portfolio in the sector.
As the majority of banks give between 10-15 years mortgage, BoG’s data indicate that the current annual percentage rate on mortgages ranges from 18.7 – 31.7 percent, with most banks sticking to the latter.
Mortgage penetration, according to the Bank of Ghana (BoG), as of 2017 was 4 percent, while penetration in Germany is 72 percent, USA – 80 percent, and most countries in Europe above 60 percent.
GREDA however said the situation of penetration in Ghana cannot entirely be blamed on banks, as the level of non-compliance and high default rates is high.
Government’s plan for mortgages in 2022
Meanwhile, government is prioritising the housing sector deficit with strategic solutions this year, through introduction of the National Homeownership Fund (NHF) as stated in the 2022 budget.
The initiative will focus on a blend of financial concepts to lower mortgage lending and rental rates to end consumers, while protecting the gains of Participating Financial Institutions (PFIs) and investors without distorting the market.