9 June 2013

Ethiopia: Housing Galore

Banking Backlog as Housing Scheme Registrations Begin At CBE 's Temenja Yaj branch, the lines would start forming early in the morning and gradually swell to reach the street where cars are parked.

Like most CBE branches Temenja Yaj branch had swarms of people flocking to it in order to open a savings account for the 10/90 and 20/80 housing schemes.

It was in a very unlucky way that Tsedale Endale missed out on registering for the Condominium housing scheme when the government unrolled it eight years ago. Hoping to take her chance of becoming a homeowner, the 45 year old hotel housekeeper stood in line at the registration station for Nifas Silk Lafto District at the break of dawn.

After a long wait and much commotion, registration forms started being distributed. As luck would have it, the very last registration form ended up being handed to the person standing right infront of her, making her miss her chance by just a hair.

Unlike her, 430,000 people were successful in registering for the first ever public housing scheme to be unrolled by the current government, and began waiting for their names to be picked from raffles every time the government finished construction of condominium houses. Eight years on, the government has managed to transfer houses to only 100,000 people, leaving 330,000 still in anticipation.

Tsedale, for her part, now spends 900 Br on rent, which amounts to more than half her net income of 1,700 Br. At the same time, demand for housing has further risen - currently reaching 600,000, according to data from the Ministry of Urban Development & Construction (MoUDC).

Following this, the government unveiled another urban housing supply strategy; this time introducing eight modalities in which housing supply could be increased in urban areas. Out of these, five are public housing modalities to be executed by the government.

The more popularised of the government public housing programmes are the 10/90 housing scheme - a rebranded version of the old condominium housing scheme, now dubbed 20/80 - and the 40/60 housing scheme. These schemes - designed for lower incomers, the lower middle class and upper middle class, respectively - all have a savings scheme attached to them, from which their names are derived.

For instance, in the 10/90 housing scheme, a person would be required to save a fixed monthly sum for three years, amounting to 10pc of the total housing construction cost, and get a 90pc loan from the government to be paid over the next 17 years.

For Tsedale and many others the introduction of these schemes was viewed as a second chance to be eligible for homeownership. So, when the Commercial Bank of Ethiopia (CBE) started opening special savings accounts for those interested in the 10/90 and 20/80 schemes last Monday - a week ahead of registrations to be conducted at weredas and Government offices, from June 10 to 28, 2013 - conspicuous lines started forming at most of the 115 branches of the CBE in Addis Abeba.

The CBE has been assigned to collect saving deposits and advance loans to the Housing Development Agency and the Addis Abeba Housing Development Enterprise, who are responsible for building the houses once registrants open accounts.

With 1.3 million people expected to be registered, this is a big deposit mobilisation drive for the CBE, an opportunity that other banks have yet to be given.

"We chose the CBE because it is a big bank that can handle such large scale projects," Amare Asgedom, head of the MoUDC's Housing Development & Government Building Construction Bureau. "We will think about handing over responsibility to other banks as the project progresses."

The CBE executives have said they will use the mobilised deposits to facilitate loans for housing construction. Already they have advanced a 4.75 billion Br loan to the Agency and a 1.5 billion Br loan to the Enterprise for the construction of houses..

Tsedale came to register at 11:00am, last Tuesday, at Finfine Branch on Gambia street. The Branch, located on the ground floor of the cylinder shaped headquarter of the CBE, had already finished giving queue numbers for morning customers and told her to come back in the afternoon. For the afternoon's queue Tsedale was the 68th person in line.

Although struggling with feelings of déjà vu as she stood in line by the side wall, Tsedale, to her relief, finally got her hands on a registration form, at half past three in the afternoon.

The CBE requires that each registrant brings two passport sized photos and a valid ID (issued within two years), along with the initial deposit required for the specific scheme people are registered in. Tsedale, who was interested in the two bedroom 20/80 housing scheme, which lies on 50sqm, would have to make a monthly deposits of 561 Br.

"This is much better than the condominium registrations in 2005," she told Fortune, as she filled out her form. Although she was guaranteed to get the special red passbook that day, she must also go to her Wereda to undergo the registration process when it starts on June 10.

Tsedale is prepared to go through the hassle because her need for a house is so strong.

"I have lived in rented homes for the past 25 years, so I would be glad to be a homeowner at last," she commented.

So serious is she in owning a home that she has already managed to save 50,000 Br, over the years, which she plans to use for her monthly deposits at the CBE. But, even with such preparation, Tsedale recognises that becoming a homeowner through the government scheme will depend on luck.

The sheer number of people swarming at the CBE branches shows how tough it will be, Tsedale says, even though she remains hopeful.

Just how great the need for housing is, was illustrated further during the week, as reports surfaced of couples divorcing, in order to bypass a restriction that allows only one of a married couple to register for a house; with none being able to register if one of the couple owns a house already.

"It is very sad if indeed people are dissolving something as sacred as marriage for material gain," Mesfin Getachew, head of housing development and administration at the Housing Development Agency, commented after hearing the reports at a press conference, held last Wednesday at the MoUDC headquarters, .

Many others who lined up to register alongside Tsedale have doubts about the housing program.

Starting from fears that registration forms would run out, like they did on Tsedale in 2005, to doubts about whether registration would guarantee access to homeownership, there were many uncertainties that registrants faced, when Fortune talked to them on Tuesday and Wednesday last week.

The question on most people's minds, was the one asked at Wednesday's press conference - where Mesfin and Amare briefed journalists about the housing strategy unveiled by the government "If there is still a delay in providing houses to at least 300,000 people who have registered in 2005, what would guarantee that this would not happen again?"

Admitting that there were financing and delivery problems for the previous scheme, the officials promised that this one would have a better execution and people would be better equipped to pay for the housing once constructed, due to the savings scheme.

Another question is that if registrants are so many, whether there be enough houses built for This especially holds true for the 20/80 housing scheme, which Tsedale is interested in.

Unlike the newer housing schemes, this scheme not only seeks to address new registrants, but also requires satisfying those who initially registered in 2005, but have not yet received condominium houses, over the past eight years.

The reason for this is that the old list is outdated and needs to be upgraded. It will also require old registrants to start saving, something which was not part of the programme in 2005.

Out of every 100 people that are picked out of the raffles to be handed condominium houses, 35 do not show up, according to officials at the Ministry and the Addis Abeba Housing Development Agency - the organ responsible for the construction and transfer of condominium and, more recently, 10/90 houses.

This is because some do not have enough money to pay for the transfer of the houses,while others are either deceased or have left the country. Of the 300,000 registrants on the old list, the government is expecting only 170,000 to reregister, according to Yinekachew Walelegn, head of the Addis Ababa Housing Construction Project Office, within the Housing Development Agency .

The rest will either change to the new housing scheme, or are simply no longer interested in becoming homeowners.

Those reregistering will get priority when names are entered into raffles. Due to this, they will pay a higher savings amount of 151 Br for a studio, 274 Br for a one bedroom house, 561 Br for a two bedroom house and 685 Br for a three bedroom house. Savings, which will total 20 pc of the housing cost, are to be completed within five years. Newer registrants, however, pay a reduced monthly savings amount of 196 Br, 401 Br and 489 Br, respectively, for the one, two and three bedroom houses over seven years.

These new registrants will also have to take a backseat if they are not government officials or women, who get a 20pc and 30pc priority when having their names entered into raffles.

In the next year, the agency plans to finish construction and handle the transfer of 61,903 houses, in three batches, constructed at the - Akaki Gelan, Yeka Ayat, Yeka Abado, Tulu imtu Akaki, Bole Bulbula, Mekanisa Kotakri Kara Kore and Mekanisa Degnet sites.

If these houses are transferred, then another 108,097 people will be left to get precedence over future constructions. And this is taking into account the agency's projection that only 170,000 of the 300,000 old registrants would reregister.

The MoUDC is expecting 1.3 million people to register, which is the amount of people currently living in rented abodes within the city. Out of these, it says 40pc will register for the 20/80 scheme. This amounts to 520,000 people. As of 4pm on Friday June 7, 107,720 people had registered for the 20/80 scheme.

"If priority is given to old registrants, government officials and women, and the excess interest in the 20/80 scheme continues, then it would be hard to get our names entered into the raffles any time soon," an accountant at a private company, who came to register for a 20/80 house, told Fortune.

The opposite problem is being witnessed for the 10/90 scheme. Despite the fact that the Housing Agency is already building 24,312 houses at the - Bole Arabssa, Akaki Kilinto and Koye Feche sites, which will be finished and ready for transfer by next year, very little interest is being garnered from registrants in this project.

By Friday afternoon, only 4,280 of the 112,000 people registered at the CBE were applying for the 10/90 housing scheme.

The project will build studio homes on 29sqm, worth 38,000 Br, for those whose monthly income is under 1,200 Br. These houses will be placed in a G+2 building, with each floor having eight studios.

"These houses would be easily accessible, as they will be finished next year, and all those who register within the deadline will have their names entered into the raffles for transfer," Mesfin said at the press conference.

In total, the agency has projected that 35,000 low income houses will be built under the program. However, as things stand, more awareness needs to be created about the 10/90 scheme, in order to garner the interest, according to Yidnekachew, necessary to go ahead with this plan.

"It really benefits the buyers, and the houses to be built will be up to standard," she added.

Since the condominium project started in 2005, 16 billion Br has been spent on construction. During this year, the Housing Agency has already used the 4.75 billion Br loan it took from the CBE for the construction of 10/90 and 20/80 houses. It plans to ask for another 11.6 billion Br for further construction in the next year, according to Yidnekachew.

Registration for the 40/60 housing scheme is yet to start. But, people were still queueing at branches to ask whether they could register for it.

Unlike the 10/90 and 20/80 schemes, both the registration and savings accounts for this program will be handled by the CBE. Over the course of five years, registrants are expected to save 1033 Br, 1575 Br and 2453 Br, on a monthly basis, for one, two and three bedroom houses, respectively. The design for the houses will use higher cost materials, including aluminium finishing, according to officials at the MoUDC. The buildings for the 40/60 houses will have a G+12 design.

Registrants must save for five years, before getting a 60pc loan from the CBE to cover the rest of the costs for the house. However, those who have the ability are encouraged to advance the downpayment, or the total cost of the houses upfront. Those that have saved the most get priority over ownership of houses already built.

The recently established Addis Abeba Housing Development Enterprise is in charge of the building and transfer of these houses. The enterprise plans to build 25, 000 houses in the first phase, according to an official from the PR office.

Construction of 10,000 houses has already started, over eight sites, which are near to the centre of the city, including - Sengatera, Meri, Gerji, Megenagna, Bulbula and Crown. These are expected to be completed by May 2014. Around 1.5 billion Br (the loan from CBE) has been paid for the construction of these houses in 2012/13.

Although the CBE is yet to announce if it will start handing passbooks in advance, registrations of 40/60 will be conducted from August 12-23, 2013. This scheme is open for Ethiopians and decendants of Ethiopians residing abroad, although they are required to make their monthly savings in foreign currency.

"When the houses are ready, those who have paid 100pc get priority; then those who have paid 99pc, and so on," Amare, from the MoUDC, explained at Wednesday's press conference. "If there are people that have saved equal amounts and the number of houses ready is not enough for each, then raffles will be used for the transfer of homes," he told Fortune.

It will be difficult to compete with registrants in foreign countries who may have the resources to pay upfront in foreign currency, according to two individuals interested in the scheme that Fortune talked to.

"By the time I save for five years, all the houses built in the first phase may be snapped up and I may have to wait longer ," one of these individuals told Fortune.

Currently there are assurances from officials at the Housing Enterprise and the MoUDC that the amount of houses to be built will be in proportion to the registrants. The houses to be constructed are determined by the amount of registrants, they say.

However, if there are many registrants who will pay upfront for the 40/60 scheme, they will be encouraged to form a housing association and get the houses built, according to Amare.

Building homes through housing associations is another scheme provided by the government. At least 24 people could form a housing association and either ask for the government to build them one, two or three bedroom houses, at a cost of 210,000Br, 280, 000 Br and 385,000 Br, respectively, or choose a contractor and a design of their own.

In this instance, the government will provide land for free waiving lease payments. If the government is contracted to build the houses through its Enterprise, it will also waive taxes on construction materials. The last waiver, however, will not be available to those associations who choose to build the houses on their own.

Payment for such houses must be made upfront - 50pc during registration and the other 50pc after land has been prepared and prior to the association acquiring a building license. Registration for housing associations will be carried out from July 22 to August 6, 2013.

Aside from doubts faced over the details of these projects, registrants are also wary of an increase in the cost of savings as time goes by. The enterprise and the agency may raise the price of the houses if construction costs increase, it states in the directives.

"I am struggling to save as it is, it will be difficult to continue saving if prices increase," Mesfin Abera, 28, who is registering for the two bedroom 20/80 housing scheme, told Fortune.

On a 1,700 Br net income, he pays a rental amount of 500 Br and also pays for part-time education to get his degree, from previous savings. "I am planning on asking for help from my family for savings," he told Fortune.

Officials at the MoUDC maintain that initial registrations would merely show the need and not the demand for housing.

"Not all that register may save until the end, so the figures may be inflated initially," an offical from the housing development bureau at the MoUDC told Fortune.

The CBE will cancel savings accounts if a person defaults on savings for six months.

There were also some irregularities observed during registration at the CBE. All new registrants for the 20/80 scheme were asked to deposit initial savings that were meant for old reregistants, who are required to pay higher. The congestion caused has also led to inexpediency at some of the branches.

On Wednesday, the CBE called a press conference to state that they will extend working hours - from 8am in the morning to 5:00pm at night, on Monday to Saturday, and from 8:00am up to 5:00pm on Wednesday, in order to make sure everybody registers on time. It also apologised for requesting higher deposits from new 20/80 registrants, promising to correct the situation immediately.

Depending on the size of the CBE branch, five to eleven people are working to help process accounts related to the housing schemes. More people will be assigned on the weekends, as other banking operations will be closed, explained Yehuala Gessesse and Derebe Asfaw, vice presidents at the CBE, who conducted the press conference.

Next week it will be the Weredas' turn to witness long lines, as registration kicks off. Already people are lining up to renew their IDs. Meron Legesse, 23, spent the whole day waiting to renew an ID, at Wereda nine, in Arada district. She is hoping to register for a two bedroom condominium house, as a new registrant, next week.

"I am hoping things are computerised and it will not take as long as renewing IDs," she told Fortune.

Wereda officials confirm that things will be computerised next week, as they will be utilising a software developed by the INSA and consultants from Addis Abeba University, at a cost of 11 million Br, which will be able to sort out those who already have a home or are registered for other schemes at the same time. In Wereda nine, twelve secretaries have been trained to register and 13 coordinators are already assigned to manage those that queue outside. Two supervisors will also assist with IT problems. Generators have been bought, in case of a power outage, according to Tarekegn Mamo, a reporter at the communications office of Wereda 9.

With such preparation, Tsedale may receive a more positive result when going to register at her Wereda for condominiums once more; unless the housing need proves too big for the preparation of the Weredas as well.

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