I screamed and jumped when a mutual friend drew my attention to this news item on the Joy online website of 20th May 2004: "IFC, BANKS TO DEVELOP NEW MORTGAGE FINANCING". Indeed, I jumped for joy when I read the details because anyone who is deeply involved in real estate financing knows that this new development is not only humongous for the real estate industry, but the implications are huge for the economy of Ghana.
According to the details, the International Finance Corporation (IFC)----the private sector arm of the World Bank Group----has reached an agreement with a number of financial institutions in Ghana to jointly develop new residential mortgage and construction finance schemes. Knowing the IFC by its track record, this world body does not just walk into any country to set up shop and start giving or guaranteeing loans to anyone. It gathers its data carefully and uses its very experienced and well-trained officers to monitor each country very carefully before making any move. Therefore, there is no question whatsoever now that it is the successes chalked up by the real estate industry and the favorable economic and political environment in our country that have convinced this World Bank outfit to make this very bold move. The financial institutions directly in the forefront of these negotiations-----SSNIT, HFC Bank, Ecobank, Fidelity, NTHC---- and members of the Ghana Real Estate Developers Association (GREDA) must all be congratulated for their efforts in making this possible.
IMPLICATIONS FOR THE HOUSING INDUSTRY: 1. This new development means that, slowly and slowly, as the new scheme develops, Ghanaians could easily buy homes WITH LITTLE OR NO DOWNPAYMENT. The age-old practice of building houses from the ground up-----ALL CASH----- which could take 5 to 10 years to complete will be gradually eliminated. Ghanaians will now buy or build homes faster with easy and readily available financing.
2. It means that, very soon, several mortgage products and loan programs that Ghanaians are not familiar with will be flooding the Ghanaian mortgage market and mortgage professionals in our country will need to get on the airwaves to educate the public extensively.
3. Real Estate Developers will now have the backing of the World Bank Group to apply for construction loans to build up tracts upon tracts of homes for ordinary Ghanaians to purchase.
4. It means that the present government can now fulfill its promise of BUYING BACK LANDS from our Chiefs for resale to developers to eliminate all the bottlenecks associated with land purchase in Ghana.
5. This new development means that a real SECONDARY MORTGAGE MARKET, the likes of Fannie Mae and Freddie Mac in the USA, can now be fully developed in Ghana. A vibrant secondary mortgage market in Ghana means that loans can easily be purchased, sold and SECURITIZED so that a new lease of cash is always infused into the mortgage market the same way it is done in the developed countries.
6. Because of the backing of the IFC, mortgage interest rates will be closely monitored just as the Federal Reserve Bank does in the USA. Mortgage rates must be low enough for Ghanaians to afford the monthly payments. Indeed, if a foreign account component could be built into the system, Ghanaians could easily obtain mortgage loans based on Western interest rates and make their payments in foreign currency as opposed to the outlandish 20 per cent or more Cedi interest rates we have in our country today.
7. REFINANCING: It means all the pent-up equities in the millions of homes in Ghana today can now be converted into cash through refinancing. The tons of cash that will be unleashed into the economy will enable Ghanaians to set up new businesses, do lots of home improvement or even buy new homes, buy new cars and pay their children's school fees.
8. COMMERCIAL PROPERTIES: It means commercial property loans can now be easily originated in Ghana. Shopping centers and Malls, the way we know them in the Western World, will now replace the shacks along the congested streets of Central Accra, Kumasi or Takoradi and modern office complexes can now be built due to the ready availability of financing.
9.REAL ESTATE REGULATION: It means real estate regulation must now take center-stage in the halls of Parliament. Regulators NOW HAVE NO CHOICE but to pass those laws that will enable the mortgage industry operate seamlessly. Of course, the necessary legislation MUST be in place to enable banks foreclose (REPOSSESS) on properties whose loans are in default. In this regard, the preferred method of foreclosure should be the TRUST DEED method of NON-JUDICIAL FORECLOSURE to avoid clogging the courts with foreclosure litigation.
10 THE MULTIPLIER EFFECT: The ripple effect of this new development on the economy of Ghana is simply huge. In one sentence, it means JOBS, JOBS, JOBS!!! From the roofing contractor to the landscaper, from the wood factory to the cement factory, from the painter to the carpenter and from the interior decorator to the supplier of kitchen equipment and household furniture------more and more jobs will be created in the Ghanaian economy. Many engineers will be put to work, many loan officers, closing agents, underwriters, appraisers and real estate agents will now have lots of work to do.
Indeed, the ripple effect of this new development on our nation's economy is truly multidimensional and those who made this possible must be congratulated! PETER TSIKATA Real Estate & Mortgage Broker Los Angeles, California. Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.
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