Cedi Depreciation May Soon Affect Mortgage Cost

The Ghana Real Estate Development Association (GREDA) has warned that the poor performance of the Ghana cedi may soon affect mortgage cost, causing an increase in prices.

President of GREDA, Patrick Ebo Bonful noted that consumers might soon push the extra cost of building to consumers if the cedi’s poor performance persists.

“If developers were to use more local materials, the cedi would have not been a problem. However this is not the case and the cost of imported building materials continue to go up,” he said.

“Currently the market is stagnant and developers are not able to increase prices as much as they would want. So they are absorbing these extra costs. And that means the profit margins will be affected”.

When asked if consumers will eventually feel the pinch when the cost becomes unbearable for developers, Mr Bonful replied ‘‘yes definitely, definitely they will’’.

Mr Bonful spoke to JoyBusiness on the sidelines of the GREDA annual breakfast meeting which brought together stakeholders in the housing industry to dialogue on their challenges and the way forward.

One other challenge the GREDA president noted was the lack of a proper legal framework to support the industry. He explained that this was impeding investments from banks.

‘‘The home finance act of 2008 770, unfortunately, is intertwined with the 1972 decree. What we seek to do is to have a law on home finance mortgages which will be easy to use and effective in addressing the issues that bedevil our industry.’’

He added, ‘‘Due to the lack of this legal framework, banks are unable to recover properties from defaulting customers and for this reason, so many banks are shying away from the mortgage market. When the legal framework is straightened out, investment will certainly flow into the sector.’’

The topic for this year’s breakfast meeting was; “A vibrant mortgage market, a prerequisite for real estate development and sustainability in housing delivery.

Speaking on the topic, Deputy Director General-in-Charge of finance at the Securities and Exchange Commission (SEC) Paul Ababioo warned the members against over-reliance on bank borrowings as a foundation for their business.

He explained that this could cripple businesses as repayments may end up being a challenge.

‘‘If you are doing a development project you need some lead time, and there’s some preparation work that goes into it, there is a construction phase, then there’s the sales phase it has phases, so if you borrowed at the beginning that you’ll have to have funds to pay for interests and then repayments. So it then becomes a challenge when you have reached the sales phase yet,’’ he said.

Source: JoyBusiness