Figure 15: Bole Summit, the last condominium site to be built on the periphery of the city. Addis Ababa. © UN-HABITAT
form of the regional and city administration purchasing bonds from the Commercial Bank of Ethiopia, secured under a Bond Agreement and paying them back over five years. Presently, CBE is the only independent financial resource for the housing programme in Ethiopia and has so far provided ETB 3.2 billion (USD 246 million) in bonds to the government, receiving a return of ETB 2 billion (USD 153 million). Up to this date, the housing programme has not received any donor funding. The IHDP is solely financed by CBE bonds and the city administration’s own budget. The returns are used to pay back the bank bonds where once they were invested into new schemes. An agreement between the city administration and the CBE has ensured that the HDPO directly receives the bonds for the implementation of the programme, and as a result the HDPO has already borrowed ETB 3 billion (USD 230 million) in three separate phases. A proportion of the Addis Ababa city budget is allocated to condominium building construction costs, labour costs, and infrastructure costs. (The infrastructure works include the water supply, the electricity, the roads and the drainage system). Within each project the relative weight of these are 60, 20 and 20 per cent respectively. The federal government and the regional states have secured a Value Added Tax (VAT) tax exemption (15 per cent) on the import of all building materials and machinery for the IHDP and have allocated ETB 2
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the condominium housing programme in ethiopia
billion (USD 153 million) for the import of loaders, crushers and other machinery for the rapidly growing construction industry. This money is transferred directly to construction companies to allow them to purchase the machinery as and when they need it. The government has also guaranteed exemption from the lease payment for land up to 50m² per unit. The construction cost of a condominium housing unit on the private market is estimated to be ETB 2,000/ m² (USD 154/m²) The target cost on the pilot project, Bole Gerji, was ETB 800/m² (USD 61/m²) and the actual figure achieved was ETB 886/m² (USD 68/m²). 12 per cent of this reduction in construction costs was due to the type of technology used, and 38 per cent of this reduction was due to the management and level of internal finishes - in other words, the phasing strategies and the absence of floor tiles, the floor screed finish and absence of wall plaster all contributed towards increasing the affordability of the scheme. In the long-term, the programme is structured to be 100 per cent cost-recoverable. Beneficiaries will eventually pay for the full construction cost of their condominiums and the land and infrastructure cost will be recovered through the sale of commercial units. Nevertheless, as will be discussed in Part Three, the question remains regarding whether or not the various financial methods the government uses to subsidise housing production in the IHDP is a cost-effective and sustainable method of procuring and financing affordable housing.