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the current situation alongside future demand will allow for a gap analysis to be performed. Such an analysis will provide the basis for the final, forward-looking section of the chapter. It will attempt to set out a recommendations framework of ways the gap in housing and the financing of housing can be bridged. Lessons and recommendations will be based on the data presented in this chapter, on experience working in African countries and other countries—both developed and emerging economies—and by highlighting some of the success stories that are already taking place in Africa. There are many positive developments that could be the spark for bigger movements and replication in new markets. Above all, however, this chapter aims to provide some enlightenment on the path out of the crisis and toward the longer-term financing of housing in Africa. As will be shown, housing finance systems are chains containing many links, each of which must be strong and play its part for the system as a whole to prosper. This chapter is therefore directed to lenders, developers, and policy makers as well as the myriad other stakeholders that, each individually, have a role to play in promoting an efficient housing finance system on the African continent.
Demand for Housing Finance All housing is financed in some form or other. Housing can be financed through a mortgage, savings, housing microfinance, or investment capital or through the imputed value of one’s own labor. Given the size of the expense that typically represents the largest purchase of any household, it makes sense to extend the financing period as long as possible to improve affordability. However, in Africa the absence of long-term funds has inhibited the growth of housing finance and other forms of financing requiring long-term money. This leaves many households with their only option: to build incrementally with the purchase of raw materials coming out of any surplus in each paycheck. This is typically a slow, inefficient way of constructing housing, and it eliminates any economies of scale that could be achieved from buying materials in bulk. It also means that the “housing good” can be consumed only right at the end of the financing period, rather than from the outset with a traditional mortgage loan. Formal financing of housing in Africa has been limited to date. Figure 4.1 shows that—with the exception of South Africa, Namibia, and some of the North African countries—mortgage finance barely registers as an asset class in the African financial system. As a continent, mortgage debt outstanding to GDP is around 10 percent, which compares to