The Securities and Exchange Commission (SEC) is developing a mutual fund scheme for the real estate sector in a bid to address the housing shortfall.
The close-ended mutual funds, which are expected to list on the Ghana Stock Exchange by the end of next year, will create a link between the capital market and the real estate sector.
The Director-General of the Securities and Exchange Commission, Mr Adu Anane Antwi, said at the launch of the McOttley Unit Trust in Accra that the scheme will help solve housing problems in the country.
The country is currently in the midst of an accommodation crisis, despite a two-fold rise in the housing stock.
Between 2000 and 2010, house and land prices have spiraled out of control, leaving middle class workers struggling to get their feet on the property ladder.
The 2010 Population and Housing Census put Ghana’s population at 25 million, with 3,392,745 houses up from the 2,181,975 recorded in 2000, which represents a 4.4 per cent rise, the highest annual growth rate in the housing stock since 1960 when there were just a little over 636,000 houses.
Ghana’s housing sector, which had been at the centre of past policy failures, has experienced acute housing problems triggered by rapid urbanisation, population and economic growth.
But Mr Anane Antwi believes the SEC’s to create the Real Estate Investment Fund (REIFS) on the stock exchange will help address the housing challenges.
Plan for GREDA
Mr Anane Antwi reiterated that there was an opportunity for the members of GREDA to develop the housing market and noted that the feat could only be accomplished with long-term funds.
The SEC boss drew a clear distinction between the US housing market and that of Ghana, saying that while in the US people buy houses in anticipation of a rise in the price, Ghanaians own houses for future generations.
He said that culture was one that the GREDA members could explore because people would want to buy and own it and, therefore, taking mortgages to buy would not pose any risk to their investments.
“In the other world, they buy houses like stocks and bonds and therefore they are exposed to all forms of risks”, Anane Antwi stated.
Collective Investment Schemes
SEC is also promoting the operations of Collective Investment Schemes (CISs) to mobilise savings for the development of the capital markets.
There are currently 39 CISs licensed and operating in the country, with 22 of them operating as mutual funds and 17 unit trusts.
So far, the scheme has mobilised GH¢445,670,263 as at the end of June 2014, showing an increase of 47.83 per cent over the June 2013 figure of GH¢301,476,587.
Comet failed to list
Attempts by Comet Properties in 2010 to list on the Ghana Stock Exchange failed because the real estate company could not raise the minimum threshold from investors.
This was after Comet Properties received approval to list on the Ghana Stock Exchange.
The approval from market regulator, the Securities and Exchange Commission, permits Comet to go to the public to raise about GH¢62 million.
Benefits of long-term capital
Long-term financing brings in stability as against matching long-term projects with short-term funds. This also helps in one’s cash flow and enables one to undertake better projects.
It also means that it will be easier to project one’s earnings and cash flows as one knows what the interest expenses will be each month.
Short-term financing on the other hand does not offer those advantages, as one has to constantly renegotiate the terms of the agreement.
Having long-term financing in place gives people a better idea of their long-term cost of capital. That way, they are able to better decide which projects are worth pursuing.
Credit: Graphic