Djibouti seeks public and private solutions to social housing shortfall

Government authorities are looking to partnerships and new programmes in a bid to address Djibouti’s affordable housing deficit.

In mid-September President Ismaïl Omar Guelleh announced a social housing plan that will provide 20,000 units, funded by grants from multiple donors, including Saudi Arabia, Kuwait, Morocco and China.

While the total value of the programme has yet to be disclosed, the completed housing units are expected to cost tenants between DJF15,000 ($84.40) and DJF40,000 ($225) per month, according to press reports.

Djibouti’s annual housing deficit stands at around 2500 to 3000 units per year, according to Abdourahman Ali Ahmed, head of the administrative and financial department at Djibouti’s Housing Fund, in addition to a structural housing deficit of around 30,000 homes that has been accumulated over the past decade.

To help tackle the shortfall, and to provide accommodation for residents currently living in slums or substandard buildings, the government is working to expand the 900,000-person country’s affordable housing options.

Zero Slums

To this end, in late July Amina Abdi Aden, secretary of state for housing, and Mohammed Nabil Benabdallah, Morocco’s minister of housing and urban policy, signed a memorandum of understanding (MoU) to reduce substandard housing and provide affordable and safe lodging through the sharing of expertise and best practices.

The MoU also includes provisions on the creation of bilateral partnerships between construction, engineering and property development companies, and professional organisations.

Under the terms of the agreement, Morocco will provide technical assistance for Djibouti’s Zéro Bidonville (Zero Slums) initiative – a scheme that has been under discussion since 2013 and aims to reduce informal housing in the Horn of Africa country. The programme will cost an estimated DJF4.1bn ($23m) over the 2015-19 period.

Djibouti is looking to emulate the success of Morocco’s Villes Sans Bidonvilles (Cities Without Slums) project, which, after a decade in operation, had eliminated slums in 55 out of 85 cities as of 2014, with 82% of households living in those slums having acquired adequate housing, according to official figures.

Increased investment

Djibouti has invested an average of $15m per year, or roughly 2-3% of the country’s annual budget into housing programmes, since 2003, according to the Centre for Affordable Housing Finance in Africa.

This allocation increased last year, with the government spending around $20.3m, the majority of which was earmarked for urban development and renewal projects.

“The strategy that has been defined implies that the state will take care of housing needs for the lowest-income groups, while for the other segments, the private sector can and should take more of an initiative,” Aden told OBG earlier this year, noting that “until now the private sector’s contribution to the real estate market has been limited”, with private investment geared primarily towards banking, commerce and transport.

As a result, Djibouti has enacted incentives to encourage private investment in the affordable housing segment.

Ongoing incentives introduced in 2013 with Law No. 13/AN/13/7th extend a number of benefits to low-income housing developers, such as tax breaks on interior consumption tax, value-added tax and imports of construction materials, as well as a reduction of taxes on profits from social housing projects.

Expanding access to finance

As with many frontier markets on the continent, one of the key barriers to expanding residential activity in Djibouti is a lack of credit. Households often face obstacles in obtaining loans ranging from collateral requirements to high interest rates and insufficient saving capacity.

“Access to financing is a major issue in resolving the need for housing,” Aden told OBG earlier this year. “Djibouti has a middle class that wants to be owners of their property, but who do not meet the bank’s rather strict criteria.”

To this end, Djibouti has announced plans to establish the Housing Bank of Djibouti (Banque de L’Habitat de Djibouti, BHD), which will be dedicated to providing greater access to lending for the residential sector.

The bank will be endowed with a DJF2.6bn ($14.7m) fund designed to finance measures such as credit guarantees for home loans and the partial subsidisation of interest rates for low-income homebuyers. The authorities expect the BHD to offer a total of 5000 housing credits, while interest rates on housing loans will be capped at 5%, according to an interview with Aden cited in international media.

Housing officials are looking for the establishment of the bank to jump-start the country’s housing sector, incentivising both lenders and homebuyers by reducing risks and barriers.

Oxford Business Group