A Zambian developer who works in the affordable housing industry in continental Africa has said:
“The problem with housing is not building it. We all know how to build houses. It’s not demand. There are plenty of people who want houses. The problem is allowing the people who want the houses the financing capacity to buy them.”
Nowhere is this statement truer than here in Madagascar.
Right now, there is an immediate need for 2 million homes in Madagascar, and the need increases by 100,000 homes per year. The demand is overwhelming, but both builders and potential buyers can't find the money. The unemployment rate is high, and many of the employed still don't make enough. To make matters worse, the average loan term has been 3 years with an average interest rate of 45 percent.
Fortunately, banks have recently started to offer better construction loans and mortgage financing, so we looked into the offers currently available to Trano Mirary and other potential buyers.
We found early success with a newly opened branch of the Bank of Africa. The local director formed a partnership with us, recognizing the good publicity and potential new clients that would come from working with an affordable housing company.
At first, the Bank of Africa could only offer us 10-year loans at 19 percent interest. That's better than the national average, but still not great. We checked with other local banks, including Bank Negara Indonesia, BFV-Societe Generale, and the Malagasy Bank of the Indian Ocean, and they couldn't do much better.
However, now that we knew our options, we were better equipped to go back and negotiate with the Bank of Africa. To our delight, they were willing to offer our clients a 15-year term and lower the interest rate to 13 percent. The lowest rate in Madagascar!
They also provided us with literature for our clients, to explain how the loans work. Anyone who has been employed for at least a year with a reputable business can take out a housing loan by setting up a bank account with a direct deposit from their employer. After four months, the bank verifies their income and they qualify for the 15-year mortgage with payments of up to one third of their monthly salary.
Another major hurdle was behind us, and we had the tools to educate buyers and provide them with an affordable option. Now on to the next step: buying land.
