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Tuesday 20th March 2018

Ethiopian Housing Boom Amid Concerns for Quality, Affordability

Business

Elias Meseret - 7Dnews Addis Ababa

Sun, 09 Sep 2018 12:28 GMT

Take a walk around the city centre or step into the outskirts of the Ethiopian capital, Addis Ababa, and you will notice how this city of more than 5 million inhabitants has transformed these days, especially in the past 10 years. New real estate projects are mushrooming in the suburbs and shiny glass and steel buildings are growing everyday thanks to the prevalence of a booming construction sector that now constitutes a huge chunk of the country’s economic activity.

However, the issue of affordability, quality and the displacement of farmers on the outskirts of the capital still persist.

Recent violent clashes between police and student protesters have claimed the lives of thousands of Ethiopians. That in part was triggered by anger towards the government’s plans to expand the city boundaries into the adjacent Oromia region. This expansion plan was to provide more land for industries and housing projects.

A series of recent building collapses in some parts of the country has raised the issue of quality, which some say is completely disregarded.  In February 2017, a three-flat building in Addis Ababa’s Bole Sub-city collapsed and a bank underneath was forced to evacuate, though no casualties were reported besides injuries. Ten months earlier, another building had collapsed in the same area. In July 2017, a building collapse in Ethiopia's Arba Minch city, 435 km south of capital Addis Ababa, killed four people and injured 11 others, Xinhua news agency reported. This has alarmed government officials and occupants of buildings alike.

Many people complain that most of the real estate developers’ properties are beyond the means of the majority of Ethiopians, and mainly cater for the rich and the diaspora.

Despite all the odds, Ethiopian officials are aiming to build millions of housing units in the next five years as part of the second Growth and Transformation Plan (GTP 2). The Ministry of Urban Development, Housing & Construction is spearheading the effort.
 
Mohammedzain Kedir, policy and programme bureau officer of the ministry, told Ethiopian local media the construction involves 750,000 houses in urban and 1.7 million houses in rural areas, thereby creating 600,000 jobs. These all are part of the government housing project.
 
In the private sector, real estate developers are trying to benefit from the construction boom by embarking on massive projects. The major players so far are Yotek, Sunshine, Tsehay, Ayat, Country Club Developers and Ropack, among others. Most of these construction companies are labelled as Grade 1 contractors with substantial capacity to carry out road, building, bridge and other infrastructure projects.
 
In addition, major international real estate companies, such as the Egypt-based Arab Contractors Company, are also trying to grab the opportunity by entering the local market,. This Egyptian company is currently working on two projects in Ethiopia at an investment of more than $111 million. It is also studying a plan for a new affordable housing project in Addis Ababa, mainly residential units of seven, nine and 12 floors each.
 
According to UN Habitat, about 70% of Ethiopia’s population lives in slums with inhuman and unhygienic conditions. Additionally, over 80% of the homes are “Chika houses” – made of mud walls and wood – and 35% of the solid waste generated by the city is not collected. According to its latest finding, only about 9% of the built up areas have connections to a sewerage system and about 71% of households do not have adequate sanitation.
 
Private real estate developers have continued to put their mark on the city in the past decade and many of them are credited for the emergence of new neighbourhoods on the outskirts of the capital. Yet many criticise this sub-sector for remaining an exclusive high-income club at the top end of the property market. And they don’t seem to be going down the income ladder anytime soon.
 
Many say the private developers’ market has ended up supplying an exclusively luxury accommodation range whose average selling price is far beyond the means of the middle-income consumer.
 
Data from the African Housing Finance Handbook 2015 has indicated that the price of the cheapest developer property that is sold in Addis Ababa is $34,000 ($567 per sq. m). This is substantiated by LAMUDI, an on-line commercial property listing platform, which compared the $477 per square meter average price with much more expensive properties in Africa and the world. This actually is nowhere near the average annual household income, which is in the neighbourhood of $1,700.
 
According to government figures, Ethiopia currently has 50 licensed companies operating in the market, exclusively catering for high-income groups and providing exclusively high-end luxury accommodation.
 
Ethiopian authorities have been rolling out what experts consider to be the largest social housing project in Africa, and one of the most ambitious in the developing world. This “Condominium Housing Project” has delivered accommodation for the past decade, though demand and supply have not been at par. To deal with this, Ethiopia’s Federal Housing Corporation unveiled in June this year another mega project for constructing 16,173 residences in Addis Ababa at an estimated cost of 33 billion birr ($1.18 billion). However, in Addis Ababa alone, over 755,535 house seekers have been registered for low-cost housing schemes, according to local The Reporter newspaper. “Out of these 126, 529 are government employees. But no evidence is collected on how many employees are under the federal government,” it added.
 

 



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