Estate developers send final SOS to BoG
Real estate developers are giving the Bank of Ghana (BoG) two options from which it has to choose one to help players in the industry to know the way forward in pricing the houses they put out for sale.
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To them, the central bank is either to stabilise the falling cedi with immediate effect or allow the estate developers to index their prices to the US Dollar, or be prepared for a bust in the housing industry.
Already, the umbrella body of estate developers in the country, the Ghana Real Estate Developers Association (GREDA), has tabled the concerns of the industry to the Vice President, Mr Paa Kwesi Amissah Arthur, after earlier petitions to the BoG on the continuous slide of the cedi, which inspired the bank's decision to partially restrict transactions in foreign currencies, failed to achieve its overall objectives.
"I must be frank with you; it is not in anybody's interest to collect dollars from anybody if the cedi is stable and there is certainty in the business environment,” the acting Executive Director of GREDA, Mr Sammy Amegayibor, told GRAPHIC BUSINESS on July 24.
“The value of the cedi is falling by the day and it is affecting prices of our raw materials we import, so what we are saying is just allow us to index our prices to the dollar so that even if the cedi is not stable, we can be sure of how much we are expecting from our clients," he added.
He said these uncertainties, together with the recent challenge with access to and cost of cement had caused many developers to produce at half their capacity.
Mr Amegayibor explained that the real estate sector, which employed hundreds of thousands of people; from cleaners to chief executive officers, is now facing its worse challenges ever as the falling cedi continues to trigger weekly increases in prices of the raw materials used in the construction of the houses.
The impact, he said was a slowdown in activities in the industry and in the companies in particular.
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Purchasing power
The local currency, which is in its worst time of depreciation, has so far lost close to 30 per cent of its value to the US Dollar mainly as a result of the BoG's inability to match foreign exchange demands with supply.
The shortage in dollar supply was mainly occasioned by speculative buying resulting from a loss of confidence in the economy right from late last year through to the beginning of this year.
Although the bank tried arresting the situation with intermittent supply of dollars and the revision of its foreign exchange rules in February this year to, among other things, restrict foreign currency transactions, the decline continues unabated.
That has led to a consistent rise in prices of goods as reflected in the rise in inflation from 13.5 per cent in December 2013 to 15 per cent in June, this year.
Prices of cement, which is the bedrock of the real estate industry, had skyrocketed; rising from Gh¢18 at the beginning of the year to about Gh¢35 in some regional and district capitals nationwide.
Although this translates into increased costs to businesses and real estate developers in particular, the situation also leads to a decline in the purchasing power of consumers, given that their incomes would no longer be able to buy more goods.
That, according to Dr Alexander Tweneboa, a former President of GREDA and Chief Executive Officer of Tracoaf Estates Limited, was worrying to the developers and the country in general.
"In January, this year, a two bedroom house would have normally sold for Gh¢120,000. Today, because of the increment in prices of cement and other cost, that same two bedroom house is selling at Gh¢160,000, which is an additional Gh¢40,000. Now, where is the average Ghanaian going to see the additional Gh¢40,000 in his salary in seven months," Dr Tweneboa, whose company specialises in affordable housing, asked.
"So basically, it has eroded the purchasing power of the average Ghanaian," he said.
Mortgage companies to petition
GRAPHIC BUSINESS learnt that the situation had led to the cancellation of contracts that were signed months and years ago as developers and clients failed to reach a consensus on how to readjust the prices to incorporate the various increments.
The acting Executive Director of GREDA confirmed that some of their members have had to cancel a sizeable number of mortgage deals as the various increments in cost had caused the disqualification of some applicants.
The paper learnt that Ghana Home Loans, which is a major player in the mortgage business, is mobilising players in the industry to present one voice to be forwarded to the BoG.
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That petition, which would be in the form of a meeting is expected in the coming days and would herald similar ones held between the bank and GREDA on the revised rules on foreign exchange usage.
But while this happens, Dr Tweneboa said the government needed to act fast in other to halt the potential migration of developers from the country to foreign markets where conditions are comparatively better.
"We have lots of clinker and we can easily produce our own limestone if we put in the necessary effort," he added.