Democratic Republic of Congo Landscape of Investment
Introduction:
This country report forms part of the Centre for Affordable Housing Finance’s Investor Programme which aims at addressing key information asymmetries on who, why and how investments are made in the African housing sector. With the intention of identifying and championing increased investment in affordable housing, the report includes insights and analysis into the depth and breadth of investment in the Democratic Republic of Congo’s housing and housing finance sector. The overall goal of this project is to quantify the breadth of investment activity with respect to housing and housing finance across Africa and to establish a mechanism to track this on an ongoing basis. This project has collected data and highlights gaps and opportunities in the investment landscape. With the aim of stimulating greater investment in affordable housing and connecting investors with potential investments, the report profiles investors and investment instruments with the greatest impact on the housing finance market within the Democratic Republic of Congo.
Growing financial sector experience and increasingly sophisticated financial instruments are driving investor interest in African real estate. This includes new market opportunities related to a rising urban middle class, an increasingly localized construction material industry and innovations in housing finance such as the emergence of Real Estate Investment Trusts and mortgage liquidity facilities across Africa.
Investment Activity in DRC’s Housing Industry:
This sections analyses the different investment tools targeting the housing and housing finance sector in DRC, their investment horizon and the period of investment.
Investment Tools:
The top performing investment tool is property (delivery of housing units/apartments). Property stands out, in response to Government efforts (with support from foreign investors) to address the acute housing deficit, particularly among the urban populations in the cities of Kinshasa and Lubumbashi. However, the price of units (above US$ 25,000) is well above the affordability scale for a typical working lower middle income household in Kinshasa (about US$ 500).
Impact of Investments in DRC’s Housing Industry:
The Breadth and Depth of Housing and Housing Finance Products DRC has a housing deficit of about 4 million units, while the annual housing requirement is close to 250,000 units. The housing requirement in Kinshasa alone, is estimated at about 140,000 units annually. Although the demand for affordable housing is evidently high, the few past and ongoing housing projects are skewed towards the needs of middle-income and wealthy individuals. These individuals earn above US$ 1,000, and constitute less than 10 percent of the population).
Challenges to Deepening the Landscape of Investment in DRC:
There is no stock market or debt capital market. Most of the private commercial bank’s products are designed for established business entities such as mining companies. Nonetheless, steps taken to liberalize the insurance sector – formerly dominated by the national insurance company – SONAS, could help un-lock some long-term funds for housing.
DRC has no functional corporate debt market and as such the fixed income market is restricted to short-term government issued treasury bills with maturities up to 28 days, which are dematerialized and freely tradable through commercial banks. Access to the primary market is restricted to commercial banks holding securities accounts with the Central Bank and all investors, including institutional and retail investors, must submit bids through banks. Commercial banks, which dominate the investor base, can also trade Treasury bills on the secondary market, but must display bid and ask prices for which they agree to conduct transactions. There is no derivatives market present in the DRC.
Conclusion:
The country has a limited number of developers (less than 20), all of whom deliver middle and high-end properties (above US$ 20,000). Institutions providing mortgage finance are fewer than 10, and significantly constrained by a lack of long term finance to offer the mortgages at modest terms. Mortgages are as dear as 16 percent, for an average tenor of 5 years. Presently, close to 80% of the housing developments were/are self-built, with distinctly poor features, not compliant to local master plans and municipal construction standards.