Excerpt from Africa Housing Finance Yearbook 2016


Mozambique is facing major near-term liquidity risks, with currency depreciation exacerbating the country’s sizeable external debt burden and opaque public borrowing prompting donors to withhold aid. Owing to drought and a sharp drop in investment, real GDP growth is forecast to slow to a 15-year low in 2016. The ruling party, Frelimo, is expected to remain in control (despite internal divides), but long-standing tensions with Renamo, the main opposition party, will stir violent insecurity[1].

Mozambique’s economy has been growing at an average of between 7.5 to eight percent over the past decade and its future economic potential is underpinned by natural resources. Mozambique is now facing difficult economic challenges and IMF has noted that economic growth this year will be below 4.5 percent which is 3 percent below historic levels. Inflation hit 16 percent in May, far from the 4.5 percent foreseeable for this year. As a result of the current economic situation metical continues to depreciate with international reserves declining.

The situation of Mozambique did not change much from last year. The

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Excerpt from Africa Housing Finance Yearbook 2016


Mozambique is facing major near-term liquidity risks, with currency depreciation exacerbating the country’s sizeable external debt burden and opaque public borrowing prompting donors to withhold aid. Owing to drought and a sharp drop in investment, real GDP growth is forecast to slow to a 15-year low in 2016. The ruling party, Frelimo, is expected to remain in control (despite internal divides), but long-standing tensions with Renamo, the main opposition party, will stir violent insecurity[1].

Mozambique’s economy has been growing at an average of between 7.5 to eight percent over the past decade and its future economic potential is underpinned by natural resources. Mozambique is now facing difficult economic challenges and IMF has noted that economic growth this year will be below 4.5 percent which is 3 percent below historic levels. Inflation hit 16 percent in May, far from the 4.5 percent foreseeable for this year. As a result of the current economic situation metical continues to depreciate with international reserves declining.

The situation of Mozambique did not change much from last year. The country is developing from a very low base and continues to be among the lowest-ranked countries on a GDP per capita basis, (averaging US$619 between 2010 and 2014 according to the World Bank).

Mozambique has relatively low level of urbanization with only 31.2 percent of people living in cities. However, the urbanization rate is estimated to be 3.28 percent per annum and it is expected to increase following the continent patterns. The concentration of business and political power as well as the urban population in Maputo means that it will remain as the main hub of Mozambique.

The country still suffers from high levels of poverty and vulnerability. United Nations Development Programme’s (UNDP) Human Development Report (HDR) 2014 ranked Mozambique 178th out of 187 countries. The poverty rate remains high at 55 percent with most of the poor living below the consumption poverty line of US$ 0.6 a day in rural areas. Mozambique is characterized by high unemployment (22 percent while the vast majority of the labour force relies on subsistence farming and informal activities. The government approved a long-term National Strategy for Development (ENDE) for the 2015 to 2035 period. The ENDE places particular emphasis on industrialization and the key priority areas of agriculture, fisheries, industrial diversification, infrastructure, the extractive industries and tourism which means there will be an increasing demand for housing in the next few years.

Access to finance

The Mozambique financial sector has seen a fast expansion during the last years, although it is still considered to be underdeveloped. Approximately 90 percent of Mozambicans are without an account with a formal financial institution, and formal credit is available to only an estimated                                three percent of the population[2].

The banking sector has 19 registered banks accounting for 95 percent of total financial system assets. However, 87 percent of the total financial sector’s assets are concentrated in the five main banks. The sector is fast expanding, both in assets and geographical coverage, and is deemed to be healthy and stable. The latest available data for 2014 reveals an average bank capital adequacy ratio of 15.9 percent and reserves ratio of 10.1 percent (the regulatory reserve rate remained at eight percent), while non-performing loan (NPLs) rate remains below four percent, in accordance with international standards[3] .Lending rates remain very high, Banco de Mozambique decreased its benchmark rate by 7.5 percentage points since January 2012 and prime lending rates fall to 14.8 percent in 2015 from 19 percent in 2011. Because of the current economic situation, Banco de Mozambique has raised the Standing Lending Facility to 14.25 percent in June 2016 and prime lending rates have increased to 20 percent. This means mortgage interest rates are around 25 percent with a term of 15-20-25 years and a minimum down payment of 20 percent.

Most of Mozambique’s commercial banks offer a mortgage product, but the mortgage loan to GDP ratio is very low measuring 0.91 percent in the end of 2014 according to Banco de Moçambique.  Banks’ mortgage portfolios represent 2.42 percent of total outstanding loans according to WDI. The conditions for mortgage loans are generally restrictive reflecting the banking industry’s great cautiousness. Loan-to-cost maximums are generally set at 80 percent. Commercial banks request another property or fixed assets as collateral for a transition loan at least until the construction is 80 percent finished, and thus can then be mortgaged. Mortgages in Mozambique have a maturity of 10, 15 or 25 years. Approximately only 15 percent of residential properties with mortgages have legal titles.For housing loans, the average annual effective interest rate is calculated based on the banks’ prime rate of 20 percent plus a mark-up of up to five percent depending on the client’s credentials (typically 25 percent).The minimum loan amount is around MZN 300 000 (US$5 000).

To make housing loans more accessible, some banks offer property leasing or rent-to-buy schemes in which the property is made available on a rental basis to a tenant who has an option to buy the property at the end of the lease.  The Fund for Housing Promotion (FFH) has agreements with several banks to make mortgage loans accessible for potential beneficiaries of its projects. Banks also offer construction and renovation loans. These have shorter terms, sometimes five to ten years, made available as unsecured loans and therefore at a higher interest rate of about 30 percent.  In some cases, the lender requires a guarantee or other form of collateral. Developer finance is considered to be too limited and expensive, with rates up to 30-35 percent.

Although the microfinance sector is vibrant- only five micro financiers offer housing microfinance as a product. There have been significant changes in this industry over the past few years and the depth of financial intermediation remains low. Currently only Socremo, at a very small scale, offers housing loans for home improvements and rehabilitation.


The country’s expectations with commodities wealth was the main reason that house prices soared as there was a big demand with a small offer in the housing market. Recent public debt crisis and metical devaluation has reduced the demand and so house prices are lower. New built condominiums have increased the offer in the upper market contributing to lower prices. There are several additional reasons for high housing costs such as: high construction costs (30 percent higher than South Africa) due to higher material cost, low labour productivity and high financing costs. A small percentage of construction materials are locally manufactured, most materials are imported from South Africa, Portugal and China. Just the most basic materials (such as cement and wood) are sourced locally. Furthermore, the lack of basic infrastructure adds to the total costs of the development. Plots are often far from main roads and not linked to the public water and electricity network.  Plots that are already more developed are transferred at high prices even though the law clearly outlines that land is government owned and may not be acquired, the right to use the land may be passed on.

Furthermore, although the minimum wage was revised to MZN3 298 (US$55) a month in April 2016 as the metical has depreciated, the majority of population earns less than US$50 a month. Banks offering mortgages have a minimum loan amount of MZN300 000 (about US$5 000), which is far out of reach of the majority and far from the cost of a house. At the current rate of 25 percent, the minimum loan would be affordable only to a household with a monthly income of about MZN20 000 (about US$ 330). The family would also need to save a further third of the purchase price to cover the deposit requirements, registration costs and taxes, and valuation and origination fees.

With regards to the lack of affordable housing and the lack of access to finance, most families rely on their own savings, local materials and self-build for housing construction. UN-Habitat suggests Mozambican families have invested at least US$3 billion in informal housing in Maputo alone. Housing affordability is also a challenge in the rental market, where high demand and the lack of adequate supply have resulted in highly inflated prices across all sectors with owners setting monthly rents in the upper market from US$1 000 to US$10 000 per property in Central Maputo.

Demand for housing far outstrips supply in the mid and low market. Low income earners cannot access the formal housing market and they can just go to auto construction.


Housing supply

FFH estimates a housing deficit of two million units and over 13.5 million people. The equivalent of 2.5 million families, or 60 percent of the Mozambican population live in substandard housing; approximately 70 percent of households in Maputo live in informal housing. In Maputo, the demand has been estimated at 23 000 units over till 2020 in the areas of Beixa, Museu, Polana, Sommerschield I, Sommerschield II and Marginal neighbourhoods. Only 4 500 new housing units are expected to enter the market in central Maputo over the same period. Furthermore the housing deficit is also felt in other emerging economic centres in the country, such as Tete, Nampula and Pemba. Until 2020, housing demand in Nacala is expected to grow to 4 475 units and 6 500 units in Pemba.

There is very limited investment in the low-cost housing sector, as investors prefer high-end projects. Low-cost housing developers are also put off by the need to build the supporting transport and services infrastructure for the new sites and the lack of government support for low-cost housing schemes, but the main problem is still the limited ability of low-income households to access to affordable finance. Some private projects aim to deliver affordable housing, Casa Jovem in Costa de Sol Maputo is often mentioned as one such example as well as Intaka. Casa Jovem is a 36 hectare housing project under development on the outskirts of Maputo.  The project comprises 1 680 flats in four to eight storey walk-ups, and 300 houses. To date, 100 flats have been constructed. However with prices of flats between US$47 000 and US$130 000, it is out of the reach of most Mozambicans.

In its five-year plan (2010-2014), the government committed to build 100 000 houses and service 300 000 plots of land by 2014.  According to local sources, the government only delivered 1922 houses by the end of 2014. The housing target in the new five-year plan (2015-2020) is less ambitious with the state committing to build 35 000 houses by 2019 (7 000 per year) but it is still not realistic. Some projects have begun in Marracuene this year. Through the ‘Housing Action Plan for the Young, Civil Servants, and Old Combatants’, these broad delivery plans get more detail: 20 percent of the planned housing delivery is to be completed by government, 30 percent by the private sector and 50 percent by residents themselves through self-construction.  Only five percent of houses are to be fully subsidised.  The FFH will take the lead in the implementation of the action plan and will collaborate with all municipalities. The FFH foresees the development of public private partnerships to diversify its financial resources. Projects in Marracuene, Tete and Nampula are on-going.

Over the years, there have been some noteworthy public private partnershiparrangements. This includesthe construction of the project Intaka(started in 2012),with the intention of building 5 000 houses in the southern city of Matola, in partnership with Henan Gouji Imobiliária. Unit prices are between US$63 000 to US$158 100.  An agreement with the Chinese government promised a further 5 000 houses in other cities.  A partnership with a Spanish construction group will see the development of 4 500 houses in three provinces, with prices starting at US$30 000 in Maputo City, construction was supposed to launch in 2014 but works did not start yet due to problems with the quality of construction.

In 2013, FFH launched the building of 100 houses in Mutaunha (Nampula) financed through the sale of houses in the Olympic Village.  The first phase has been completed. Furthermore 240 apartments were expected to be constructed during the second phase of construction in theOlympic Village with a total value of US$30 million increasing the housing stock of the Olympic Village to about 1 100 homes.Other developments include a US$217 million facility provided through three credit lines by the Indian government in 2013 to fund public works and housing projects. The projects included the construction of 1 200 houses in Tete (400 Units), Zambézia (400 units) and Cabo Delgado (400 units).In addition, FFH also signed agreements for a new social housing project in the Provinces of Cabo Delegado, Nampula, Tete and Maputo, where the Macau Charlstrong Engenharia, Technologia e Consultoria, Ltd, expect to build 50 000 housing units at a total cost of US$5.5 billion. South African company Sasol, according to its website, aims to deliver 97 houses in Vilanculo on 22ha of land in collaboration with Companhia Mocambicana de Hidrocarbonetos (CMH) and the International Finance Corporation (IFC). These new houses are intended for their staff working there, the majority of which are Mozambicans. The construction of the new ring road of Maputo is providing huge amount of available land in the north and the north-west of the city for housing. These new spaces are an opportunity for Maputo but the lack of planning and infrastructures is threatening the extension of the city with isolated, low density developments.

Despite all the new housing developments in the market, the cost of the housing units is out of reach for the majority of Mozambicans and is only affordable to middle higher income earners and civil servants. Auto-construction remains the only option for low income groups. There are pilot projects run by Reall in Beira and Casa Minha in Maputo based on an incremental housing concept but no units are available in the market yet. Casas Melhoradas is another new approach project to improve housing in unplanned settlements with low cost materials but it is still in the pilot phase with only three units built.

Property markets

The state owns all land in Mozambique. Land rights may not be sold, mortgaged or otherwise alienated. The Land Law recognises a “use right to land”, known by the Portuguese acronym DUAT (directo de uso e aproveitamento dos terras).  Any investment made on the land itself is considered to be private property and can be bought, sold or mortgaged.

Land use rights are obtained by inheritance, occupation, state grant, purchase or lease. In urban Mozambique, 62 percent of households access to the land through the land market, either obtaining land on the formal market by buying or leasing use-rights held by DUAT holders or, more commonly, obtaining use-rights on the informal markets. Other means of accessing land include customary rights systems such as inheritance or borrowing (19 percent), state allocation (13 percent) and occupation (six percent). Most rural land is held by communities, which have perpetual DUATs based on historical occupancy. Foreign persons and entities with local residences may obtain DUATs in connection with approved investment projects. Some developers are cautioned by the fact that land can be leased for 50 years with an option of renewal. According to the Global Housing Indicators, only 20 percent of properties are registered. It takes an estimated 40 days to complete the six procedures involved in registering property and the process costs an estimated 6.9 percent of the property value[4].

The registration and cadastre systems still only cover limited urban areas. This limits the amount of formally financeable land through mortgages and contributes to a general lack of clarity on property titles. Secondary sales are also limited. Apart from the fact that they are difficult due to the protracted procedures and consents necessary because of leasehold tenure, owners also avoid the risk of forfeiting current rights in the process of sale (fearing, for example, that the title may be questioned). The problem of collateral enforcement is exacerbated by the long times it takes to go through the courts (on average three years), and that there are many instances of fraudulent titles.

Some rental housing stock converted to private ownership is emerging from government’s policy since 1991 of divestiture to existing tenants at concessionary prices and interest rates. The majority of this stock has already been sold.

A country specific property market issue pertains to the occurrence of “downward raiding” by higher income earners of plots occupied by low income groups due to the unmet demand for suitable land for housing. As a result local buyers are pushed out of the cities into cheaper areas. The ensuing land scramble has caused further problems as some local Mozambicans have faced losing their homes (especially those without a formal title to their houses) and those who live on “illegal” land.

Policy and regulation

Many of the laws governing property date as far back as the 1960s and have not been updated since. Housing is coordinated through two government organizations. The National Directorate for Housing and Urbanization (DNHU)) and the Fund for Housing Promotion (FFH), both under “Ministério das ObrasPúblicas e Habitação” (MOPH9, are the two government agencies with specific mandate for housing. With the reorganization of the MOPH in 2010, the different departmental roles wereclarified so that DNHU is in charge of the politics side and FFH has the mandate to act as an implementation agency. At the same time, within the MOPH, a Directorate that is responsible for the building materials was also created.

The policy and regulation frameworks governing the housing sector is based on article 109 of Mozambique’s Constitution of 2004 and states that all ownership of land vests in the state and all Mozambicans shall have the right to use and enjoy land as a means for the creation of wealth and social well-being. The Constitution further provides that the state shall recognise and protect land rights acquired through inheritance or by occupation, unless there is a legal reservation or the land has been lawfully granted to another person or entity.

The Land Law of 1997 reasserts the state’s ownership of land and provides that individuals, communities and entities can obtain long-term or perpetual rights to use and benefit from land. The Land Law protects the customary rights of communities to their traditional territories and recognises rights obtained through traditional and good-faith land occupancy, as equivalent to rights obtained by government grant. Community land use rights are legally equivalent to rights granted by the government to individuals and entities. Women and men have equal rights to hold land. Nationals have unrestricted rights of access to land; foreign individuals and entities must have a local residence and an approved investment plan.

Rural Land Law Regulations of 1998 provides rules for the acquisition and transfer of use-rights. The process for identifying and recording the rights of local communities and good-faith occupants is governed by the 2000 Technical Annex to the Land Law Regulations.

National Land Registry and Real Estate Cadastre Decree No. 1 of 2003 established new provisions for the registration of inherited land use rights and secure rights to customary rights-of-way.

Urban Land Regulations 2006 apply to existing areas of towns and villages and to areas subject to an urbanization plan. The regulations govern the preparation of land use plans, access to urban land and the rights and obligations of owners of buildings and DUAT holders.

Financial Sector Development Strategy 2013-2022 (MFSDS) provides an overall vision and a comprehensive and detailed roadmap for reforms in the financial sector. The strategy foresees the elaboration of a policy on housing finance, which will address necessary reforms for the development of the financial market for construction and purchase of housing. A first step in improving housing finance has already been implemented by revising the status of the FFH, giving it access to a variety of refinancing resources.

Economic and Social Plan, and the Slum Upgrading Strategy, both of2012, add emphasis to housing and urban infrastructure upgrading.

The Housing Policy of 2011 foresees the creation of adequate housing at an affordable price for all social groups. The policy recognizes the need to improve land management, facilitate access to infrastructure as well as promotion of housing construction and availing financing resources. It highlights the need for the creation of institutional structures which will allow coordination of the joint effort of line ministries in implementing necessary reforms.

Mozambique recent healthy rates of economic growth and foreign investment have slowed in the last year.  Analysts suggest that the development of the natural gas and coal reserves in Mozambique should have a big impact on GDP growth and create opportunities in the industrial and commercial sectors.

There are big opportunities for both public and private sectors to strengthen the development of housing finance, as well as increase its supply. Possible initiatives include expanding tailored housing loan products to low income groups and introducing innovative and competitive housing solutions and products for these people. There is a big need and potential for housing microfinance with many supporting reasons such as pre-existing microfinance industry, self-construction being an accepted building method, provision of starter plots by the Housing Promotion Fund and secure tenure among urban dwellers.

Furthermore, given the price escalations of building materials, opportunities exist regarding the use of alternate approaches, technologies and local materials that could help to reduce the need for imported building materials and speed up the delivery of affordable housing.

There is a significant need for greater supply of affordable housing. With housing finance remaining largely cash-based, there are many opportunities for housing financiers in the market.


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