A Great Essay on Real Estate Development in Ethiopia

We encountered this great essay by Yared Mussie and decided to share it with the world. After reading
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By Yared Mussie

So far the solution has been simply to expand. In terms of residential expanse, much of the real estate
has been developed towards the outskirts of the city creating a vast suburbia in neighborhoods such as
Ayat homes, to the east, or posh gated communities such as Berta’s Habitats south of the city. Guest
houses often located within the city center, have also become popular amongst more short term visitors
as they are already fully furnished and have hired help ready for service. Although there is plenty of land
in the country, land within the city limits of Addis is highly priced thus a growing number of apartment or
condominium high-rises are being built in the city by both private sector as well as the government. Be it
so, these real estate developments are a drop in the bucket when contrasted with the immense number of
homeless who either live on the streets in makeshift shelters or in “illegal” squatter slums. According to
CSA, 92% of Addis Ababa residents earn a monthly income of less than $167 a month. Hence the
number of private applicants (63,380) registered to acquire plot of land to build their dwelling between
1988 and 1995 was only 3.4% of the total average population of the same period. The problem
essentially is that these people simply do not have the financial means to purchase or rent a reasonable
place to dwell.

The previous mayor-ship of Addis, Ato Arkebe Oqubay’s administration, had begun a real effort in trying
to build mass housing units for low income groups but they were still met by tremendous challenges. The
city administration had started to act on the long lived housing problem by giving prior attention and
allocating a significant portion (almost 50% of the capital expenditure in 2004/05) since 2003/04.
Accordingly, it planned to finalize the construction work of 31,756 units at a cost of $93.2 million and to
build 33,000 new units at a cost of $95.1 million USD in 2006/2007. In other words, the amount of money
needed to cover the planned housing activities is $188.3 million, which is about 81% of the revenue
collected in 2004/05. The decision was made to subsidize the housing units in order for the people to
afford them. The rising cost of construction material was included of course and the city estimated that a
housing unit studio would cost $127.6 per m Sq and a one bedroom $133.9 p m Sq which was
approximately 37% lower than the market value which was estimated by the Construction & Infrastructure
Authority of the city administration. The beneficiaries of these types of units were also allowed lower level
of down payment (7.5%), and would pay 25% of their monthly income to finish their loan within 20 years
at 0% and 2% interest rate respectively. Based on this payment arrangement an individual would have to
earn a monthly income of $49 (416 Birr) and $86 (730 Birr) so as to purchase a studio or one bed room
type of house respectively.
For the foreseeable future affordable housing in Addis Ababa will remain to be a troubling issue for its
residents due to the sheer multitude of obstacles compromised within the city. One factor being high cost
of construction material coupled by the high cost of fuel energy. And second, although this could be
altered with the right policy, are the actual market prices for land. There really is no one solution or even a
defined way forward as of yet, but one thing is clear, there needs to be more of an effort from all parties
with a stake in the real estate and housing sector. The obstacles are too great for the Addis Ababa city
government to tackle this on their own. There are foreign non-governmental organizations such as GTZ
(a German institution) that has constructed low cost housing units in Mekelle, Tigray and have plans on
building more in other towns and cities. However, low cost housing should not be limited to government
and non-governmental organizations to develop, the private sector can and should be involved in some
form.