Diaspora, Housing & Bank Loan in Ethiopia

Housing is second essential human need, next to food and water. It is a social good, an asset which promotes individual and collective dignity, privacy and security.  Also, it is an important component of the economic and social development of the country.

However, home ownership is the serious problem to most people due to low income and poor saving habit, amazing increase in land lease & construction materials price, low dedication of banks to give mortgage loan due to acute shortage of deposit and the like.

The major purpose of this proposal is to facilitate mortgage loan in different techniques to diaspora and people living in Ethiopia thereby to support the deposit mobilization and foreign currency generation effort of NIB in collaboration with the real estate developers and homebuyers.

The real estate Business in Ethiopia is an infant industry with a lot of opportunities, market potential, and high customer demand but trapped as a result of unethical practices.

  1. REAL ESTATE BUSINESS IN ETHIOPIA

Real-Estate Business in Ethiopia, is an infant industry, with a lot of opportunities, market potential, and high customer demand but trapped as a result of several factors, like

  • Rigid and lethargic governance from policy makers,
  • Lack of strong auditing and reporting standards,
  • Undeveloped legal system ,
  • Immature regulatory framework relating to real estate taxation, planning and building codes,
  • Lose enforceability of contracts and title,
  • Misuse of public trust by real estate developers and
  • A strong tradition of property rights.

This and related factors hampered the industry from being a means to economic development, high job opportunities and standard quality of living.

1.2 OPPORTUNITIES OF REAL ESTATE BUSINESS

All real estate historical success mainly begins on the demand side. The industry had a number of forces that made a very favourable buyer environment at the beginning:

  • Increasing Foreign Direct investment, the recent economic development of the country and service sector booming in Ethiopia has created;

•             High  office space demand,

•             High retail space needs,

•             Prosperity on some individuals and the like.

  • Changes in where people want to work and where they want to shop.
  • Significant improvements in the product by itself: the facilities, the layout, the elevators and others.
  • A very attractive set of offers and promises to homebuyers from developers directed vast pool of capital to real estate developers attracted a lot of Ethiopian Diaspora but due to unethical practices, it blemished before it went long.

1.3 PROBLEMS THE REAL ESTATE BUSINESS FACED

Problems the real estate business faced are as follows:

•             Rigid and lethargic Governance from policy makers,

•             Lack of strong auditing and reporting standards,

•             Undeveloped legal system ,

•             Immature regulatory framework relating to real estate taxation, planning and building codes.

•             Lose enforceability of contracts and title,

•             Misuse of public trust by real estate developers,

•             A strong tradition of property rights and the like

This credit scheme allows Diaspora Ethiopians (Non-resident Ethiopians and Non-Resident Foreign Nationals of Ethiopian Origin) to purchase or construct residential or commercial buildings in Ethiopia by saving with the Bank certain portion of the value in advance in foreign currency for a certain period.

The Mortgage is a secured Long-Term Loans that allow Diasporas to purchase real estate and homes in Ethiopia. The loan product is available to eligible Diasporas with verifiable and steady income flows.

Purpose of Loan

  • Purchase of residential house, a residential unit / apartment, condominium unit or commercial building
  • Construction, renovation or extension of a residential unit / apartment or commercial building
  • To simultaneously purchase and improve a home/building.
  • Finish construction of residential house/commercial building
  • Refinancing of existing mortgage loan/ Take-out of existing housing loan from another bank
  • Building can be either residential or for commercial purpose

Target Market and Eligibility

  • Non-resident Ethiopian Nationals living and working outside Ethiopia for more than one year who can produce authenticated documents.
  • Non-resident foreign nationals of Ethiopian origin.
  • Companies owned by the above-mentioned non-residents and located in Ethiopia
  • Debtors who are the capacity and willingness to service the loan in foreign currency.

Loan Amount

  • The amount of loan is determined by the repayment capacity of the borrower as evidenced by his income and the cost of the home/building to be purchased/constructed and related collateral.
  • The Bank may decide on the minimum and maximum amount of the loan apart from these conditions.

Repayment Frequency

  • Monthly instalment frequency for purchased home and monthly or quarterly instalment buildings under construction, as required.

Joint Application

  • Inclusion of spouse as a co-applicant may enable the primary applicant to take a higher loan amount.

Loan Security

  • The loan will be secured by the house or building purchased/constructed.
  • The Bank may require or accept other collaterals in addition to the house
  • Collateral (s) shall be registered in the name of the Bank on first degree basis for the total loan amount.

Required Documents

The Application letter has to accompany the following documents:

  • loan application form
  • Copy of Sale Agreement with the seller of the house/building.
  • Copy of title deed
  • Valuation Certificate from approved valuator of a house, if valuation is outsourced.
  • Application forms properly filled and signed by the applicant.
  • For individuals of Ethiopians or foreign nationals of Ethiopian origin, valid passport and/or identification card.
  • For businesses, Certificates of ownership entitlement for the organization and/or Articles and Memorandum of Association, etc.

Bank Account

  • Bank statement as proof for deposit of equity contribution

Fees and Charges

  • As per the prevailing Terms and Tariff Guidelines of the Bank

Property Estimation and Related Fees

  • As per the prevailing Property Estimation Policy of the Bank, and Terms and tariff thereon.

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