condominium housing in ethiopia - International Union of Tenants

Beneficiary financeCondominium unit beneficiaries are required to make adown-payment out of their own savings to secure theirunit. The down-payment percentage varies accordingto unit type. Beneficiaries enter into a contractualloan agreement with the CBE on the basis of monthlyinterest and principal repayments. Initially, interestrates for studio units were zero per cent and 2 per centfor 1-bedroom units (Table 3), but the system has beenchanged and includes annual interest rates of 8.5 percent for all units.The project finance structure aims to cross-subsidizethe studio and one-bedroom units as a pricing strategyto increase affordability for low-income households.Studio and 1-bed units are sold lower than theirindividual construction costs and 2- and 3-bedroomunits are sold higher than their individual constructioncosts. The subsidy percentages are: studio -30 per cent,1-bed -10 per cent, 2-bed +5 per cent, and 3-bed +10per cent of unit construction cost. Likewise, there isintended to employ families for six months on theconstruction sites where they could earn ETB 2 a day(USD 15 cents) and save half of this to go towardsthe down-payment for a unit. Unfortunately, thisprogramme feature did not eventuate.The Addis Credit Savings Institution (AdCSI),established in 2000 and capitalized with ETB 517,000(USD 39,000) in city funds, provides savings accountsand lending services to individuals, cooperatives, smallbusinesses, and others. It has experienced an increase inhousing lending as it offers down-payment loans to lowincomebeneficiaries of the IHDP 3 .2.2.4 Location of projectsThe IHDP was envisaged as a national housingprogramme to meet national housing demand.Accordingly, in 2006 a decision was taken to implementthe IHDP in the nine semi-autonomous administrativeTable 3: Initial financial structure for beneficiaries according to unit typeUnit type Down-payment Interest rate Grace period Repayment periodStudio 10% 0% 6 months 20 years1-Bed 10% 2% 3 months 10 years2-Bed 30% 7.5% - 15 years3-Bed 30% 7.5% - 10 yearsCommercial 100% - - -Source: Based on data from: Haregewoin, Y. (2007) Integrated Housing Development Programs for Urban Poverty Alleviation andSustainable Development (The Case of Addis Ababa). Proceedings, European Network for Housing Research 2007: Sustainable UrbanAreas. Rotterdam, 25-28 June 2007. p.13.cross-subsidy from commercial to residential with thesale of commercial units financing the construction ofinfrastructure for each site.No credit or income checks on potential beneficiaries areundertaken. The assumption is that if beneficiaries havethe financial capacity to meet their mortgage obligations,they will do so. If not, they will rent out their unit andfinance the mortgage through this income. The CBErefers outstanding mortgage repayments to the HDPO,who, depending on the grace period, in turn may replacethe household with another household who has theability to pay.In an effort to improve affordability for low-incomeunemployed households, the programme originallyregions of Ethiopia. It was thought that this actionwould address the problem of migration from ruralareas to the urban centres at the source, and potentiallyimprove secondary cities, whilst acting “as a preventivemeasure against slum development” 4 .Methodologies and guidelines were drawn from AddisAbaba’s experience of the programme, and adapted tosuit the regions. As of mid-2010, the programme hadbuilt a total of 69,921 units in the regions of Ethiopia,of which 22,699 have been transferred. However, theIHDP has been suspended in the regions for a variety ofreasons. The condominium blocks have been describedas ‘an eye-sore’ in the smaller low-rise provincial townsand demand has been low due to considerably lowerpurchasing power in the regions than in Addis Ababa.Condominium Housing in ethiopia19