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New Project Brings More Choice to Housing Crisis

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The Addis Abeba City Administration launched a grand low-cost condominium housing project to build homes like those seen in the above picture six years ago which was intended to solve the housing problem in the capital. However, the shortage continues to be one of the major problems for city residents. The result is that the City Administration has come up with another housing scheme, featuring houses like those seen in the pictures below.


For the 42 year-old tailor, who prefers to be called by his nickname, “Tilahun” Mulu, anniversaries have a lot of meaning. A resident of Kechene area in Gullele District, Addis Abeba, Tilahun recently commemorated his silver jubilee. As a married man and father of three, the tribute was not to his marriage but to the year that he left his parents' house.

When he rented his first single-room house for 70 Br in Piazza, he had not even reached the age of maturity. Twenty-five years later, Tilahun is still living in a rented house.

Before he moved into the latest one, which he first rented five years ago, he had lived in six different houses, but the location has always been either Piazza or Kechene. The two locations were chosen based on their proximity to his workplace, a small tailor shop situated in Serategna Sefer, Arada District.

Out of his monthly average income of 3,000 Birr, he currently spends 800 Br on rent. This shows a threefold increase compared to the price he paid five years ago.

Looking at the escalating price trends and dreaming to own his own house, Tilahun decided to try his luck when the Adds Abeba City Administration announced its plan to build low-cost condominium housing in 2004.

The project, aimed at providing decent shelter to low and middle-income families, targeted the construction of 30,000 condominium houses, annually. Dubbed the Integrated Housing Development Programme (IHDP), the ambitious plan aimed to build 400,000 condominium houses, create 200,000 jobs, and promote 10,000 micro and small-scale enterprises (MSE).

Unable to achieve the target, the Addis Abeba City Administration has managed to construct around 23,000 houses every year, for a total of 140,246 condominiums by the end of the last fiscal year. Though, 340,000 city dwellers registered for condos, including Tilahun, only 72,826 houses were transferred to owners.

Such a huge wide gap between demand and the slow pace of the construction and transferring process has frustrated Tilahun. Since his registration, he has frequently visited Arada District, where he previously lived and is currently working, to get the latest information about the condominium housing project’s progress but always gets a response of “wait and see.”

Finally, he quit his customary visits six months ago.

The level of disappointment he reached went as far as ignoring the launching news of a new housing project of the City Administration in collaboration with the federal government. The new project, which targets low and middle-income residents of Addis Abeba, was launched two weeks ago.

Under the administration of the Ministry of Urban Development & Construction (MoUDC), the new project aims to minimize the housing problem in the capital and the regional cities.

The Addis Abeba City Administration has already established a newly authorized body, 40/60 Housing Enterprise, named after the down payment and loan proportions for individual units.

One who wants to own a condominium house allotted for middle incomers should pay a 40pc down payment with the rest to be covered by a loan from the Commercial Bank of Ethiopia (CBE), according to the financial arrangements of the new housing project. The loan should be completely serviced within 17 years.

In addition to providing loans, the CBE will also have a role in the registration process, which the Enterprise is expected to commence in September 2012. The CBE has already identified 30 of its branches in Addis Abeba for handling registrations. When the project starts in the regional cities, the regional branches of the CBE are expected to give the service.

Along with registration, the newly established Enterprise, which has already recruited professionals for its managerial positions and is now in the process of hiring engineers and other experts, will start construction of the houses in the same month. The design of the houses was finalized by a local consulting firm, ETG Designers & Consultants Plc, and was delivered two months ago.

“The Enterprise will construct 10,000 40/60 houses and 35,000 low-income houses in the capital,” Mekuria Haile, minister of the MoUDC, told media during the launch of the new project on July 19, 2012.

Such projections do not impress residents who have waited for years to get condominium houses like Tilahun has.

“Why does the Authority not finish the previous project before starting another ambitious one?” he asks.

Unlike Tilahun, Admasu Walelign, 27, who failed to register for a condominium house, sees the new project as the “best opportunity” to have his own house. A resident of Arada District and a teacher by profession, Admasu is now living in a rented house. In his District alone, which has a population of 211,501 people, only 50,349 households own their own houses.

Based on the projection made by the Central Statistical Agency (CSA) in 2009, the difference between the supply of housing units and the demand is 240,208 units. Observing the gap through his own experience, Admasu is afraid that he might not benefit from the new opportunity, unless the government comes up with a strict registration mechanism.

“The authorities should identify those who have a house and those who do not during the registration,” Admasu told Fortune. “I suspect that condominium drawing winners will register again for another chance.”

For such fears, the Addis Abeba City Administration has an answer. Each applicant will be registered after they bring a letter stating their housing status from their kebele administration, said Kuma Demekssa, mayor of Addis Abeba, during the launch of the project.

Beyond the registration process, Admasu doubts whether the 40/60 scheme would really work for civil servant like himself. Out of his monthly salary of 1,500 Br, he currently spends one-third of it on house rent. Adding the expenses of food and transportation, he feels that he might not be eligible for the 40pc, 60pc payment arrangement.

“I pay 500 Br for house rent, and it may increase next year by some unknown per cent. So, it is difficult to pay the required money,” Admasu argued.

The monthly payments for 40/60 houses start from 857 Br for a house with a single bedroom. Those who want a house with two bedrooms are expected to pay 1,337 Br monthly, and the amount is 2,133 Br for a house with three bedrooms. The total cost of each is 128,590 Br, 200,475 Br, and 320,000 Br, respectively.

“Our study shows that one who saves one-third of his monthly income can be an owner of a house from one of the three categories,” Atsbeha Gebreyohanees, deputy head of housing development and public building construction at the MoUDC, told Fortune.

An expert, who has worked for about 20 years in the construction industry and has conducted research on the prices of houses in Addis Abeba, tells Fortune that a person with a net annual income of 35,000 Br and above can afford one of these houses. The expert believes that 50pc of the residents are in this category. Admasu, who earns 18,000 Br a year, however, is definitely out of this league.

Those who do fall into the above category also have their doubts. They fear that if they fail to pay the 40pc down payment immediately, the authorities will give priority to those who can afford to do so.

Confirming that those who come up with the down payment will immediately get a house, Atsbeha also said that there will also be an arrangement for finalizing the first installment within five years. The advance payments for the houses will be deposited into savings accounts in the name of the potential buyers, earning 5.5pc interest, while the loans from the CBE will be charged 7.5pc interest, down from the normal rate of 9.5pc.

For residents like Admasu, officials from the MoUDC also have other proposals. The officials say that residents can also benefit from the newly launched low-income housing scheme or the existing condominium project.

The total cost of a house built for the low income project is 76,615 Br, of which the government will subsidize 50,544 Br. The deposit that the buyer is expected to save with the CBE is only 4,495 Br. The rest of the money, amounting 21,576 Br, can be obtained from a CBE loan with 17 years of servicing.

Officials also argue that the new scheme is another opportunity for people, who registered for condominium houses without any success, like Tilahun. They can shift their choice to the new project but cannot remain in the drawings for both at the same time, according to Atsbeha.

Registered residents, who suffer from escalating rental prices, do not agree with this. Considering the lateness of the housing agency’s previous system, they suggest that, instead of shifting, the choice should be open-ended.

“I do not believe that this system is the right choice, because they have not considered our problem,” Tilahun said. “So, we have to be allowed to try both chances, and, if it works, we will leave the one.”




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