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Take advantage of capital market -SEC
 
Posted on: 27-Aug-2013        
 
 
 
Real estate developers have been advised to capitalise on the high demand for houses in the country to grow their businesses. Consequently, the Securities and Exchange Commission (SEC) has renewed calls on the members of the Ghana Real Estate Developers Association (GREDA) to use the capital market to raise long-term funds to improve the housing stock.

The Director-General of the SEC, Mr Adu Anane Antwi, made the call when he addressed members of GREDA at a cocktail in Accra on how to use the capital market to raise long-term funds to finance their housing projects.

The programme was sponsored by Graphic Business, the business and financial newspaper in the Graphic Communications Group Limited newspaper stable. It also forms part of a conscious education programme undertaken by the SEC and the Ghana Stock Exchange to encourage more companies to use the capital market to raise funds for long-term projects in the country.

Housing deficit

Ghana currently has a housing deficit estimated at over 1.7 million units with an increase in demand of over 70,000 housing units annually.

It is estimated that more than 50 per cent of Ghanaians live in sub-standard houses, deprived inner city dwellings, uncompleted houses, containers, shops, kiosks and other unsuitable structures.

Many of those who are also renting are being made to pay huge rent, particularly in the urban centers and this is eating deep into the nominal income of workers, both formal and in the informal sector.

Plan for GREDA

Mr Anane Antwi reiterated that, there was an opportunity for the members of GREDA to develop the housing market and noted that the feat could only be accomplished with long-term funds.

The SEC boss drew a clear distinction between the US housing market and that of Ghana saying that while in the US people buy houses in anticipation on a rise in the price, Ghanaians by their culture own houses for future generations.

He said that culture was one that the GREDA members could explore because people would want to buy and own it and therefore taking mortgages to buy would not pose any risk to their investments.

“In the other world, they buy houses like stocks and bonds and therefore they are exposed to all forms of risks”, Anane Antwi stated.

Benefits of long-term capital

Long-term financing brings in stability as against marching long-term projects with short-term funds. This also helps in one’s cash flow and enables one to undertake better projects.

It also means that it will be easier to project ones earnings and cash flows as one knows what the interest expenses will be each month.

Short-term financing on the other hand does not offer those advantages, as one has to constantly renegotiate the terms of the agreement.

Having long-term financing in place gives people a better idea of their long-term cost of capital. That way, they are able to better decide which projects are worth pursuing or not.

Mr Anane Antwi advised members of GREDA to avoid going for short-term loans to finance the long-term projects.

The Deputy Managing Director of the GSE, Mr Ekow Afedzi said the GSE has introduced the Ghana Alternative Market (GAX) to encourage more companies, particularly the small scale enterprises to come to the market to raise long-term funds for their projects.