Property purchases in the real estate market in Ghana can be quite strenuous. Ghana’s property market has over the years experienced substantial demands due to its fast-growing population. A projection by the World Population Review (2020) estimates that Ghana’s population is set to be over 30 million by 2020. Yet, there is a housing deficit of about 2 million.
Ghana’s real estate market is highly dominated by the informal sector (about 90 percent) with respect to market share. Whereas the credible and registered developers under GREDA (Ghana Real Estate Developers Association) contribute to the housing stock of 4,500 housing units per year.
Potential homeowners are often faced with two choices: purchase land and build incrementally or buy a completed house in the property market. Within the jurisdiction of Ghana, it is very important to understand the different land acquisition systems before making this lifetime investment.
First, there are four types of land one can acquire in Ghana. These include;
- Government land
- Vested land
- Customary/stool land
- Family/ private land
Government lands are compulsorily acquired by the state with necessary compensation given to landowners for a broader public service or benefit. The acquisition of such lands is done within the parameters of the constitution.
Vested lands are lands managed or held in trust by the government for a landowning community. The States reserve the right to sell, lease, manage, collect rents, etc.
Customary lands (stool lands) constitute about 80% of the total land-owning system in Ghana. These lands belong to tribal chiefs or other customary authorities.
Family/private lands are owned by families and individuals in certain parts of the country.
According to the 1992 constitution of Ghana, foreigners can own these lands under a leasehold of up to 50 years. The indigenes can own these lands under a lease of up to 99 years. To acquire vested or government lands, one needs to apply with the Executive Secretary of Lands Commission or the Regional Lands Officer.
Further, one needs to request for a site plan after identifying the land-owning systems and interests. The site plan is needed for a search to verify if the land is free from litigation. It helps safeguard buyers from fraud and a common phenomenon of multiple sales.
The Lands Commission of Ghana remains the largest repository of land information. Therefore, it is a safe place for one to verify if the land is litigation-free. Alternatively, one can simultaneously conduct a thorough and independent background search on the seller of the piece of land. This whole due diligence process could be time-consuming, but it saves investment and sanitises the land acquisition system. saves time and money.
The real estate developers registered under GREDA provide different property types such as serviced plots, flats, apartments, estates, and detached and semi-detached buildings. Individuals interested in any of these properties have to conduct due diligence by cross-checking if the developer is registered under GREDA. Again, an independent search can be conducted with the land commission to check if the land in question is free from any litigation. The potential homeowner, after the due diligence, is now informed to choose to buy his property.
Property sales in Ghana can be financed in numerous ways: self-finance or a resort to mortgage facilities.
The mortgage market has seen growth in recent years with the dominance of players like GHL (Ghana Home Loans), Stanbic Bank, HFC Bank (now Republic Bank), Fidelity Bank, and Cal Bank (Cal Mortgage).
A prospective homeowner needs to meet the pre-qualification of the various financial institutions to be eligible to get a mortgage.
The pre-qualification procedure requires the tendering of the documents below:
- Proof of identity (ID card, passport, Driving license)
- Proof of employment
- Letter of intent
- 3/6-month bank statement
- Residential address
- Applicant must be above 18
Most of these financial institutions have gone digital with the pre-qualification processes to give potential homeowners a seamless service of obtaining a mortgage. Despite these innovations, potential homeowners are required to be diligent by checking the credibility of the institutions, the ability of the institutions to grant the loan amount, and the terms and conditions for the arrangement. It is advised that the services of an attorney should be sought.
The payment plan for the mortgage is largely determined by the type of mortgage one acquires. For the home-purchase mortgage, the borrower is required to make a down payment of 15-20% deposit of the purchase price. The bank also pays the remaining percentage of the purchase for the borrower.
The loan’s interest rate varies depending on whether the borrower opted for foreign currency or a cedi-denominated mortgage. However, the remaining balance is spread over the years on a monthly payment depending on the arrangement and financial muscles of the buyer. Irrespective of these, the prospective buyer must consider the cost of maintenance, property insurance and possible upgrade of the property.
After purchasing the property of your choice, it can be leased or rented to generate revenue. A lease is a legally binding contract between a landlord and tenant for the period agreed upon. In this process, the property owner must consider these important guidelines:
- The name of the parties must be stated in the lease
- The time duration must be clear
- The specific property should be stated with the site plan attached
- Terms and conditions for renewal, cancellation, and covenants must be clear
- A specific consideration (lump sum or ground rent) should be stated
Purchasing a property can be difficult, but with the right information and due diligence, one can make the best and sound decision in the property market.
