Real Estate in Ghana

By | AUBREY NANA NSENKYIRE AIDOO

The Republic of Ghana (Ghana) is situated along the Gulf of Guinea-Atlantic Ocean surrounded by Togo at its East, Burkina Faso at its North and the Ivory Coast at its North1 (all Republic States) meaning that the aforementioned waters complete the southern part of the country. The land mass of Ghana is circa 238,535 km2 inhabited by a population of 25.9 million as at 20132 . Ghana depends largely on natural resources most of which are associated with or derived from land; in that, an estimated 70% of Ghana’s GDP is gained from agriculture, forestry and mining3 . It is thus imperative that the country adopts a robust land management system for its economic sustenance. Real Estate in Ghana was largely galvanized by colonization and modernization and even though Ghana is yet to enact its latest Real Estate act4 , there are already existing laws and various enactments regulating the ‘industry’ in Ghana. Whereas the Ministry of Lands and Natural Resources has the overall responsibility of land administration in Ghana, Real Estate in Ghana is further regulated by the 1992 Constitution of the Republic of Ghana, Ministry of Works and Housing, the Town and Country Planning Ordinance (Orders), 1951 (Cap 84 Ord) Land Registry Act, 1962, Lands (Statutory Wayleaves) Act, 1963 (Act 186) the Land Title Registration Law, 1986 (PNDCL 152), State Lands Act, 1962 (Act 125), Chieftaincy Act, 2008, Rent Act 1963 (Act 220), Land Commission Act 1994 (Act 483), Ghana Highway Authority Act, 1997 (Act 540). Principles of Common Law and Equity and other laws enacted to protect the interest of the Ghanaian lands. Various enactments are to similar effects in the West African sub-region as the Land Use Act of Nigeria5 prescribes the mode of land allocation and other land regulatory issues. The major concerns of any investor have been land acquisition difficulties, security and diseases, firm and enforceable contracts and other difficulties in settling or conducting business in Africa.

Land acquisition in pre-independent Ghana was unanimously based on Customary Law which comprised mostly of stool/skin lands, settlement and conquest as the primary sources6 . Post-independent Ghana however, introduced Government/State-owned lands as a measure seeking to manage lands in Ghana. The current system of land acquisition is usually by way of lease from the landlord. A lease is an interest in a specific parcel of land for a fixed period and the general practice is that a lease shall survive for a maximum of 99 years for a Ghanaian Lessee and 50 years for a non-Ghanaian lessee - article 266 of the Constitution7 . The Principle Quicquid plantatur solo, solo cedit which means that something that is or becomes affixed to the land becomes part of the land8 and therefore shall pass with title to the land and consequently upon the expiration of the Lease, the land and all situated thereon shall conjunctively pass to the Lessor/Landlord; the lessee has the option to negotiate the renewal. A persistent problem in land acquisition has been dealing with the proper landlord/lessor and executing the right lease or assignment as the case may be. This has been the general excuse for preferring to deal with Real Estate companies as opposed to landlords in Ghana.

Real Estate in Ghana is predominantly focused on the construction or refurbishment of houses which has seen investors gain large returns on their investment ensuing from construction of houses strategically situated in the prime areas of the country. There is also, the emerging trend of Airbnb and commercial leases where investors set up plazas and high-rise buildings to rent for office spaces. The prices of land, like other jurisdictions, are dependent on the surroundings, location, accessibility and proximity to business districts and the availability of various social amenities close-by. To this effect, houses put up by private real estate companies are priced in dollars and charged exorbitantly high leaving the asking prices of three (3) bedroom houses which is presumed to be the ‘standard house’, to be USD 70,000 in a country whose minimum wage is Gh₵8.00(USD 2.00) 10. The Government of Ghana (GoG) introduced the Affordable Housing Project which has done little to resolve the situation11 as a one (1) bed room house costs USD$37,00 and a two (2) bedroom USD$47,000 both of which are conducive for the average Ghanaian family. The price of one (1) night in a three (3) star hotel room is Gh₵1,500 (USD370). These unfavourable prices result in tenants and prospective tenants applying for various financial facilities to purchase a standard house. Ghana Home Loans and other companies and initiatives have provided mortgage facilities and other means of purchasing at reduced financial constraint but the requirements, interest among others actually deter most tenants. Other factors responsible for the high prices of houses include the high cost of land, cost of building materials, high cost of living and high cost of property management which means that the price of houses is based ultimately on demand and supply basis. With government unable to regulate the industry in terms of prices, the Rent Act and other enactments serve as a check in regulating the activities of the Real Estate Industry in Ghana. Furthermore, the Real Estate Authority Bill, 2014 if passed as an Act will harmonize the relevant provisions in the various land and rent acts with contemporary practices. In addition, the Land Use and Spatial Planning Bill, 2016 will serve as an auxiliary authority for town and country planning institutions and also real estate stakeholders.

While the prices of houses in Ghana are continually soaring up, another area of concern has been contracts and agreements governing land/house sale transactions. The existence of preferably a written governing agreement to any transaction ensures that the interest of the parties are stated clearly and protected. Real Estate is no exception to this fact. The challenge that the Ghanaian Real Estate Industry faces is that there are contracts but they are poorly drafted. The terms do not capture the specific concerns of the parties and certain standard clauses are absent or grossly inadequate where present. A typical Ghanaian Real Estate contract is hinged on clauses ensuring payment, obligations of the parties and a description of property. A definitions section, clauses on insurance, liability, health safety and environment, security, severability and other standard clauses are uncommon in the ordinary Ghanaian Real Estate contract. The reason for these is because Ghana is not ordinarily prone to natural disasters and being a developing country, the major concern has not necessarily been security or insurance just to mention a few others but not to undermine the importance of these absent clauses. Liability and enforcement of remedies in addition, becomes problematic where the need to activate such rights arises.

The current crises challenging transaction of business especially on the international front include money laundering, terrorist attacks and outbreak of diseases. Africa has been over the years been susceptible to diseases and the rise of Boko Haram and ISIS has added to the list of deterrents from investing in the continent. In the 21st century, the Ebola virus epidemic in West Africa has resulted in at least 28,657 suspected cases and 11,325 confirmed deaths12. During 2013-2014, countries such as Sierra Leone were earmarked as dangerous areas to visit by Europe and the United States. This label considerably reduced the number of visitors to the country and other neighbouring countries in the sub-region for any purpose including business and pleasure. This went on to affect investment in various sectors as health took centre-stage. The advantage of having gone through the plight of the deadly epidemic is that awareness was created amongst Africans on individual and environmental hygiene and health practices. Citizens have now adopted proactive measures to ensure that prevention of a recurrence of the epidemic does not ensue including vaccination. Tests and checks are done at immigration points to screen immigrants and emigrants as well. The management of Ebola virus and later Lassa fever shows that West Africa still lacks some inroads in health management and control measures. Non-Governmental agencies have invested in setting up structures and facilities to support the fight against deteriorating health standards in Africa and the situation may at this time present an opportunity to investors to set up hospitals and medical schools to conduct research and fight against diseases. The opportunity affords the investor a ready market as universities in the sub-region may not have the resources to construct such facilities but once set up, patronage which is always on the high, shall guarantee returns on the investment in the mid-term.

The Government of Ghana recently established the Financial Intelligence Centre13 to act as a supervisory institution to identify fictitious trading suspicions of money laundering and fraud. This, a measure taken to align the Ghanaian jurisdiction with the standards set by the Sarbanes-Oxley Act, 2002, the Fair Credit Reporting Act 1970 and Foreign Corrupt Practices Act 1977, has been effective even to a fault; in that, the restrictions placed by some of these institutions cause costly delays in transactions through various tracking and investigative procedures.

Security remains the primary concern of investors willing to do business in African countries. The unstable governments, terrorist groups and civil wars have all exposed the frail security configuration of the continent. In 2014, Boko Haram was responsible for the kidnapping of over two hundred (200) girls in Nigeria14. There have been bombing incidents in hotels in Mali and Burkina Faso and the threat only seems more imminent. In the first quarter of 2016, the National Security Council of Ghana attempted to step up security in hotels as it was believed that the probable targets of terrorists included hotels. The main and common reform adopted in Ghana was security checks of vehicles at hotel entrance gates for weapons and materials that could be used to create weapons. The reform hasn’t fully succeeded as some hotels failed to ensure this requirement for one reason or the other; a common excuse being that the security of the hotel is outsourced to an external company and if that company cannot meet the requirement of the National Security, the onus does not fall on the hotel to ameliorate the situation. There are beautiful landscapes in various locations in Ghana and hotels are frequently patronized but the unresolved management of security threats may be a disservice to the reputation of Ghana as a peace and safe country and thus compromise the desire to invest in real estate in Ghana.

The inflation rate in Ghana at March 2016 was 19.2%15 and while there are no signs of a decrease in the rate, the investor is faced with the dilemma of importing some materials and paying hefty import duties and charges or buying locally produced materials at inflated prices, of inferior quality or having a lack of variety. A prudent investor will have to compare and test all products (locally made and foreign) and make a fair assessment to maximize efficiency and profit. Ghacem Ltd, Dangote Cement PLC, K. Ofori Ltd and Sethi Steel Ghana limited are some leading processors and distributors of building materials in Ghana and investors may purchase from them or beat their prices to survive in the terrain. There is a lot of promotion for patronage of locally made goods and protection of local interest in Ghana. Section 16 of the Insurance Law, 1989 (PNDCL 227) as amended by the Insurance (Amendment ) Law, 1993 ( PNDCL 31616), for example, makes it necessary for every insurance business in Ghana to have Ghanaian participation, and Ghanaians should own at least 40% of the capital or other proprietary interest. Also, the Ghana Investment Promotion Centre Act (GIPC Act) states that companies with Ghanaian participation should satisfy a minimum foreign requirement of USD 10,000. These regulations amongst others such as the Companies Code 1963, Act 179 of Ghana set the prerequisite for doing business in Ghana and nonetheless, the standards. Investors are likely to find these very favourable as the provisions therein are in no way trade-restrictive.

The Parliament of Ghana is hosting bill symposiums on select bills which include: Hazardous and Electronic Waste Control and Management Bill, 2016; Land Use and Spatial Planning Bill, 2016; Companies Bill, 2013; Real Estate Authority Bill, 2014; National Disaster Management Organisation Bill, 2015 and a few others which I have been invited to. The aim of the symposium is to provide the platform for experts and stakeholders to add to and have a premise to surmise what shall constitute the trends in the various industries affected or regulated by the enactments. There is little doubt that the provisions will be consistent with the prevailing contemporary laws of other jurisdictions as have been the whistleblowers act and other acts, however, enforcement and impact may be the challenge.

The Real Estate regime in Ghana is still in its infant stages and an investor shall have to consult various experts to proceed and survive in terms of continuity of business and profit-making. My advice to a person willing to undertake such a venture will primarily to contract a lawyer to create a compliance function. The essence of the compliance function is to first of all assess the laws that are relevant to the industry such as mentioned earlier on to avoid any infractions with laws of the state. A compliance register may be a straight-forward way of assessing these laws and ensuring that a checklist is in place. The lawyer shall give the background as to reason behind complying with immigration requirements, land laws, environmental laws, money-laundering and tax laws amongst others. The investor shall then proceed to register shall then proceed to register a company in accordance with the laws of Ghana. Upon registration, the investor shall identify the required experts including but not limited to a land surveyor, marketers, accounts and administrative persons who shall assess various lands and property, their prices and the capacity of the investor to pay as they are qualified to advice. I would propose that a case study of Habiterria Building Solutions17 especially their exploits in Mexico (in building two (2) bedroom houses to be sold for USD 2500 there) could serve as a strong competitor to the African Real Estate. The investor shall then engage the lawyer to finalise acquisition of land/property and prepare leases thereof which should include land documentation, payment schedules, duration or term, insurance, health safety and environment report, required permits to build, severability, covenants and rights of parties, security, liability, force majeure, liability, liquidated damages, retention clauses and other contractual clauses that ensure apt obligation to contractual obligations. Once a firm contract is in place, it is possible to ensure compliance to terms and recover damages in default of non-performance or enforce specific performance. A common practice in Nigeria, Benin and Ghana has been the placing of sticks with red flags tied to them on the lands by the land owners indicating that the lands are not for sale but these practices do not suffice these days