Affordable housing does not mean cheaper, inferior-quality alternatives, though an exact definition may vary depending on the location and context, it generally means that the cost of housing does not exceed 30% of a household’s income.
Keeping that in mind, the goal of affordable housing projects is to enable those with low to moderate incomes access to housing either as a rental or a purchase. Albeit, “household income” is defined as the sum of all household members’ earnings during a specified time period, typically a year; having accessibility to rent or purchase a home is the most significant factor.
Thus a person’s annual income range from sources, such as wages or salaries, self-employment income, income from investments, government benefits, and other sources. Is not more relevant than the availability, especially when the availability of inexpensive housing has become the primary lever for the private sector to enter the real estate market and establish a presence there.
In our experience, most Real Estate Developers with an initial push to do affordable housing do not target individuals or families with low to moderate incomes after a while. There are several reasons why real estate developers may prefer expensive development projects over affordable housing projects, but here are four:
- LAND AVAILABILITY
In some areas, finding suitable land for affordable housing may be more difficult, whereas land availability for luxury development may be ampler, and zoning laws or neighbourhood opposition may make it difficult to build affordable housing projects in desirable areas.
- LOWER RISK
Expensive developments are frequently regarded as lower-risk investments because they are less reliant on special government programs, financing, or mortgages, and there may be healthy competition in the high-end market.
- STATUS AND PRESTIGE
Developers may choose to build luxury properties to enhance their reputation or status in the real estate industry.
- HIGHER PROFIT MARGINS
Developers may choose to build expensive projects because they can make more profit per unit, as the cost of construction is often similar, but the sale price is higher for luxury or high-end properties.
Now, the question is; where do you start?
Begin by researching affordable housing options in Ghana, including all leasing ownership options. Look for housing developments or programs that provide a comfortable payment schedule, financing options, or varying finishing points to help reduce the cost of housing.
After knowing which property catches your fancy, your lifestyle and most importantly budget points, check the eligibility requirements thoroughly for the affordable housing options you’re interested in to ensure you meet the income and other requirements.
This is one of the most significant things you have to do to ensure that after all the financial commitments there is disposable income enough to not only fund your lifestyle but you do not lock any income which can be used for discretionary spendings, such as entertainment, travel, funerals, naming ceremony or savings.
Prepare or focus on paying a good percentage (above 50%) down payment as soon as possible if you want to leverage your finances to acquire a home. This will not only make the initial purchase more affordable, but it will also lower your monthly payments, interest charges and default risks.
Personalised your contract. Note that buying a home comes with individual risks and opportunities so do not settle for a generic agreement or accept a one-size fit all kind of contract. A good home purchase contract should be fair and equitable to both the buyer and seller and should provide a clear and concise roadmap for the sale/purchase of the property.
It’s important to have a real estate agent or lawyer review the contract to ensure that it meets all legal requirements and protects your interests.
We promise you that by following these steps and being persistent in your efforts, you can increase your chances of affording an affordable home in Ghana.
As an industry expert, we recommend that you subscribe to our next article, which will provide guidance on calculating your yearly earnings or household income to acquire your ideal home.
It is important to know how to add up all sources of income over the course of a year, as this will be a crucial factor in determining your ability to afford a house with convenient terms and accessibility.
