Cardano Development is joining forces with a team of housing experts to create a platform to build affordable housing and associated social infrastructure across Africa, starting in Morocco and Tunisia
Cardano Development, the Dutch-based fund manager and incubator, has launched a platform to facilitate building affordable housing and associated social infrastructure in Africa.
The platform, Social Infra Ventures (SIV), brings together Cardano with a team of housing experts with experience of developing similar social infrastructure projects in 8 African countries over the last 15 years.
As part of Mixta Africa, a company originally backed by the International Finance Corporation (IFC), the team developed 13,000 residential units in north and west Africa, of which 90% were classified as affordable.
SIV proposes to replicate the operational platform created for Mixta Africa, but using an investment strategy that goes beyond house building to include development of social facilities, such as clinics, schools and student accommodation, as well as a residential rental platform.
By developing this social infrastructure, SIV hopes to create the foundation for sustainable communities.
“When people think of affordable housing, they tend to think of huge projects, probably well outside the city. That’s not the idea with SIV, because we’ve seen a lot of failures with those sorts of projects in Africa. We want to provide developments on a human scale, close to, or in the city centre, of 200 to 500 units maximum for each project,” Daniel Font, CEO and COO of SIV, told Impact Investor.
Proof of concept
Armed with an initial capital pool of some €15m in equity and local debt, SIV plans to first develop two pilot projects in Morocco – a country where the team has considerable experience from Mixta Africa days – to provide a proof of concept from which it can then scale up.
“In the past, we found that if you go into the market with just your concept, it can take a lot of time to get long-term funding in place. It definitely helps to prove the concept by starting with small developments and then scaling the company further from that base,” Frederik van Pallandt, SIV’s chief investment officer told Impact Investor.
Van Pallandt joined Cardano from Dutch development agency FMO in January, before assuming his role at SIV.
The focus for the next four years will be on Morocco and Tunisia, two relatively well-developed African housing markets. In that time, SIV plans to bring in other investors to build up capital to around €60m, before moving into other regions.
The company is currently in talks with a number of institutions to provide investment or other support, including the European Commission and a number of leading DFIs, said van Pallandt.
Phase two will focus on West Africa countries, such as Nigeria, Senegal, Ghana and Côte d’Ivoire. After that, SIV will look at opportunities in East Africa.
Besides facilitating the flow of capital to SIV, Cardano will also be able to play a role by providing financial tools and other support, for example by working with local financial institutions to improve mortgage availability – a must if people are to afford the homes that SIV will build.
Affordable mortgages and formal rentals
The two-bedroom apartments that will be the mainstay of its developments are likely to cost around €20,000 to €40,000, depending on the country.
The availability of affordable mortgages varies considerably from country to country. While Morocco’s market is better developed, in Nigeria there are only an estimated 32,000 mortgages in a country of more than 200 million people, Font said. This is partly due to the lack of affordable housing to buy in Nigeria, where builders typically target more lucrative high-end developments.
Given some 90% of Africa’s population cannot buy a house or even qualify for a mortgage, and most people in urban areas rent in the informal sector, there is an urgent need for a shift towards formal rental housing to help solve Africa’s the housing crisis in Africa, according to Font.
SIV plans to make around 30% of the homes it develops available as rental properties. These will typically be smaller than the properties for sale and will be targeted at groups such as young Africans and others who don’t have the capacity to buy a home.
The idea is not only to provide a blueprint for further SIV developments but also for others that want to come into the African affordable housing market.
“Africa’s population is predicted to double to 2.5 billion by 2050. This will make Africa the most populated region on Earth. Around 257 million people in Africa live in slums and this is forecast to double in the next 15 years, so we need to provide a solution of some kind. But know we are not going to do that on our own, so we need to create scalable and replicable projects to allow others to follow the lead,” said Font.
“The affordable housing crisis and associated social facilities are one of humanity’s greatest challenges. It is also one of humanity’s greatest opportunities,” he added.