In this interview with The Worldfolio, Ibrahim Bah, Managing Director of Regimanuel Gray Limited (RGL), discusses the performance of the real estate sector in Ghana and how RGL strives to be the market leader especially in terms of technology or advancing construction techniques.
How do you asses the performance of the real estate sector and what is your outlook for the upcoming years?
The economy has suffered some tremendous setbacks over the last couple of years, both globally and in Ghana in particular. This has consequently had an adverse impact on the construction and real estate sector which happens to be our core business. The adverse impact mainly was reflected in the considerable drop in the purchasing power of home owners. Even the international market that used to be a vital customer base, has experienced a dramatic drop. I think we can attribute that to the slow economic growth that has been taking place. In short, we have all felt the brunt of the global economic downturn.
But, in terms of outlook, based on the pragmatic solutions being touted by the new government, and all the proposed policies that they are trying to put in place, we are pretty optimistic that once these things are realized, there should definitely be an upturn in the economic activities that will consequently impact our industry.
Regarding real estate and construction, the new administration has already removed the 5% VAT on property transactions and has removed taxes on the import of machinery and raw materials for production. What are your thoughts on the impact these policies will have in revitalizing the real estate sector?
The 5% VAT on real estate transactions dealt a heavy blow to the industry since it put a 5% mark up on the cost for the consumer in an already difficult market. Other taxes on input supplies had the same effect of adding to cost, not to mention banking costs. We envision that once that VAT element has been looked at, it might definitely improve the situation. We are also looking at other economic factors, such as the interest rates. The interest rates which manifest in the high cost of credit/borrowing is one factor that impacts both the demand side and the supply side, because most people buy their houses with mortgages. When you look at the interest rates, it is almost unaffordable for people to take a mortgage.
For us, on the supply side, the high borrowing rate is as much a deterrent as it is on the customer front. There is no way these finance charges can be added on to the cost of the houses and still leave them marketable to the average middle-income earner. So even though we are looking at the VAT as a critical component within the cost build up, one other essential component is the high interest rates.
Ghana has a housing deficit of 1.7 million homes. The main issue is how to make low-income housing attractive to developers. How should the public and private sector work together to bridge this housing deficit?
Well, in that case, you have to look at the various components that form the ingredients of a typical quality house. You are looking here at the land, and at the infrastructure to enhance the quality of the location. I am referring to drainage systems, electricity, water, gas, roads, and so on. These are huge challenges private developers have had to grapple with instead of relying on the government whose purview it is to provide them and who happens to be the entity that controls them. A private developer cannot build its estate in isolation, you need to bring these infrastructural/utility services to the location of the estate for marketability purposes. From our experience, the private developer does all these at a very huge cost for the company and this ultimately reflects the pricing of the completed unit/house.
Let me cite our Katamanso Satelite Town Development Project as a recent example. This is a project where we have earmarked the development of 17,000 units in separate clusters. The first cluster, which is almost completed, is made up of 472 houses. When we started building these houses, there was no water because the nearest water line is over two kilometers from the site and the Ghana Water Company was not prepared to make that kind of investment because it was not in their immediate plan. Regimanuel Gray Limited had to foot the huge bill to engage contractors and consultants to work side by side with the Ghana Water Company to connect the line from over two kilometers to our estate. The irony however is that immediately when the connection to our estate was completed, it automatically became the property of Ghana Water Company even though it did not pay a dime for the entire exercise.
We also constructed an access road of similar distance from the main road to our estate at private cost, and this has become the normal access route for surrounding neighborhoods. It is the same story with electricity connection to our estate. All of these costs have to be loaded onto the cost of each house because it must be recouped for further investment. If the government is not prepared to meet real estate developers halfway, these houses will continue to seem unaffordable – not to mention the myriad of challenges relating to land acquisition and the attendant prolonged litigation. These all become accrued cost eventually leading to the high cost of the houses.
The government can take some form of initiative that harmonizes all these fragmented units relating to the development of estates within each municipality or locality, such as the local government authority, the utility service providers, the ministries, the banks, we the developers, the land owners i.e. the chiefs. Once all of these bodies come together we can have an understanding and a blue print for the development of estates so that we can substantially reduce the housing shortage.
Regimanuel Gray Limited was established in 1991 and in its more than 25 years has positioned itself as the leading real estate developer in Ghana, expanding operations to other West African countries. How would you describe Regimanuel Gray’s success story and what vision do you have for the company?
From a humble beginning, we have been trying to put ourselves where we know we have the competence, and that is in terms of building residential homes. We have been graduating and increasing our scope over the years from low income to medium to high-level houses.
The consumer taste has taken a savvy turn. So, for instance a three-bedroom house will now need four toilets. While each room is en suite you still have to provide a guest toilet. So, you end up building more toilets than even rooms because of this trend. This brings more challenges and adds more cost to the house. There was a time when you could easily reduce a square meter of the house in order to reduce the over all cost, but people now need tons of space. These are examples of the challenges the developer faces in modern times; how do you maintain the cost of the house viz-á-viz the dynamic tastes of the new home buyer.
Regimanuel Gray Limited is striving to deliver what we do best; delivering reasonably priced quality housing units.
The residential property market in Ghana has been booming over the last decade due to the strong economic growth and a growing middle class. How are you ensuring Regimanuel Gray’s portfolio meets the demand of the rising middle class?
Well, there's one thing that Regimanuel has never compromised on, and that is “quality”. We have always made sure that we give the homebuyer a product that they can always be proud of. We have very good input suppliers both local and foreign. Where we insist on local materials, we always make sure we get the best. We are aware that a house is the singular biggest investment any family can make within a lifetime, and when somebody makes the decision to buy a house, you really have to make sure that you satisfy that person's needs. We always make sure that we give our customers the best in terms of quality.
One of the most used terms nowadays is “sustainability”. Industries across the world are more and more concerned about the importance of creating a sustainable environment, in using clean sources of energy, using environmentally friendly materials and having a positive impact in the communities in which they operate. How do you ensure your developments are sustainable and in which ways are these developments impacting the community?
The Regimanuel Gray tagline is “Building for a lifetime, lasting through generations”. We strive to be market leaders especially when it comes to technology or advancing construction techniques. We are one of the first real estate developers that has introduced a central sewage system for one of our latest developments. Now, we are expecting that by the time we finish the 1,770 flats, all the sewage will be centralized and it will be biodegraded and processed, and what you end up having is water you can use for gardening, and some residual things that you can use for fertilizers and stuff like that. We paid over 1.5 million euros to get that system in place; it is tried and tested.
We have also introduced a gas farm because of all the health hazards that are associated with people getting their own gas canisters in each and every flat, or using all sorts of different types of energy sources for cooking and for heating. We have introduced a whole gas farm, whereby we have connected all our flats to one central system, and all of those will be metered and people will be charged, so that we have it clean and tidy. We are currently working with a German company, to try and see whether we can have a solar farm whereby we will be selling solar power energy to our housing units directly and try to reduce the use of other forms of energy, just to be green and to be very environmentally friendly.
Our technology and our housing techniques are getting greener and more sustainable, rather than relying on just the power grid or the generators, as the case may be. We are mindful of these things, and I can proudly say that we are leaders in this particular type of business.
Since its inception, Regimanuel Gray has always taken into account Ghana’s diaspora needs to provide suitable properties for them to invest in. How do you approach diaspora in a market like the UK? How do you facilitate the buying process of a property?
We work very hard in developing our international market. We establish offices in locations, it is practical to do so or we rely on Resident Representatives. We participate in as many housing fairs as we can and try to maintain a constant advertising presence on the print and electronic media space.
Why can Regimanuel Gray be the perfect partner of choice for UK investors looking at real estate opportunities in Ghana?
Well, we have always been open to business partnership and collaboration, in fact, the success story of Regimanuel Gray reflects the successful partnership between a Ghanaian company and an American company at the start of the venture and it has flourished over the years. We also forged further partnerships with venture capital firms like ABRAAJ. We are always open to business ideas and partnership proposals. We have replicated such partnerships in our regional ventures with overseas stakeholders.
There was a time when a lot of firms were moving to emerging markets. But now that firms are moving back to the developed markets. There was a time when you could easily get cheap funds, probably like 1 or 2%. But when you look at it now, the cost of borrowing even for people who are ready to provide funds for African countries, it's on the higher side, because the risk is also high.
As MD of a company like Regimanuel Gray Limited, what is the achievement that you are most proud of?
For us, it's a company that has been here and we have a brand, and we have been trying as best as possible to sustain the brand. We are aware that changes have to be made; a company cannot keep on doing the same thing day in and day out. That is why we are open to change, we are currently looking at our house designs based on current customer needs and preferences. We are also looking at the environmentally friendly options and modern technology in building. Over time, we have been evolving and trying to see how best we can improve our construction techniques and how we should be reducing costs, and at the same time, satisfying our customers.
To survive this market, you have to be prepared to transform. We are also looking at how we can diversify some of our operations into other areas. If you ask me in terms of achievement and all, it was a small company, it is a family company, and we can proudly say we are one of the companies in the top 100 successful companies in Ghana that has survived over the years.