Real Estate Development in Ghana: Providing Affordable Housing by Blue Rose Limited

Interview with Eric Ebo Acquah, CEO of Blue Rose Limited

What is your assessment of the real estate sector in Ghana? What are the latest trends? How is the sector evolving and what are the main challenges?

Blue Rose Limited has been in business for 30 years. We have built over 1,000 houses and still continuing. In Ghana there is the opportunity for huge potential but most of the time people do not understand the system very well. You need to understand the Ghanaian system before you can do real estate. The income levels here are somewhat low and the mortgage system is not very well established so interest levels are also high. We particularly are looking at the public sector workers who earn between 500 to 1,500 USD monthly. We have to position ourselves to provide houses for this group where there is close to one million people who are looking for a comfortable place that they can call a home. We see many people in need of housing in this area where we have chosen to operate. Most developers are involved with medium to high-end which most of those people cannot afford. We are not doing social housing because we are a company that also needs to make a profit. Only the government can do social housing. But we are also targeting the low-income groups. We are doing one-bedroom and two-bedrooms at about $20,000 starting price. If you are able to get someone who is earning $500 to $1,000 into a $20,000 house, they can pay it off within 10 to 15 years; whereas that person cannot afford a $100,000 house. Most of the developers are developing but they are not getting return on their investment because the property prices are high and people cannot buy them. There are many vacant houses scattered across Accra. Because our prices are good and we are doing affordable housing in the range of $20,000 to $50,000, we always have many people coming into our office. We are not doing social housing but we make sure that we are giving them quality housing.

Is there room in the market? Is there a lot of competition in the Central region?

We are located on the outskirts of Accra in the Central region. It is closer but it is a bit away from the Accra city center so it is easier to commute to Accra.

Are there many other projects like yours near Accra?

I have been in this business for 30 years. We started as a landscaping company and somewhere along the line we also saw the need for affordable housing. We have seen that it has a huge potential. Every country is driven by their real estate.

There are only a few developers who are able to do what we are doing, maybe only two or three maximum. It is an area that is very difficult to enter because the margins are small. But, because we are doing enormous numbers, it is good for us. There is still a need to build where people can have houses and be able to afford them. There are people who are starting out and do not have much to spend, but they still need a decent place to live. Those are the people we are targeting: the teachers, the nurses, the municipal servants. These are the same people who with time, their situation will improve. When someone is 30 to 45, they could be the director of a company and then be able to build an extension or buy a bigger house. This is where the numbers are huge, but it is also very difficult so many developers wish they can do what we are doing but they are not able to. We are able to because we understand the system and the people who we want to sell to and we make sure that we do not spend a lot on add-ons. We have sizeable administrative costs. Our office has been here for 20 years because we do not want to pay a lot in rent. If we have a bigger place it would come out of our costs. We always try to cut down on costs so that we can deliver quality houses to our customers.

Are you looking for investors? What would the benefit be that you can offer them to invest in your company?

Because we are doing low-end housing, the numbers are huge. Even if our margin is small, when you multiply it by our volume, the more we do, the more profit we get. With an investor, we will be able to turnover as quickly as possible. At the end of the day, the investor will earn more than if they had invested in a luxury product. We are doing close to 500 to 1,000 houses per year. If your margin is even 15%, 15% on 1,000 is huge compared to if your margin is 40% on 20 units a year. Moreover, we are also solving problems, giving people decent places to live. The numbers make the scheme very attractive. The experience that we have is an advantage and we understand the system very well. That is one of the most lucrative projects for investors because with our margin if you invest $5 million, within a year or two you can double it because of how quickly we turn it over. What we are doing in one year when we have the money, we can turn it over three times. When you have a luxury house you cannot turn it over as quickly. If it was not worthwhile, by now, we would not be in business. We started with just two houses and now we are doing thousands, so it means that we are growing.

How attractive is the location for an investor?

We are planning to have various locations, about five different locations which we have seen that there is also a market for. Some people also want houses closer to their hometown, others want it at the other side of town for various reasons. We want to have five different sites. Takoradi would do the eastern part of Accra. Then, we also want to go to Kumasi because the population there is huge and it keeps growing. If we are able to extend, within one year, if one project site consists of 200 houses, another 700 houses, it makes the company bigger.

How long have you been in business? Is it a reliable model? What kind of investors are you looking for- international, Ghanaian, regional, others?

I have been in this business for 30 years. We started as a landscaping company and somewhere along the line we also saw the need for affordable housing. We have seen that it has a huge potential. Every country is driven by their real estate. Now, even the secondary market will also grow. Because interest rates are going down, most of the banks will also look here because it is one of the safest places to invest. With real estate, you can see it and you can feel it. It is not something that can easily crash because we are doing low-end housing. If you do high-end housing, the possibility of a crash is high. With low-end, even if a bank non-finances and the person is not able to pay and the bank repossesses the property, it is easy to sell it to someone else. When you do an expensive mansion and repossess it, you cannot sell it. It is one of the most attractive areas, but it is challenging. You need to understand it. There are many companies that come here and want to do what we are doing, but they are still doing one-bedrooms for over $50,000. We have a lot of experience and we want to leverage that experience to expand to the other sites. Very soon, we will be in every region of the capital. Then we will go to some of the district capitals. Blue Rose is now a household name. People know what we stand for. With a little push we can do a lot of things. The foundation is already done. The difficult aspect is already done. Some of the workers have been here for 20 to 25 years. They know what they are doing, they understand it. Our corporate governance is very solid. We have a board and management. Everything is in place. We are looking for local and foreign investors, but more importantly, for someone who shares our vision and our passion and who also knows what we are doing. In two to three years, we want to not only be in Ghana, but in other countries such as Liberia and Sierra Leone. We can use our experience and break into the entire African market.

Is this a demand or a supply market?

In every business, there is demand and supply. But here, the demand is more than the supply. People want decent accommodation, but it depends on how much they are earning. If you want to live in one of the posh residential areas, you cannot afford a $500,000 mansion, so you are forced to look for something that you can easily pay off. The demand is high but the supply is low. The government also wants to find a way to supplement workers with reduced interest rates so more people can buy. One strategy we use is to develop in the so-called deprived areas. In the western part of Accra that we are developing, it was not open. We went there and opened the place up and our presence has helped to improve the lives of those in the area. In such areas, when you offer work to the people there, it improves education and the quality of life of the people in that area. We are also very mindful of our environment. Trees that we cut down we then replant as we build to make sure that the greenspace is also maintained. We are mindful of the environment, the people we are serving, and the communities where we operate. Our presence in the community must help elevate the living standard of the area. That is a social responsibility on the part of the company. We are also offering scholarships to the people in the catchment area and beyond. We are building schools and we also organize workshops for the community. We are giving our best contribution to the community and once that is done, the company can be sustained. If you are operating in an area and the people fight with you, your company cannot survive. The people are proud we are there and they offer us all their support.

Do you have any final messages?

At Blue Rose, we believe that every human being is entitled to decent accommodation and we pride ourselves in giving people a decent place to live. That is what we have committed ourselves to do and we will continue to do it. We are also working so that Blue Rose can move from generation to generation and not be dependent on one person. Blue Rose will be a household name and in 100 to 200 years we will still be in existence providing quality, affordable housing as an indigenous Ghanaian company with Ghanaian majority shareholders.

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