There is a high gap between the demand and supply of housing in Ethiopia particularly in the capital due to rural to urban settlement. This paves the way for many Real estate developers in Ethiopia to invest their capital in the sector. The main impact of financial challenges in the real estate industry are failures to provide houses as per the consent with customers and it results in low quality of houses at the end of the project these resulted from lack of long term loan and other financial sources. As a result, most of the developers need support from the government by policy framework including regulations.
In Ethiopia, the real estate sector including with construction sector contributed 12.5% to the GDP. From this share to GDP, the real estate sector alone account for about 60% and the remaining is considered to be a part of the constriction sector. Both components in the sector have developed by a total of 25% in the previous consecutive years when compared to the total GDP average growth of 10% (Natnael 2018). In recent years, investors have considerably accelerated development, mainly in the more urbanized cities like the capital Addis Ababa. The real estate market is in increasing rate in the city, pulling capital from overseas and domestic investors due to fast urbanization and elevated demand in the housing
In order to improve the impacts of financial challenges in the Real estate developers in Ethiopia sector:
- The government must motivate real estate development banks in order to provide sufficient long-term loans for developers and it is believed foreign banks’ entry may improve this while the country’s policy does not support it due to the protection of domestic banks.
- Rules and regulations must be revised to give much room for investors in the sector.
- Real estate developers also segmented only high-income groups they must include the middle as well as the low-level income groups as much as they can.
The creation of public-private partnership is also creating a good environment in the sector if it is supported by the policy framework
- Stockholders in the sector must access the maın challenges regardıng finance and other varıables by establıshıng theır own assocıatıons
- The creatıon of publıc prıvate partnershıp ıs also creatıng a good envıroment ın the sector ıf ıt ıs supported by polıcy frame work