Ethiopia: Constructing Residential Houses Buttresses Economic Growth

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ADDIS ABABA (HAN) May 15.2016. Public Diplomacy & Regional Security News.  EDITORIAL. Urban population is growing from time to time. On the average the city population growth is 6 per cent per year. In addition, the rural urban migration contributes a lot for population growth. If people get access to education, health and conducive residential houses they could be economically active citizens. They will be both producers, service providers and consumers. Contrary to this, if they find themselves uneducated, unemployed, slum dwellers and idle they will be tempted to engage in destruction and hooliganism. Planned Residential Houses are the most important component of basic infrastructures helpful for human development.

It is known that for modern and planed urbanization, cities must have municipalities which have an authority to mobilize resources and allocate budgets based on the plan that supports economic growth. In addition to this, the authorities must be accountable to the public and in most cases it is preferable that the authority must be elected by direct vote. In most developing countries, cities’ authorities suffer from shortage of budget. In such cases, governing the city based on master plan will be hard and the provision of services also will be inadequate.

In our case, urban development, historically, was not based on master plan. It was rather, the outcome of rural urban migration and arbitrarily settlement and the current housing problem is rooted to that time. In that imperial era, residential house construction was totally carried out by individuals. As land was owned mostly by individual or citizens, the cost of land transaction was cheap and the price too. However, the land system itself was also a source of arbitrary settlement. In the later decades, particularly in the 1940s, the implementation of city master plan took place. Since then, modern urbanization has flourished. In the Derg era, land was managed based on the socialist principle. Land totally became nationalized and its transaction was banned which in turn hampered residential house construction and the only possible way to construct house was through cooperation. This clearly indicated that how house supply and demand trends were going against each other.

While population exploded house construction was going at a snail’s pace further aggravating shortage of houses. According to studies, currently, more than three million people reside in the city and due to rural-urban migration the population growth is increasing and there is a clear gap between house supply and demand.

In order to fill the gap, the government is vigorously pursuing the house construction task through various schemes. The most known are through public owned condominium construction, real estate development and through the activities of house construction associations.

By now the government, on behalf of the public, is the sole administrator of land. And land is supplied to the market in lease auction system. As there is still gap between supply and demand, land price is very high. Of course, land is both a source of wealth and at the same time it is a component of capital formation. And from land the government derives huge sum of revenue which can be utilized as an input for development, which benefits the public.

However, it is an undeniable fact that, due to scarcity of supply, land is expensive.

This implies that, the land price has its own impact on house rent, services and commodity prices. Thus to minimize the cost, increasing land supply should be taken as a possible way out. The real estate development scheme, owned by the private sector, plays crucial role in supplying residential houses to the market. And the wealthy segment of the society enjoy it, but due to the high standard and high cost, their prices are untouchable to ordinary citizens. Nevertheless, they are a source of revenue to the government and to the nation at large. In addition to that the real estate development has played pivotal role in bolstering the construction sub sector, creating jobs for thousands and strengthening the enhancement of value chain among different sectors. The house construction association had previously played crucial role in providing residential houses to their members. But due to construction input and land cost, they were tardy in seeing completion of the houses and this in turn, creates additional cost to their members. By now getting land through associations has declined and their activities have somewhat screeched to a halt. The public owned construction schemes has a lions share in meeting the residential house demand. Since the beginning of the construction of condominium houses for the last ten years almost 120 thousands houses are delivered to the residents. But as compared to the registered residents the number is insignificant. Though nearly one million people are registered as candidates to receive condominium houses, till now, only 10 per cent of the registered candidates have managed to receive the completed residential houses. Hence, more exertion is needed on the part of the government and other stakeholders to narrow the gap witnessed in housing market. So far, the construction has contributed a lot in beautifying the city, renewing the old residential areas and creating job opportunities for hundreds of thousands. The involvement of thousands contractors, consultants and labourers has breathed life into and added value on the construction industry.

Small-scale enterprises, engaged in metal and wood work, have gained a lot of experience, which could be an asset for their bidding capacity. Local cement industries have also gained a lot from the market created by the construction industry. Crushed stone and other inputs from local sources enjoy market. Value chain is also created. Side by side with this, the condominium construction programmes serves as a catalyst for the strengthening of saving culture in urban centres. As mentioned above, the demand for residential house is one of the best basic needs to human beings. The United Nations Convention with regard to residential house has clearly underlined that access to conducive and affordable house for citizens as fundamental human right. Thus, our house construction should notice such rights. On the other hand, according to the recent World Bank study, urban centres in Ethiopia contribute 23 per cent for job creation and to utilize such resource for the economic growth workers should get residential houses suitable for life. When they get their own house they could save money which can be invested for the future of the country. Inadequate house supply has a drawback on socio-economic progress. Therefore, constructing houses in a speedy pace should be a priority agenda.

In sum, urbanization without sufficient and modern housing gives way for the expansion of slum areas, which are a source of anti-social activities. Hence, to curb the possible danger and to achieve meaningful economic progress, accelerating residential house supply should be strengthened.



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