Can blockchain solve Africa’s worsening housing shortage? This startup thinks so

There’s hardly a better way to put it. The African housing markets are in dire conditions. There is varying data on how wide the housing gap is in different countries across the continent. The common denominator is that the shortages are in the millions. No thanks to roller coaster-esque economic and political conditions, millions cannot afford the properties built in many African countries.

Glen Jordan witnessed, first-hand, the crippling effects of these African housing challenges on lower- and middle-class citizens while running a fintech startup, catering to his fellow Zimbabweans who migrated to South Africa during their country’s economic crisis.

By building the fintech company — IMB Financial Services — Jordan was exposed to the realities of wealth creation in Africa. He realized that property ownership, one of the fundamental building blocks of wealth, is largely inaccessible to most people in the developing world.

Millions of Africans survive on informal income, making owning properties via the credit market nearly impossible.

Millions of Africans survive on informal income, making owning properties via the credit market nearly impossible. Their earnings cannot be tracked or used to create profiles for accessing mortgages.

Jordan soon joined the ranks of entrepreneurs and institutions looking to bridge the gap. His focus: to find a better system to provide affordable housing.

While researching, he was advised to consider blockchain. He was initially wary of the technology due to the cryptocurrency’s volatility and scams. His disposition changed once he identified the opportunities decentralization provides regarding value distribution. His attention was also drawn to Mozambique, the Southern African Nation with a population of 30 million people and an estimated retail mortgage adding up to a measly 600.

“There’s no way that there are only 600 families in a country that can afford a home loan … it’s not the fact that there’s no money there,” said Jordan from his home in Amsterdam, where his son is learning to become a professional footballer as an academy member of football club Ajax.

He added: “[The fact is] that the systems are not catered to the reality of the market. And that’s the whole thing that has to be addressed. So, when looking at blockchain, for me, what started to become interesting was the ability to transfer value cost-effectively without an intermediary.”

From his epiphany on the utility of blockchain, he founded Empowa, a financial technology company utilizing on-chain payments and NFTs to enable funding for affordable housing through a lease-to-own model. Empowa aims to allow global access to investments in Africa’s emerging affordable housing market. Its self-acclaimed climate-smart houses are currently offered to Mozambique’s low- and middle-income earners. The company plans to expand to other African countries, including Nigeria, Jordan said.

At launch, the company raised $300,000 through an NFT sale to finance housing provisions for 30 families in Beira, Mozambique. According to Jordan, this milestone enabled Empowa to increase the home loan market in Mozambique by 5%.

“We have reduced the average age of the homeowner by 20 years; we’ve given people access to their own homes 20 years before they would have it normally”

“We have reduced the average age of the homeowner by 20 years; we’ve given people access to their own homes 20 years before they would have it normally,” Jordan said. “As an opportunity, that is immeasurable. 50% of [the] homeowners are women-led households ... it’s a huge thing around women’s empowerment and safety. To be able to provide safe environments for women-led households.”

The project was executed in partnership with Casa Real, a Mozambican construction company that offers housing solutions to low and middle-income earners for as low as $10,000 per unit. Casa Real was a 2022 finalist for the best affordable housing project award by Africa Property Investments (API). Casa’s cheap houses are reportedly resilient against cyclones. Seven high-intensity cyclones have hit Mozambique over the past two decades.

There’s, however, a catch with the $10,000 figure, which, Jordan explains, is the cost of a starter home. A starter home in this context could mean a one-room apartment.

“What Casa Real, the affordable housing developer in Beira, Mozambique, did was [to] reduce the size — so we can have a starter home that literally is one room with the foundations for extensions, Jordan said. “You can purchase the first home, move into that, ... proof payment, and then you can extend. By doing it that way, they reduce the cost of the first initial home from 55,000 to $10,000.”

Last November, following the pilot project’s success, Empowa launched its new project called “catalyst,” in partnership with the Municipality of Beira, Mozambique, to provide access to finance for climate-smart affordable homes for 25,000 families in the town.

In April, Empowa conducted a public sale (essentially a blockchain-based fundraising) for its native token — the EMP. The project raised $3.75 million, an Empowa representative told Mariblock via Telegram.

Given the controversies surrounding the industry, the lens through which one views blockchain and digital assets projects should come with a film layer, colored skepticism, asking, “Why do you need blockchain to solve this problem?”

For one, Empowa currently only caters to accredited investors, and as Jordan agreed, this cohort can already invest in big real estate projects … without NFTs or any other crypto vehicle.

For example, last year, the International Finance Corporation (IFC) launched a $300 million investment platform in partnership with Chinese multinational construction and engineering company CITIC Construction. The goal is to develop affordable housing in multiple African countries. The fund IFC deploys are proceeds of bond issuance, part of which comes from wealthy (accredited) investors.

But Empowa says investments are just one element of its system.

“Verification is a key part [of] what we’re doing. Traditionally, if you’re a wholesale provider of capital and you want to send it to somebody in order to provide home loans, you have no view of what’s happening on the ground.”

“Verification is a key part [of] what we’re doing. … Traditionally, if you’re a wholesale provider of capital and you want to send it to somebody in order to provide home loans, you have no view of what’s happening on the ground. And that’s effectively what we’re doing; we’re creating that mechanism by which there can be a direct view of exactly what’s happening. And that’s one of the ways we mitigate risk.”

Jordan described the verification element of the Empowa platform by highlighting that payments for funding home loans and leases are recorded on-chain. That, in theory, brings more transparency to the process.

Altogether, time would prove the feasibility of Empowa’s vision. A few have tried to build blockchain-based real estate solutions for Africa. One of them, HouseAfrica, launched in 2019, seeking to decentralize access to real estate investment. It has since pivoted away from investing to running a blockchain-based land registry service called Sytemap. HouseAfrica recently raised a $400,000 venture investment.

Empowa finances these housing projects through its platform, where talented and well-known artists sell their NFTs. The proceeds are then converted to EMP tokens and used to purchase leases from its project partner, Casa Real, who manages sub-letting. The Mozambican residents make rent payments on the EmpowaPay platform, and the money is distributed back to the NFT/token holders as principal and impact rewards.

Empowa makes money by charging a spread on the cost of capital from investors.

Empowa’s setup also seeks to solve the well-documented liquidity challenge in real estate investing. EMP tokens can be traded on an exchange like any other crypto asset. The Empowa team claims, in an EMP token video explainer, that there’s a mechanism for protecting investors against the currency fluctuations that are a norm in many African counties.

As an additional step to mitigate the socio-economic and political risks, Empowa supports diversification by investing in portfolios of multiple housing projects across several countries. That way, investors aren’t exposed to the situation in any particular country.

Though incorporating blockchain elements, Empowa isn’t a fully decentralized system. Again, only accredited investors can ploy funds to the platform due to regulatory constraints.

Empowa is, however, optimistic about achieving its goal of raising capital globally and putting its tenants on a path to developing a credit history, enabling them to unlock more traditional financing opportunities.

“Our objective is to find a way to meet the market needs ... in new and unique ways that actually [prepare] the [informal] market for the more formal and traditional [market]. So hopefully, we can provide, after a certain period of time, a credit record for a traditional financial institution that will enable somebody to actually get a loan or even get a mortgage. … Because, at the end of the day, that’s what we’re seeking to do. Kickstart economies, create jobs, improve living conditions, and just generally really uplift the cities of Africa,” said Jordan.