Pilot Launch | NFTs Fueling Affordable, Climate-Smart Housing in Mozambique

Mercy Corps Ventures and Empowa launch new pilot in Mozambique spurring affordable, climate-resilient housing under a lease-to-own model which leverages NFTs and on-chain payments.

This post is the first of a two-part series; the second blog will share key insights after the pilot is completed. Written by Njeri Muhia, Pilot Manager at Mercy Corps Ventures.

Ninety percent of Africans live in informal housing where living conditions are often unsafe and lack basic services like water and electricity. This is the result of insufficient housing unit supply, home ownership pricing being prohibitive to the mass market, and lack of accessible credit options. Alongside this, Africa has the fastest urban growth rate in the world: by 2050, Africa’s cities will need to house another 950 million people.

The growth rate of informal settlements and communities is significant in the context of climate change. Informal homes are built out of any available materials meaning they’re structurally vulnerable to disaster and climate shocks and leaving occupants exposed to adverse health outcomes and safety and security risks. In Mozambique specifically, 80% of the urban population (1.8 million urban households) live in overcrowded informal settlements with poor living conditions.

This will be further heightened by the country’s rapidly growing urban population where approximately two million new housing units are required, with the need increasing at a rate of 2.8% per year.

Informal settlement in Maputo, Mozambique. Image copyright Johan Mottelson (source)

The current demand needs to be met with urgency given the climate conditions to which Mozambique is exposed. “Mozambique is considered among Africa’s most vulnerable nations to climate change. That’s because of its long Indian Ocean coastline and its location downstream of nine major river basins”, reports The New Humanitarian. Cyclones and flooding are already leading to the destruction of available housing, emphasizing the urgent need for climate-proofing existing and new housing.

Two solutions must be facilitated. First, the creation of climate-smart housing. Second, accessible lease-to-own models that enable low- or mid-income households to secure homes. Traditionally, real estate has been illiquid, but on-chain asset tokenization — a blockchain-based application — has the potential to dramatically unlock liquidity, access, and choice for such an investment instrument at scale.

The Pilot

In September 2022, we partnered with Empowa to launch an affordable housing pilot powered by “RealFi” (tokenized real estate investment). This pilot is testing the ability to use retail NFT sales to create liquidity for the provision of affordable housing units. The pilot offers Mozambican households a “lease-to-own” model, partnering with Casa Real as the primary property developer to avail affordable, climate-smart housing units.

Empowa

Empowa is a unique decentralized property development and NFT digital collectibles platform seeking to harness the power of community to enable “affordable home loans for the financially excluded”. By leveraging the convergence of emerging technologies such as tokenization, blockchain, and crowdfunding, Empowa is working to enable global markets to cost-effectively invest in the exciting multi-billion dollar, emerging market, affordable housing opportunity, with an initial focus on Africa.

Empowa looks to leverage the rising interest in digital collectibles by selling return-yielding NFTs to generate liquidity and linking various sources of capital to multiple and varied projects that enable the development of housing supply.

Image courtesy of Epowa.

Casa Real

The first property developer that Empowa is working with is Casa Real, a Mozambican affordable housing development enterprise offering housing solutions to lower- and middle-income earners starting from as low as $10,000 per unit — the second cheapest newly built housing offered in Africa in 2021. Each home is climate-smart through the use of solar power and cyclone-resistant design, and is fully serviced (i.e. with electricity, water, and sanitation). The ambition is to tackle the fact that, on average, the cheapest formal homes are approximately $55,000 — unaffordable to 99% of the population.

Casa Real has embarked on its first mixed income housing project in Beira, Mozambique, constructing 180 houses that will provide homes for 900 people. Through Empowa, Casa Real will offer a lease-to-own model, enabling families to initially rent affordable homes with the ability to make equity pre-payments leading to home ownership.

The first residents under the Casa Real scheme have had a positive experience so far.

“It’s a dream come true, I have no headaches anymore in having to share water with multiple neighbours and I know I will own this house eventually. Moreover, I don’t have to worry of the next cyclone destroying my home again, this house is a very strong one”

Testimonial from one of the families to recently move into a Casa Real home

Image courtesy of Casa Real.

Through this pilot, Empowa will work with Casa Real to test the ability to use NFT sales as a liquidity generating event to fund affordable housing projects in Mozambique, offered to tenants under a lease-to-own model. At launch, Empowa conducted a close-ended NFT sale to raise $300,000 to fund the acquisition. Empowa and Casa Real are using the proceeds raised to enable 30 families to move into homes, offering family-specific rental pricing and the ability to make equity pre-payments towards eventual home ownership. Through this model, Empowa also seeks to address households’ inability to access credit by recording payments made by tenants on-chain within their EmpowaPay app, which will be shared with financial service providers to demonstrate creditworthiness, with the potential result of unlocking mortgage facilities for residents.

Empowa could create sustainable housing at an affordable rate to over 60% of Mozambique’s population, while decreasing the average homeowner age by 20 years.

Concurrently, the rental income collected will be redistributed back to NFT holders via Empowa Tokens and Redeemable Impact Rewards.

Pilot participant and partner process flow.

As of launch, all 30 families have moved into the homes, and just over half are female-led households.

Our Hypotheses

The pilot will increase the amount of available capital that can be directed towards affordable housing projects in emerging markets by leveraging an innovative fundraising model focused on NFT sales. This will be measured by:

· Total amount raised through NFT sales

· Number of homes financed using total capital raised

· Number of property developers contracted via Empowa

This pilot will allow Empowa to offer residents an affordable and sustainable lease-to-own model, improving residents’ living conditions and access to home ownership. This will be measured by:

· Number and demographic of families moving into Empowa homes

· Residents’ Net Promoter Score and qualitative satisfaction metrics (i.e. construction quality, location / surroundings, neighbors, safety, financial wellbeing)

This pilot will enable tenants a path to developing a valid credit history that can be used to unlock more traditional financing opportunities. This will be measured by:

· Amount of rental income paid (along with payment status)

· Percentage of households adhering to payment schedules

· Amount of equity pre-payments made

Casa Real staff. Images courtesy of Casa Real.

Learning Questions

1. How can blockchain technology unlock lease-to-own affordable housing models?

2. How can digital, on-chain rental payments drive access to housing for low-income populations in emerging markets? What is the value-add of payments being on-chain?

3. How does access to affordable, climate resilient housing impact quality of life and livelihoods for low-income populations in emerging markets?

By creating innovative funding models to increase access to affordable and climate-smart housing we’re testing a new way to increase the supply of affordable housing units in Mozambique, while simultaneously improving living conditions in urban communities and future-proofing for climate events. This pilot aims to illustrate an important use case for RealFi projects (projects that link blockchain to real world applications), demonstrating the power of community-driven funding that, when paired with climate-smart modern construction technology, can increase the potential of addressing the growing housing supply gap. Scaling this pilot could significantly contribute to improving the safety, security, and dignity of living conditions in Mozambique and beyond.

Stay tuned for updates, evidence, and insights on our other Mercy Corps Ventures pilots, responsibly testing Web3 solutions for unbanked and underbanked populations in emerging markets.

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