Is Eritrea On The Verge of A Construction Boom?

Modern houses in Asmara, Eritrea

Is Eritrea On The Verge of A Construction Boom?


During an interview with state media on Sunday, Presisdent Isaias Afwerki said:

"The pilot housing project in Asmara is a precursor of a comprehensive urban and rural national housing scheme for the years to come."

In other words, the 1,680 modern homes and shops under construction in Asmara are just the tip of the iceberg. This is encouraging because Eritreans have been complaining (rightfully so) for many years about housing shortages in urban areas, particularly in Asmara. But these projects are not just about meeting housing demands; there are numerous economic benefits that comes from investing in the construction industry.

Residential construction alone can kick-start Eritrea's economy and become the driving force behind it for years to come. There is a strong desire to build houses among Eritreans, and if these demands are met, it will create thousands of jobs in the short term, grow the economy for decades to come and put the country on a fast-track to modernization.

China is a great example of what a residential construction boom can do to an economy. Since the reform period of the 1980s, China's construction industry has been a driving force behind the nation's rapid economic growth and modernization. After nearly three decades, construction activity in China continues to boom, with the industry's output currently representing 24% (USD 1.4 trillion) of China's GDP.

Not only will the construction growth help modernize Eritrea and expand the economy but there will be political benefits for the government, too. With more people from the diaspora investing on new properties in the country, they will, naturally, do everything they can to protect their investment(s) and become more active in supporting the country and government.

To fully capitalize on this industry, the government should consider being more flexible about the 2% recovery and development tax. Instead of making the 2% tax a prerequisite to build or buy property for Eritreans in the diaspora, the state should give potential home buyers more options. For example, if they don't want to pay the tax, then they have to agree they will not receive free social services that the government provides. Another option would be to have them on a payment plan that is tailored to their incomes and expenses. At any rate, having a rigid position isn't in anyone's interest.

Although the project will be the largest infrastructure development in Eritrea since the Italian occupation, there isn't any reason to doubt it won't be completed. After all, the country has all the prerequisites needed to complete such a monumental project. It has the Gedem Cement Factory; the massive demand from the diaspora and within the country; and the financial capacity to invest hundreds of millions of dollars on its construction industry annually. But above all, it has the leadership in place to get the job done.

Render of 200 sqm modern houses, each featuring 1 living room, 4 bedrooms, 4  bathrooms, and
 1 kitchen that will be on sale for  €113,006 (US$150,184 ) - Sembel district of Asmara

Villas worth €113,006 (US$150,184 ) are being constructed in the Sembel district of Asmara

Render of some of the apartment buildings under construction in Asmara

Replicas of the residential buildings to be built in Massawa

China's Construction Industry's Output 

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