Real Estate Unite – Experts highlight real estate growth prospects

Stakeholders in the real estate industry have said that despite funding and infrastructure challenges, opportunities for growth in the sector are increasing with the expanding population creating demand for residential and commercial properties.

They added that the prospect would continue to increase with rising intra-Africa trade and investment, which would remain an important growth driver.

According to those who spoke at a gathering of professionals in the industry, Real Estate Unite, with the theme, ‘Connecting the dots in Africa’s real estate’, the sector is growing rapidly with a burgeoning middle class and rapid urbanisation.

The Senior Manager, Real Estate Finance, Stanbic IBTC, Mr. Tola Akinhanmi, said there was still a strong market in Nigeria’s real estate.

He noted that the sector had emerged the sixth largest in the country, accounting for 8.4 per cent of the total Gross Domestic Product in 2014; and in the second quarter of 2015, the sector grew by 18.78 per cent.

“The Nigerian real estate sector has in the past five to seven years witnessed increased foreign and domestic investment; entry of foreign developers, investors and service firms; increased joint venture arrangements between local sponsors and financial as well as strategic partners; and development expansion into secondary cities such as Delta, Owerri, Abeokuta, Enugu, Ibadan and Kano, among others,” he said.

Akinhanmi noted that there had been growing interest and focus on investment grade assets within the retail and office segments with increased government interventions and support for the housing sector such as the World Bank-led housing initiatives, establishment of the Nigerian Mortgage Refinancing Company and relative mortgage accessibility through pension reforms.

According to him, emerging trends in the sector include a shift from luxury development to middle income housing; affordable housing schemes through private-public partnership arrangements; and the potential to bridge the housing gap with new residential developments when mortgage reforms become effective.

The Managing Director, FHA Mortgage Bank Limited, Mr. Roland Igbinoba, said the sector was being driven by demographic shifts, macroeconomics, capital, data, policies and standards, and technological growth.

He said, “Driven by demographic trends and urbanisation, Africa’s population is rising rapidly at a time when population growth is slowing in other global regions. And this will drive the demand for real estate. Unprecedented shifts in population will drive changes in demand for real estate. Africa is becoming much more populated, creating more demands for assets; and real estate assets constitute 54 per cent of the world’s wealth.

“According to the World Bank, Nigeria has annual estimated average urbanisation rate of 3.75 per cent per year for the period 2010–2015, with a total of 47 per cent of the country’s population currently living in urban areas. Nigeria is projected to be 440 million by 2050, hence the recent burgeoning middle-class urban populations will need far more housing and the influx of migrants into Nigeria will drive house appreciation.”

Igbinoba said that one of the biggest reasons that some banks failed in recent times was the failure in commercial real estate portfolios.

“Loan standards spiralled out of control and banks were unprepared for the crash that followed. But PwC has projected an increase in real estate’s contribution to the GDP of Nigeria from $9.16bn to $13.65bn in 2016 if the right environment is created,” he added.

Igbinoba stated that with the upsurge in mobile commerce, Internet penetration and digital channels, access to real estate information had increased across the country and the traditional consumer culture was changing.

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He said it was expected that online transactions in the country would exceed $6bn and that technology had altered the face of real estate by creating demand for virtual environments such as websites or other services such as online shopping.

The Investment Principal, Stanlib Direct Property Investment, Ms. Nnema Bryd, said rural-urban migration would also be a major growth driver in the sector in the coming years.

She added that over the next 40 years, 86 per cent of the global urbanisation would occur in Africa and Asia.

Bryd said, “By 2030, over 50 per cent of the African population will reside in cities, rising to 60 per cent or 1.2 billion people by 2050, the current population on the continent. It is something that can’t be stopped in terms of the number of people that will live in urban areas.

“Cities are more efficient; so, it cannot be stopped. What matters is how the government prepares for the rapid and significant migration; they have to look at providing the appropriate and sufficient infrastructure, and public facilities that will cater to the needs of these people. The government can capitalise on this to boost the economy.”

Igbinoba stated that private capital would also play a critical role in funding the growing and changing need for real estate and its supporting infrastructure and that the Real Estate Investment Trust would help to build the real estate investment marketplace and provide a reliable way for Nigerians to save overtime, invest for current income and long-term growth.

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The Chief Executive, 3invest Limited, organisers of the Real Estate Unite, Ms. Ruth Obih, said a real estate boom was an inevitable side effect of Africa and indeed, Nigeria’s rapid urbanisation and growing middle class, creating infrastructure needs and funding requirements.

“It is estimated that with the quoted shortfall of 17 million housing deficits in Nigeria alone and a funding requirement of $363bn, the change in demographics and increasing urbanisation will create opportunities for investors in the long run,” she said.

 

— Punchng