Analysts say Africa underweight in real estate asset value at €113bn

Real estate investment analysts have said that with only €113 billion gross asset value of real estate, representing 1 percent of the world’s total value, Africa is underweight despite its large and growing population estimated to be 15 percent of the world total.

The continent, they insist, is underweight in asset value of real estate relative to other continents, adding, however, that this state of affairs has its positive side, having made it an attractive prospect for investible funds in real estate.

Analysts have always raised concerns over the dearth of long-term funds for investment in the Nigerian market, hence the consideration for the growth and development of Real Estate Investment Trusts (REITs) as an investment instrument that could harness the opportunities that the market offers.

Andrew Baum, a Cambridge University professor and thought leader on global real estate investments, confirmed that Africa is underweight in his review of the global performance of REITs at a roundtable in Lagos, noting that domestic and foreign investors are more attracted to markets with properly structured REITs sectors.

The roundtable with the theme ‘Catalysing the Growth of REITs’ was organised by Stanbic IBTC Capital in partnership with Actis and Resilient Africa for key industry stakeholders and regulators, including SEC, FIRS, NSE and PENCOM, to discuss REITs’ potential in improving investment in Nigeria’s real estate market.

Niyi Adeleye, head, Real Estate Finance (West Africa), Stanbic IBTC, pointed out that a well-structured and sustainable rental cash-flow is the most important driver of the value and quality of REITs and other real estate investments as opposed to the over-weighted attention on project construction cost, property appearance and perceived building quality.

In the same vein, Des de Beer, chairman, Resilient Africa, called for a drive to encourage corporations to release the stock of real estate assets in their portfolios for securitisation to increase efficiency in the market.

By: Chuka Uroko