Opinion: Zimbabwe’s Cash Crisis Is An Opportunity For Real Estate Investors

Opinion: Zimbabwe’s Cash Crisis Is An Opportunity For Real Estate Investors

Zimbabwe’s cash crisis presents an opportunity in the real estate sector, according to local attorneys.

Despite the cash challenges facing Zimbabwe, the demand for well-priced real estate remains strong because real estate is perceived as a domestic investment safe haven, especially among Zimbabwe’s diaspora population. The Zimbabwean diaspora has a significant interest in property investment in their home country.

A consortium of Zimbabweans based outside the country recently invested $1 million in Bulawayo to develop upscale townhouses in the city, according to a report in NewsdzeZimbabwe.

The townhouse development is a first project for Comfort Creek Land Developers, and could open the door for more investment in the country, said Pedzi
Makumbe, CEO and head of the Zimbabwean Diaspora Network in North America.

About 60 percent of the Zimbabwe diaspora is willing to make investments back home in Zimbabwe, Makumbe said.

More than 3 million Zimbabweans live outside the country and contribute about 10 percent to gross domestic product through remittances.

Zimbabwe needs to foster an environment that takes advantage of demand and opportunities for real estate, said Jabulani Nhongo and Bridget Mafusire-Kamanga, attorneys with the Zimbabwean law firm, Manokore Attorneys.

Until now, opportunities in Zimbabwean real estate have taken the form of cluster housing and sectional title models using inventive pricing aimed at addressing affordable urban land, they reported in the DLA Piper Real Estate Gazette.

However, due to the acute demand for urban housing and land — including commercial and industrial property — there are further opportunities in real estate that can help address the challenges currently facing Zimbabwe, and thus improve its investment environment.

From DLA Piper Real Estate Gazette. Story by Jabulani Nhongo and Bridget Mafusire-Kamanga.

Although agricultural land is typically state-owned, and rural land is typically communally owned, urban land in Zimbabwe is held under freehold title, and registered at the Deeds Registry under the Deeds Registries Act.

Due to the rights that attach to ownership of urban land, there is significant interest in, and potential for, investment in urban land in Zimbabwe.

Investment in industrial property represents an attractive opportunity because it aligns with the government’s policies towards stimulating Zimbabwe’s export economy.

Investment in residential property has also seen an interesting shift in the profile of investment and development. Cluster housing developments and sectional title housing have become very popular in Zimbabwe, largely due to affordability, size and the ability to implement innovative pricing structures for these types of investments.

Continued interest in property among Zimbabwe’s diaspora population has seen increased demand for smaller-scale, affordable housing in both low and high density areas.

On Oct. 31, 2016, the Special Economic Zones Bill was passed into law, incentivizing investment in certain areas in Zimbabwe based on geographical location or sector.

Due to the high demand for housing in Zimbabwe and the fact that the government has identified affordable housing as a priority, thereal estate sector may benefit from this legislation.

Risks and protection

Common risks associated with investing in real estate in Zimbabwe include restrictions on repatriating funds and arbitrary amendments of government policies, especially indigenization and exchange control.

There are measures in place aimed at addressing these risks. For example, the indigenization policy has been streamlined to apply on a sectoral basis. Each investment is viewed through the prism of each individual sector on a case-by-case basis rather than a one-size-fits-all approach.

Zimbabwe recently became a member of the African Trade Insurance Agency.

These factors are important when assessing how the real estate sector can act as a catalyst for investment and development in Zimbabwe:

  • Demand: approximately 1.5 million people do not have access to housing. The government has identified affordable housing as a priority, which may foster beneficial investment conditions.

  • Growth of the informal sector has resulted in a need to accommodate informal traders through the development of smaller scale commercial structures outside central business district in major urban hubs.

  • Infrastructure development: there is a need to upgrade Zimbabwe’s infrastructure to keep up with the increasing use of roads, sewer systems, water delivery and drainage.

  • Natural resources: Zimbabwe’s abundant natural resources provide the materials necessary to build affordable housing in the country.

Read more at DLA Piper Real Estate Gazette.