REITs Growth To Help African Nations Deepen Real Estate Investments

REITs Growth To Help African Nations Deepen Real Estate Investments

The growth of Real Estate Investment Trusts (REITs) could help African nations harness the opportunity that the market offers and increase accessibility of long term funds for developers on the continent, BusinessDay quoted analysts saying.

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.

This however makes the world’s poorest continent attractive for real estate investible funds if they work on developing well structured REITs at the capital markets.

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 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 ‘Catalyzing the Growth of REITs’ was organized 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.

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 securitization to increase efficiency in the market.