Experts advocate better REIT regime to unlock housing finance
The Managing Director of the Federal Mortgage Bank of Nigeria (FMBN), Mr. Gimba Ya’u Kumo has been quoted severally to have put the cost of bridging the country’s housing deficit at an estimated N56 trillion based on a conservative cost of construction at N3.5million per unit, a figure that is not far from the World Bank’s estimated N59.5 trillion.
The figures no doubt underscore the vast and untapped investment potential of the country’s real estate sector with a 17 million housing deficit as at 2013.
Given the huge capital that is required for direct real estate investment, most investors are unable to achieve a real estate portfolio that is diversified across real estate types, such as commercial real estate, residential real estate among others and it has also become overwhelming for the National Housing Fund (NHF) with such colossal amount.
Experts in recent time have unanimously stressed that it has become very pertinent to explore offshore funding possibilities to boost financing for mass housing which the nation urgently needs.
This reflection came under serious consideration at the recently concluded Real Estate Unite 2015, an annual flagship summit where global real estate leaders discuss pertinent opportunities and issues in Africa’s real estate market.
Speaking on capital and demography, Nnema Byrd, CFA, a Principal, West Africa Specialist STANLIB, in structuring investments in real estate property, conducting due diligence and capital raising emphasized that in spite of the shocks that the Nigerian market is facing, long term trend remains strong, Africa collective GDP is supposed to continue
She said available figures show that population growth by the end of the century will witness growth especially between 18 to 64 years of age, an important group that drives employment and productivity.
The Nigerian population is expected to grow at compound annual rate of 2.4 percent per year which compares to the annual growth rate of the world at about 0.9 percent. Nigerian prime age population is expected to exceed the total depended population through the end of the century.
“We anticipate by 2050, Nigeria will have a total population of 413 million people. The working age demographic is supposed to be the fastest in the world at 3 percent through 2050,” she said.
Nnema said, “These people will need a place to live, shop, work and be entertained, are we prepared for that?” she asked rhetorically.
The expert advocated the need to take a critical look at Real Estate Investment Trusts (REIT) as viable and dependable source of unlocking finance to the housing sector if we must close the gap that is expected to quadruple with the projected population figures.
The need to give all investors in Nigeria the opportunity to invest in largescale, diversified portfolios of income-producing real estate in the same way they typically invest in other asset classes through the purchase and sale of liquid securities gave birth to REIT in Nigeria with Skye