Nigeria, Ghana, Rwanda and many other African nations are still lagging behind in Real Estate Investment Trusts (REITs), New Telegraph has learnt.
According to research on African real-estate markets by Jones Lang LaSalle (JLL), low legislation, lack of transparency and underdeveloped listed public markets are among factors Nigeria and other African countries lag behind on REITs.
The research noted that Nigeria, Ghana and Rwanda were still low in the area of transparency, while Uganda, Tanzania, Ethiopia, Côte d’Ivoire and Senegal are opaque.
The report, however, said that Nigeria, Ghana and Rwanda were moving in the right direction.
The research singled out South Africa as the only sub-Saharan African country that could be considered transparent in REITs.
It pointed out that Africa’s real-estate sector would continue to lag behind in terms of attracting foreign investment until legislation to facilitate REITs moves up the agenda.
According to the report, diversified property exposure in a context of rapid African urbanisation reduced the dangers for foreign investors in markets that they consider too risky to enter.
The report stated that fast-tracking the adoption and implementation of REIT legislation was a way for African countries to expand the universe of investors willing to consider Africa.
The Chief Executive Officer, Nigerian Stock Exchange (NSE), Oscar Onyema, in a forum recently, said the African REITs market was valued at $29 billon, adding that it was available in four countries namely, Ghana, Nigeria, South Africa and Kenya.
He said: “There are only 32 REITs in Africa with South Africa being the largest REIT market having 27 REITs and Nigeria second with three REITs listed.
“In 2015, an estimated $265 million worth of transactions were concluded in Kenya, Nigeria and Ghana, a big improvement to the $65 million seen in all three markets in 2012.
“This indicates an increasing market as a larger number of investors are beginning to take increased interest and participation in the Real Estate Investment sector.”
According to Onyema, while Nigerian market might not be as developed as other emerging markets such as Mexico, South Africa and Singapore, the asset class had definitely come to stay.
“Today we have about N40 billion in REITs market cap listed on the NSE and a total of N96 billion in the construction/real estate sector of our equity market,” he said.
To create a more transparent, liquid and accessible market structure in line with global best practices for REITs, he said the NSE had started the process of implementing some changes in terms of reporting and valuation of REITs and other collective investment schemes listed on the NSE.
However, Linklaters law firm found that, between 2013 and 2018, Africa-focused real estate funds raised only $2 billion from investors, compared with $11.9 billion and $4.2 billion raised by private-equity and infrastructure funds.
A Real Estate Investment Trust (REIT) is a company that owns, operates or finances income-producing properties.
Grit Real Estate’s Chief Executive Officer, Bronwyn Corbett, stated that Africa presently had “relatively undeveloped” listed public REIT markets.
She expects the creation of multiple REITs in major African markets over the next decade, noting that Ghana and Mauritius were among countries in the drafting phase.
According to her, adopting REIT legislation would help to bring those institutions on board.
Major obstacles, Corbett said, were the time taken for REIT legislation to be drafted and then promulgated, and lack of clarity on tax structures and accounting, even after promulgation.
“Lack of investor familiarity with REITs and real estate as an asset class are also causing delayed take-up in African markets,” she said.
She stated that increased property-sector liquidity was of critical importance to African pension funds, “which typically hold far more of their investments in direct property holdings compared with those in developed countries.”
Grit is listed in London, Johannesburg and Mauritius.
The CEO said that diversification was key to the company’s strategy, both in terms of geography and property type as the company has a mix of 25 shopping centres, hotels, office and industrial buildings in Morocco, Zambia, Mozambique, Ghana, Kenya, Botswana and Mauritius.