Progress of real-estate investment trusts (REITs) in financing Africa

“There are only 32 REITs (real-estate investment trusts) in Africa with South Africa being the largest REIT market having 27 REITs and Nigeria second with 3 REITs listed”, according to Oscar Onyema, CEO of the Nigerian Stock Exchange. He said REITs are only available in 4 countries – Ghana, Nigeria, South Africa and Kenya – and their total value was $29 billion. (TM NOTE: Mauritius and some other markets also list real-estate investment companies under general or other listing regulations, without specific rules for REITs).

Onyema said that the volume of transactions had climbed from $65 million across Kenya, Nigeria and Ghana in 2012 to an estimated $265m worth of transactions in 2015. “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.

“Whilst the Nigerian market may not be as developed as other emerging markets such as Mexico, South Africa and Singapore, this asset class has definitely come to stay. Today we have about N40bn ($126.8m) in REITs market cap (capitalization) listed on the NSE and a total of N96b in the construction/ real estate sector of our equity market”.

Minister of Power, Works and Housing, Babatunde Raji Fashola (who was represented by Ayo Gbeleyi, Managing Partner of GA Capital Limited) said Government would use the stock exchange among other tools to raise finance for housing: “It is difficult, if not impossible, for Government to provide all housing solutions given the diverse demands. Best practices in places like the UK, US, Canada and Singapore are stories of a mixture of ownership and rental arrangements.

”In the medium term, we intend to raise more capital outside direct Government Treasury, working with the Federal Ministry of Finance, through Infrastructure bonds, REITS and other forms of real-estate financing instruments, leveraging as most appropriate the platform of the Nigerian Stock Exchange”. Other funding sources include pension funds, private equity funds and the National Housing Fund managed by the Federal Mortgage Bank.

Onyema said the exchange is implementing changes in the reporting and valuation of REITs and other collective investment schemes listed on the NSE, in order “to create a more transparent, liquid and accessible market structure in line with global best practices for REITs”.

Abimbola Ogunbanjo, the first Vice President of the National Council of NSE, said the Nigerian REITs market is largely underdeveloped due to lack of clarity on regulatory issues: “The major challenges facing the REITs industry in Nigeria include restrictive legislation, poor knowledge and understanding of the industry in addition to prolonged bottlenecks created by the Land Use Act of 1978. Nigeria’s Land Use Act is embedded in the Constitution of our country. Thus, any attempt to rectify its inadequacies requires a constitutional amendment which of itself is a major challenge”

The speakers were at a recent conference at the Nigerian bourse to promote real estate investment trusts (REITs in Africa). It was sponsored by Stanbic IBTC Holdings Plc, FSDH Asset Management Limited, PricewaterhouseCoopers (PWC), United Property Development Company (UPDC) Plc, Rand Merchant Bank (RMB) Nigeria Limited, Udo Udoma & Belo-Osagie and Mixta Nigeria. Click for NSE press release and photos.

RETS conference: Photo Nigerian Stock Exchange.

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