DRIVERSFOR REAL ESTATE IN

NIGERIA

Presented @

By: Roland Igbinoba

Introduction

• Fourteen years ago, the Economist labeled Africa as the‘Hopeless Continent’, but in 2013 the Economist published‘ASPIRING AFRICA’.

• Africa is no longer viewed as a region of long term economicdistress, but now seen as a continent of increasingopportunities. The Real Estate sector is playing a significantrole and there is an increased number of internationalproperty investors and corporate occupiers due to rapidlygrowing economies of Africa

• The need for high quality commercial and residential realestate will only increase as the economies of Sub-SaharanAfrica grow in importance on the global stage.”

• This document deep dives into the key drivers that accountsfor the recent growth in Africa’s Real Estate with focus onNigeria

Nigeria - Key indicators for Real Estate

• Income level: Lower middle income

• GDP: US$522.64 billion (2014) GDP growth: 5.4% (2013)

• Population: 178.5 million (2014)

• Inflation: 8.00% (Dec 2014)

• Political stability: -2.08 (2013)

• Corruption Perception Index: 27 (2014)

Unveiling the Drivers

Macroeconomics

Capital

Policies & Standards

Demographic Shifts

Big, Smart & Consistent

DATA Technology

&

Digital1

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Demographic Shifts• Driven by demographic trends and

urbanization, Africa’s population is rising rapidly at atime when population growth is slowing in otherglobal regions. And this will drive the demand forreal estate

• Unprecedented shifts in population will drivechanges in demand for real estate. Africa isbecoming much more populated, creating moredemands for assets; and real estate assets constitute54% of the world’s wealth.

• UN projections suggest that the population of Africawill almost quadruple to more than four billion by2100, with nearly one billion of these peoplein Nigeria alone.

Demographic Shifts

• According to the World Bank, Nigeria had anannual estimated average urbanization rateof 3.75% per year for the period 2010–2015,with a total of 47% of the country’spopulation currently living in urban areas

• Nigeria is projected to be 440 million by2050, (i.e 3rd most populous country in theworld), hence the recent burgeoning middle-class urban populations will need far morehousing and the influx of migrants intoNigeria will drive house appreciation.

Macroeconomics

• One of the biggest reasons some bank failed inrecent times was failure in Commercial Real Estateportfolios. Loan standards spiraled out of control andbanks were unprepared for the crash that followed.

• But (PwC) has projected an increase in real estate’scontribution to the gross domestic product (GDP) ofNigeria from $9.16 billion to $13.65 billion in 2016 ifthe right environment is created.

• Since the Real Estate market does not operate in avacuum, macroeconomics helps to depict the currentstatus of the market; hence investors can makeinformed decisions.

“Broadly speaking, when the economy is sluggish, so is real estate; and vice versa”.

Capital

• Private capital will play a critical role in funding thegrowing and changing need for real estate and itssupporting infrastructure.

• Also, the Real Estate Investment Trust will help to buildout the real estate investment marketplace and toprovide a reliable way for Nigerians to save over time,invest for current income and long-term growth.

• In an attempt to balance between different types ofcapital sources and investment structures, such asequity and debt, short-term and long-term, public andprivate; Private real estate capital will become animportant partner of Government real estate capital inorder to finance urbanization.

Capital

• Capital generation of a citizenry dictates how real estatethrives in such cities. This implies increase in economicgrowth will make real estate to be attractive and providenew opportunities for discount and luxury retailers .

• Increased allocations of funding to the asset class by localand foreign investors are also key drivers of projectedgrowth in this sector.

• According to a recent PWC report, the global investiblereal estate universe will expand substantially, leading to ahuge expansion in opportunity, especially in emergingeconomies like Nigeria.

Big, Smart and Consistent Data• Democratizing data is transforming real estate

finance; making the commercial real estate industrymore transparent, improving how buildings aremanaged and helping potential investors make betterdecisions.

• But there is so much dumb data everywhere, dumbdata become SMART when there is integrity,regulation and accountability; and this helps inforeclosure and short-sale changes and also boostspitches.

• Prospective investors can analyze how sound aphysical structure is and also assess a building'sfinance, loans and investment platform with today’sdata availability

Policies and Standards

• Good policies, governance and standards are themost important drivers shaping the global realestate financial market. The nature of the problemrelated to these drivers is quite simple: there isoften too much debt and too little documentation.

• A robust system for data collection would be basedon changes to real estate ownership and lease laws,such that no asset sale or lease contract would bevalid without notary registration and publicpublication of the key data of these activities.

• Continued government reforms have created anenabling environment for property developmentand financing.

Policies and Standards

• Policy response framework must be formulatedwith the consideration of sustainability principles,with particular attention to population growth,urbanization limits and the use of naturalresources.

• Increased political stability in Nigeria and increasedparticipation in local partnerships will continue toease investors’ concerns relating to investingacross Nigeria.

• Collaborating with governments or involving a localpartner in future real estate developments inNigeria will become more important to mitigatethe risks.

Technology & Digital

• With the upsurge of mobile commerce, Internetpenetration and digital channels, access to real estateinformation has increased across Nigeria and thetraditional consumer culture in Nigeria is changing.

• It is expected that online transactions in Nigeria willexceed US$6 billion by the end of 2014.

• Technology has altered the face of real estate bycreating demand for virtual environments such aswebsites or other online services such as onlineshopping.

• The advent of Innovative and low-cost buildingtechnologies will also help make housing affordable inNigeria