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18 Sep 2018 Updated 21 Nov 2019

Africa

Shift in Real Estate Paradigm: Meeting the Needs of an Urbanising Africa

Africa Singapore Business Forum 2018 | Panel: Real Estate – Africa's Urban Opportunity

Even as Africa continues to urbanise her cities, lack of affordable housing remains a problem. Nigeria alone has a deficit of 17 million homes, and the rise of the middle-class population also signals a housing need for university students and young professionals. Panellists at the Africa Singapore Business Forum (ASBF) held on 28 and 29 August 2018 highlighted these problems, as well as identified three areas of opportunities for Singapore companies.

ASBF2018 04 Panel
From left: Mr Dipak Chummun, Chief Finance Officer, IBL Group; Mr Ameel Somani, Principal, Helios Investment Partners, Mr Olasupo Shashore, Advisory Board Member of Landmark Group & Eko Hotels, and Partner in Africa Law Practice; Mr Thomas Wee, Deputy Managing Director, Middle East, Africa, Turkey & India, The Ascott Limited and Mr Karim Anjawalla, Managing Partner, Anjarwalla & Khanna and Africa Legal Network (Moderator)

1. Provide more affordable housing and serviced apartments

Mr Ameel Somani, Principal, Helios Investment Partners noted that many countries in Africa have an oversupply of luxury apartments, retail malls and office spaces. The opportunities therefore lie in more difficult and complex real estate.

“There has been a complete paradigm shift. Now, we need real estate that really cater to the demographics,” he said, adding that there is a big demand for studio apartments in East Africa, such as Kenya, for the young population who cannot afford expensive housing.

Mauritius, on the other hand, faces a different challenge. Mr Dipak Chummun, Chief Finance Officer of IBL Group, said that the country’s diversification into tourism and financial services has ramped up the need for several types of real estate, such as luxury housing and serviced apartments. He said: “We’ve noticed a lot of interest in hospitality assets. Yields are quite high in Mauritius—relative to Europe and many parts of Asia.”

2. Understand the local market by working with local partners

Mr Thomas Wee, Deputy Managing Director for Middle East, Africa, Turkey and India at The Ascott Limited, also identified serviced apartments as an area of opportunity for businesses.

“We are bullish but cautious about Africa. Our key consideration is to look for aligned partners,” he said, adding that Ascott had signed two agreements for the first time with Ghana last year. He also advised companies to engage with local partners to understand the market better.

“It takes a while for us to understand the local context, the market, the business, the government before the group comes in to invest. Therefore, it is very important for us to find the right local partners who can guide us.

ASBF2018 04 Thomas

Mr Somani agreed and said companies need local partners to assist in the planning process and sourcing of materials, the procurement of land, and to make sure that there are no encroachment issues.

“Land disputes are very common, so it’s important to have a good local partner and a good lawyer,” he advised.

3. Advantages of international debt financing and government support

Mr Olasupo Shashore, Advisory Board Member of Landmark Group & Eko Hotels, and Partner in Africa Law Practice, said access to debt distorts the market in a place like Nigeria, where the pricing of debt can be very high. Singapore’s access to international debt financing is, therefore, an advantage for investors, especially in the long term. He also mentioned that government support can help to boost the success of projects, and gave the example of Eko Atlantic— a public-private partnership on a 99-year concession to reclaim and develop land from the Atlantic Ocean—in Lagos, Nigeria.

ASBF2018 04 Olasupo

“All too often, governments in Africa fail in their duty to support real estate in the provision of infrastructure, waste management and water provision. That doesn’t mean projects are not viable. Thinking out of the box and not following the regular template can help you get beyond the road blocks,” he said, adding that developers can recoup their initial capital by selling a percentage of the land they are entitled to, as well as generate revenue from the infrastructure they developed.

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