Experts push for expansion, new opportunities in real estate sector

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It was really an exciting discursion in Lagos as experts in the real estate sector gave detailed analyses of the sector, major challenges, opportunities and suggested ways to push for new frontiers. DAYO AYEYEMI reports.

Stakeholders comprising property developers, finance/mortgage providers and pension fund managers are seeking the expansion of the real estate space to allow new opportunities, more participants and investments for the nation’s economic growth and development.

Converging on Lagos for the West Africa Property Investment Summit (WAPI), the experts identified major issues limiting the growth of the sector and suggested way out in order to unlock the potential of the industry

They also itemised the challenges of high inflation, dollar liquidity tightening, weak naira, food crisis, social tension, rising interest rates, slow growth and recovery confronting Nigeria and Africa countries in general, calling on the government to fix these issues to improve investments in the real estate sector.

They pointed out that institution investors were very critical to unlock the real estate sector, adding that more Real Estate Investment Trusts (REITs) would be needed in the market to be part of the products as it’s been done in other jurisdictions.

According to them, real estate space needed more investors, adding that information about REITS has to flow.

Themed:” New Frontiers In The New Normal, some of the experts that spoke at the forum included the Head, Equity Research, West Africa, Stanbic IBTC Bank, Muyiwa Oni who gave the macro-economic Overview of the economy; Head Real Estate Finance, Stanbic IBTC Bank, TolaAkinhanmi; Executive Director and Head, ECM Execution, Africa Regions, Stanbic IBTC Bank, OyindaAkinyemi; Director, Novare Fund Manager, Pierre Groenewald; CEO, SFS Capital, Patrick Ilodianya; CEO, Pension Fund Operators Association Nigeria (PENOP), OgucheAgudah; Legal Officer, Pennek, MichealObiaju; and Managing Director,Dutum Properties Limited,Mr Tope Runsewe.

To unlock the industry’s potential, CEO, Pension Fund Operators Association Nigeria (PENOP), OgucheAgudah, said there was a need for information sharing and the need to get financial and REITs markets together.

“Another is the liquidity, there is need for more work and there is need for regulations on how the Pension fund can be invested in REITs. We need to understand that with pension industry. There’s need for advocacy and engagement,” he said.

Executive Director, Stanbic IBTC Capital, OyindaAkinyemi, said there was a need to get more REITs into the market. Besides, she is of the opinion that more sponsors who are doing great work in the real estate space together with the investors must be involved.

According to her, there was a need to inform investors about the opportunities in real estate, the REITs in particular.

“I am aware that a lot of investors have got burnt over the last two years, but I think there have been a lot of improvements, a lot of progress, and there has been a lot of structures in that space in term of what the regulators have done and in term of making the REITs product to act as a crystal vehicle similar to what we have in other jurisdictions.

“And I think the processes of educating the investors, getting to know and understand are important. This can only come about by engaging the players in that space, understanding what the potential risks are and they can determine how they want to play. But I think bringing the players together like we have in the conference is extremely important,” Akinyemi said.

Also,Head Real Estate Finance, Stanbic IBTC Bank, TolaAkinhanmi, talked about the need for institutionalizing real estate, saying this would play a key role to show how to utilize the capital market, REITs and REIT Bond.

Explaining, he said: “Institutionalizing real estate plays a key role and it’s not just a real estate. When an industry is fragmented and it is small, you will not be able to harness the opportunities, you are not going to attract capital. That is why is important to remove the opaqueness in the market. Part of it is what we are doing now, releasing information and engaging stakeholders, proffering the solutions so that we can educate the market, create the right framework, the right information that we enable investors and different players to support investment in the sector.

“When we talk about institutionalising investment, it goes beyond rational things, it goes to how you utilize the capital market,REITs REIT Bond.”

“The investors in the market require a detailed information that, if you are not institutionalised, you will not be able to be a player in the market or attract investment.”

“We have to understand the language and what the investors need because you have to deliver what you promised. If we get that right, even retail investors can by units in those REITs.

“So you don’t need to own the building but you own a stake. That is what it is. We have to get real estate into that space the way you buy a share in MTN and Nigerian Breweries,” he said

Presently, he said Nigeria has four REITs companies, adding that there has been growing form of assets that could be used to create more REITs to engender more activities in the real estate space.

According to him, institutionalising framework has been the challenge, saying stakeholders would need to get the capital in, increase asset stocks and transfer those assets into the market.

He also called for the need to create liquidity, pointing out that a lot depends on the macro-economic impact.

“We want to see that the investors see the assets as they see the country as an important destination for investment. All the players must ensure they build to quality and positive cashflow,” he said.

On housing deficit, Legal Officer, Pennek, MichealObiaju, said there a big future for Nigeria’s real estate,urging the government to allocate requisite resources to the housing sector.

According to him, Nigeria needs to produce one million units of housing per annum.

“Real estate is big. It provides wide range of opportunities and I’m also of the view that real estate in Nigeria is a goldmine. It’s the current gold mine after oil,” he said.

Speaking about the opportunities in the sector, he said these centered around certain demography and zones like Lagos , Abuja and Port Harcourt, calling on government to come up with policies to decentralize these developments to other parts of the country so that there can be less pressure on urban centres, adding that urban migration would also reduce.

Talking about the challenge of urban population, he said most Nigerians spent 60 per cent of their income in rent.

High rental payment, he said ought not to be if development had not centered on cities/urban centres due to migration.

With government coming up with policies that engineered funding for housing, Obiaju said there would be more opportunities in real estate, adding that people would want to take advantage of the mortgage scheme to create opportunity for themselves.

To promote development in the sector, he urged government to develop a friendly policy that would allow the private operators partner government in providing housing.

According to him, there was no lack of finance in the sector but that the risk associated with issuance of the funds were the issues.

“If you approach them, they begin to mention their risks, they will consider economy, security, cost of the houses, affordability and how to pay back the loans,” he said.

Managing Director, Dutum Properties Limited,Mr Tope Runsewe, harped on the need to develop a thriving mortgage system in the country.

He spoke on the need for government to fix the economy, fix inflation and falling naira.

“ As a matter of fact, I believe we have not scratch the surface of the potential yet in term of what is achievable in real estate.

“The reason for that is because, being an emerging economy, you can always take queue and tips from other countries that have gone ahead and see the process they gone through and where they are presently.

“When you look at the gap where we are presently and where we are going, you know that, definitely there is a lot of room. For example, Nigeria still don’t have a thriving mortgage system, and anywhere in the world the mortgage system is what grown the real estate sector,” he said.

’In a situation where right now you want to buy a house in Nigeria, I believe over 70 to 89 per cent of the people have to look for 100 per cent cash to buy the houses. Anywhere in the world where the economy is developed, you don’t need more that 10 to 20 per cent of the amount and you will own your house. So imagine the multiplier effects that will have the moment we have a thriving mortgage sector.

In the same vein, because of that it means we cannot build too many houses because there are not enough people to buy them even though there is a gap. They talked about 20 million gap, but in reality how many people are able to afford to buy the house. That is the area that needs to be resolved, and I believe as the economy continue to grow and develop and we have organisation like the Nigerian Mortgage Refinance Company (NMRC) and the rest of them, then the mortgage sector will grow and definitely real estate sector will grow.