Experts have said a good investment option in the midst of naira devaluation, galloping inflation and worsening foreign exchange volatility is real estate, especially land, which serves not just as a store of value, but also a hedge against instability in the financial system.
They said this at the BusinessDay Property Investment (PRINVEST) 2024 conference, with the theme ‘Navigating Real Estate Dynamics: Balancing rural to urban migration population growth, and economic impacts,’ on Thursday in Lagos.
Ebitu Ukiwe, CEO of Locus Group, said there are opportunities for investors in the high and volatile FX environment, adding that there is now preference for investing in assets like real estate over holding money in naira due to its devaluation.
“The dollar has gone up so much that it incentivises people to keep money in dollars, but investment-wise or in the real estate sense of things, it incentivises investors to keep money in real estates as it gives better yield than most other asset classes,” Ukiwe said.
He said land is the most basic asset in real estate that retains the most value and returns.
Regarding financing options for real estate, Ukiwe noted that the current mortgage markets lack attractiveness for buyers.
He, therefore, urged the government to establish effective financing instruments such as sovereign funds or bonds to stimulate the mortgage market’s growth, citing the mismatch between rates and investor-preferences. “An investor would not want to buy into a single-digit mortgage bond when he can buy into a commercial paper or other double digits instruments,” he said.
“The government needs to establish the right financing instrument either sovereign fund or bonds. There’s a need to establish a financing instrument that will be in the mortgage market and mortgage market will grow the supply side of the real estate market because the demand is there,” Ukiwe added.
Looking at longer-term financing in real estate, Obinna Onunkwo, deputy CEO of Purple, highlighted the importance of exploring instruments like repository funds, with pension funds being a significant potential source.
He talked about the necessity of longer-term commitments, contrasting them with the prevailing short-term focus on the fixed income market.
“Looking at fixed income, you would see shorter instruments gaining weight but for real estate, there is a need for a longer term of seven years for the real estate sector,” he said.
On the construction side, Obinna highlighted the need for collaboration, shared resources, and efficient governance to enhance productivity.
He underscored the role of technology in optimising real estate distribution and operational efficiency, advocating for its integration as a key enabler.
Emeka Eleh, principal partner at Ubosi Eleh + Co, said when investing in this harsh economic time, land will always stand out because of its value, which usually appreciates.
He, however, cautioned that when investing in real estate, the investors need to be extra careful with their decisions. “One thing to look out for is to identify the right landmass, the geographic area where the land is located,” he said.
Continuing, he said: “When it comes to investing in real estate, land happens to be a better option because, in years to come, the value continues to appreciate; people are encouraged that land ends up being a better investment option,” Eleh said.
In May 2023, President Bola Tinubu scrapped a costly but popular petrol subsidy and lifted currency controls in June which, he said, was to save the economy and the country from going under.
The naira has plunged to record lows across markets since the central bank allowed it to weaken by as much as 40 percent against the dollar in June last year.
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