• Saturday, March 02, 2024
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Real estate taps debt as equity dries up


In response to the considerable drop in bank credit, coupled with shrinking equity funding, real estate developers have resorted to the capital market to raise funds for projects.

The expectation is that this will lead to an increased housing supply that will benefit homebuyers and other investors.

A new real estate market review for the first half of 2023 compiled by Northcourt Real Estate shows many of the big developers have raised funds through bonds and commercial papers for their projects—some completed and others at various stages of completion.

Veritasi Homes and Properties Limited, a Lagos-based development company, did a N10 billion issuance programme and has now redeemed N5.53 billion in series 1 & 2 bonds under the programme.

Landwey Investment Limited has issued a N20 billion commercial paper on the FMDQ Securities Exchange to hasten the development of ongoing projects and its wellness city in the Epe area of Lagos.

Lekki Gardens Estates Limited also announced the redemption of N3.48 billion series 1 (tranche A) commercial paper issuance from its N25 billion commercial paper programme listed on the FMDQ Securities, while Homes Fund Limited listed a N20 billion Sukuk bond on the Nigeria Exchange Limited under its N30 billion issuance programme.

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Recently, Housing Solution Fund, a local currency real estate investment trust (REIT), announced that it has completed its series 1 issuance under its N100 billion programme. The fund is authorised and registered by the Securities and Exchange Commission.

The fund is managed by an alternative investment management firm, FundCo Capital Managers, and co-sponsored by Shelter Afrique, alongside pioneer investments from four domestic pension funds and one insurance company.

“We are excited to have completed our first series under our programme with a mix of direct foreign investors, pension funds, and insurance investors. We are confident that our innovative business model will play a pivotal role in increasing the housing stock in the market through strategic collaborations with key partners such as InfraCredit, Shelter Afrique, Nigeria Mortgage Refinance Company, and eligible developers,” Maurice Okoli, the fund’s chief investment officer, said.

It is expected that the funds raised from these activities in the capital market will enable the developers to embark on more projects that will lead to the development of more houses that will come to the market in the coming months.

Though persistently high inflation, escalating energy prices, and devaluation of the naira have put pressure on the prices of construction materials, some developers have completed their projects, while others have initiated projects that have progressed toward completion.

Eximia Realty Company, for instance, completed a 48-unit housing project called Fiona Lawton Apartments in Lekki, offering one- and two-bedroom apartments. In the same vein, in partnership with Cocoon Atlantic estate, the Federal Mortgage Bank of Nigeria (FMBN) also completed 28 apartments in Sangotedo.

Mixta Africa initiated the construction of Marula Park, a residential community in Lagos New Town, while simultaneously introducing a home financing product that allows renters to lease a two-bedroom apartment in Marula Park for a maximum of three years.

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This comes with the option to purchase at the end of the rental period. UPDC Plc announced its new development, The Hampshire, situated in Sangotedo, Lekki, Lagos.

“The performance of the real estate market in H1 2023 has been challenged in quite a number of ways,” Ayo Ibaru, Northcourt’s CEO, said, adding that this has been met with a mix of sentiments from market players, primarily due to the economic effects of the national and subnational elections and its outworking among investors.

“The Lagos real estate market exemplifies the determination of the developer class as they continue to secure funding from the capital market and regional institutional investors in national elections (and its outworking) among investors,” he said.

Ibaru said that during the period under review, demand for housing continued to surpass supply in various areas of Lagos, Kano, Kaduna, and the FCT, particularly in the low- to mid-income market segments, adding that this situation increased the pressure on the residential market.

Developers and investors are attempting to actively address housing shortages by capitalising on improved infrastructure quality and transforming land positions in both inner and outer city areas.

Researchers assessing the Kano real estate market recently concluded that building setback, open space, the volume of development, population per room, building coverage, cross ventilation, living room size, fire extinguisher, colour code, store size, source of water, certificate of fitness and habitation, and as-built drawing compliance are below 50 percent.