• Friday, April 12, 2024
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West African real estate needs stable interest rates for growth, say operators


Operators in the real estate sector in West Africa — with Nigeria and Ghana at the forefront — have said that the stability of the interest rates is needed to spur growth in the sector.

In Nigeria, the real estate sector is navigating a turbulent period marked by a significant increase in mortgage rates, which have climbed from 20-24 percent per annum to a range of 22-27 percent.

This substantial hike has triggered a cascade of challenges, including skyrocketing building material costs, disrupted supply chains, and a shrinking pool of prospective homebuyers.

They made this known at the West Africa Property Investment Summit organised by Africa Property Investment Summit held on Wednesday in Lagos.

“Stable interest rates are needed for the real estate sector to deliver properties at a reasonable rate and manage them effectively. Unfortunately, the current inflation situation in Nigeria is expected to continue until at least the end of 2025,” said Lanre Sonubi, the Head of Marketing and Corporate Communication at Knight Frank, Nigeria.

Read more: West Africa’s real estate leaders gather to rewrite the narrative at the 9th West Africa Investment Summit #WAPI2023

According to Sonubi, the real estate sector cannot drive inflation, but it is affected by inflation through factors such as building materials and labour costs.

He said that the acceptability of real estate investment trust (REIT) in Nigeria depended on the trust being sold to investors.

“There was a need for education about how trust works in managing investments because it also goes hand in hand with sustainability and succession planning.

“Listing real estate businesses on the Nigerian Stock Exchange can be volatile, but it offers opportunities for raising funds and increasing the attractiveness of the business to investors.”

Read more: Professionals seek new policy, financing model to reposition real estate

Meanwhile, Pepler Sandri, Director, Capital Markets, Jones Lang LaSalle (JLL) for Sub-Saharan in Africa, a real estate firm, said that the stage of the commercial real estate cycle had hit a relatively low point.

“Looking back a few years, the COVID-19 pandemic put a halt to the market globally and since then each country has had different rates of recovery. I would say Nigeria has also had macro issues affecting that recovery and as such is really at a difficult stage in the cycle.

“JLL’s house view is that across most developed markets, interest rates should be coming down in the next six to 12 months in the global developed markets. Whether Nigeria will follow that trend is still up for debate, “ he said.

Read more: Investors outline inflation-proof real estate opportunities

On the other hand, Tola Akinhanmi, the Head of Real Estate Finance at Stanbic IBTC, said that the real estate sector had remained resilient in spite of the economic challenges.

However, he said that the government could play a role in creating access to land and investing in infrastructure to support real estate development.

“Land availability and infrastructure expansion are key factors in reducing the housing deficit and opening up new areas for development, “ he said.

API Events is committed to fostering global and local real estate communities. The firm sees the 9th annual WAPI Summit as a crucial component in driving investment and development across the continent.

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