For investors seeking green fields that harbour opportunity for good yields, retirement and care homes offer such opportunity and it is largely untapped in Nigeria, according to a new report.
The opportunity in this market arises mainly from the lack of functional national policy on the care and welfare of older persons in Nigeria. Also, changing demographics in the country coupled with the breakdown in family structure and absence of a social security system, present unique challenges to the elderly in Nigeria.
This means an investment opportunity for investors ready to deliver fit-for-purpose homes and other facilities that will address the current challenges that the aged community in the country faces.
“There is a general lack of adequate enclosed retirement communities for the elderly. Opportunities in the retirement/care homes which are largely untapped also arise from the 2014 reform in the Pension Fund Administration (PFA) scheme.
“This scheme guarantees stable retirement income for the elderly and provides the necessary cash flow to fund this lifestyle,” Olumide Osundolire, Partner at Banwo & Ighodalo, confirmed.
In the report, ‘New Investment Opportunities’ Osundolire listed three basic types of retirement/care homes, each depending on the range of its services. They include independent living apartments; nursing homes and home health care. The first type is the current destination for investors with its encouraging return on investment.
Though Nigeria’s population aged 65 years and above fluctuated substantially in recent years, it tended to decrease through the 1971 – 2020 period, ending at 2.7 percent in 2020 which is about 5.4 million.
With the largest population in Africa, estimated at 200 million, Nigeria has an elderly projected population growth rate of 3.2 percent and this rate has been estimated to double by 2050.
The implication of this is that the size and value of this market are encouraging enough for investors to go for the opportunities which will be increasing as years pass by.
But investment considerations here should favour facilities and amenities that enhance the lifestyle of the middle-class retirees from 60 years and above. Again, the gated communities are developed with a needs-driven approach to meet the lifestyle needs of the residents from housing design, shopping, exercise and fitness, mobility, health home services, entertainment and community activities.
The expectation is that opportunities here are to be nurtured by a significant rise in the population of the aged going forward. Osundolire noted that the ageing population is a global trend, quoting a UN report which estimates the world percentage of persons over 60 years old at 13 percent.
“Sub-Saharan Africa, which has the smallest proportion of elderly and which is ageing slower than the developed regions is projected to see the absolute size of its older population grow by 2.5 percent between 2000 and 2030,” he said.
Tokunbo Ajayi, CEO, Propertygate Development and Investment Company, affirmed that opportunities exist in this market and residential developments generally, pointing out, however, that much of the opportunities in residential real estate are in small-size residential family units.
“The reason developers and investors opt for these small-size units such as one-bedroom and two-bedroom apartments is that luxury housing units hardly find buyers as they are no longer in high demand.”
He lamented that even with the switch to smaller family units, developers’ challenges remain as funding is not coming easily from traditional lenders such as banks.
Jide Odusolu, CEO, Octo5 Real Estate, shares this view, stressing that since the pandemic, banks do not fund real estate development, noting that very few of them invest or support the middle market, which is the source of the bulk of true demand.
“To further complicate the situation, agencies such as Family Homes Funds (FHF) and Nigeria Mortgage Refinance Corporation (NMRC), which are trying to avoid the mistakes of the Federal Mortgage Bank of Nigeria (FMBN) and fund real demand, are hampered by inadequate supply, which is the proverbial chicken and egg situation,” he said.
According to him, there are better opportunities now for demand-side support, but very little support for the supply-side, lamenting that government institutions erroneously assume that most developers are fronts, which is not true and rather than provide support, end up choking the industry.
To remain afloat, he said, many developers now rely heavily on syndicated private bonds to source take-off capital and thereafter bundle their off-take to mortgage facilitation entities.