For investors seeking to expand their investment portfolios, opportunity exists now for investment in retirement/care homes which is a largely untapped and unserved market in Nigeria.
This opportunity arises from the lack of adequate enclosed retirement communities for the elderly, and also by the 2004 reform in the Pension Fund Administration (PFA) scheme which guarantees stable retirement income for the elderly and provides the necessary cash flow to fund this lifestyle.
There are three basic types of retirement/care homes, each depending on the range of its services. They are the Independent living apartments; Nursing homes and Home health-care. The first type is the current destination for investors with its encouraging return on investment.
The retirement community, according to a new report on ‘New Investment Opportunities’ by Real Estate Investor Series (REIS), consists of facilities and amenities that enhance the lifestyle of the middle class retirees from 60 years and above.
“These 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, community activities amongst others,” the report, powered by K. Parkwood Property Services, explains further.
Expectation is that this opportunity is to be nurtured by a significant rise in the population of the aged going forward. Olumide Osundolire, Partner at Banwo & Ighodalo, affirms this, noting that ageing population is a global trend. He quoted 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, he added, is projected to see the absolute size of its older population grow by 2.5 percent between 2000 and 2030.
“Nigeria, the country with the largest population in Africa, estimated at 200 million, has an elderly projected population growth rate of 3.2 percent, a rate that has been estimated to double by 2050,” he said.
The National Population Commission estimated that, in 2015, the elderly population in Nigeria was 9,319,025. In 2016 and 2017 it increased to 9,622,057 and 9,934,942 respectively. In 2020, population aged 60+ years in Nigeria was estimated to be 10,877,000 persons and it has been projected that this number will rise to 33,190,000 by 2050.
Besides the growth prospect, another highpoint of this market is what the report describes as demand resilience. Though like all property types, retirement/care home investments have their own business cycle, the demand for these properties is far less affected by the rise and fall in employment or the expansion and contraction of gross national income (GNP).
Furthermore, while other market trends may be cyclical, there will always be a need for long-term facilities for ageing population which proves to be resilient asset class. “Its needs-driven demand characteristics allow retirement housing investments to be resilient against the head winds recession pressures faced by other real estate sectors,” Osundolire assured.
Relatively high return on investment puts this asset class ahead of others. According to Osundolire, depending on the location, property quality, and the contract term with the operator/management, retirement homes yield between 6.5 percent and 10 percent annually.
He cited an extracted audit financial statements (profit & loss) data between 2010 and 2015 from 4,232 care home companies in the UK, showing that the average annual revenues of this dataset during the period was £10.4 billion, comprising just under three quarters of the estimated market size.
