Risk-averse investors seeking high yield on their investment still see the real estate market as a viable destination despite the ravaging impact of coronavirus pandemic on global economy.
The net asset value (NAV) of real estate funds climbed to N45 billion as of April 24, 2020, representing a 2 percent increase when compared to the N44.15 billion reported on February 28, a day after Nigeria recorded its first Covid-19 case.
The investors who began reconsidering portfolio composition due to the impact of coronavirus on Nigeria’s economy injected N883.39 million into the real estate funds within two months of the virus outbreak, as reflected in the Securities and Exchange Commission (SEC) data.
A real estate fund is a type of mutual fund that invests in securities offered by public real estate companies, including REITs. However, some real estate funds invest directly in properties.
While Nigeria’s real estate industry has been disrupted by the outbreak of the novel virus.
Temitope Oshikoya, Managing Principal, Nextnomics Advisory, said he is optimistic that the sector with a housing deficit of more than 17million units will remain viable despite the heat from the pandemic.
”Even if the market goes down, it will not remain there, ” Oshikoya said, adding that the continuous demand for housing will bail it out from the challenges caused by the pandemic .
An analysis of the SEC data revealed that real estate, fixed income and bond funds were the only mutual fund instruments that recorded increase in their investment inflow in this pandemic era.
Increase in the asset of real estate funds coupled with the combined NAV of N29 billion added by both the fixed income and bond funds pushed the total asset managed by Nigeria’s mutual fund to a record high of N1.22 trillion as of April 24, 2020.
Money market funds, mixed funds, equity funds and ethical funds reported a joint decline of N18.79 billion in their NAV.
Further analysis revealed that money market funds recorded the most decline by N14.99billion and was followed by mixed funds which shed N1.5 billion asset.
Equity-based funds and ethical funds reported NAV decline of N1billion and N226.4 million respectively.
Industry analysts believe real estate is a great investment option because of its predictable cash flow, less volatile nature which has many advantages over stocks, and some other investment instruments and, more especially, as its value appreciates with time. It is also resistant to inflation.
A breakdown of the funds performance listed under Nigeria’s real estate by SEC showed that UPDC real estate investment fund raked the highest inflow with a NAV of N32.18billion,
72.88percent of the entire N45 billion managed by the real estate funds.
Managed by both SFS Capital Nigeria Ltd, Union Homes REITS and Skyle Shelter Fund shared the remaining asset in the real estate funds. Both of them posted a NAV of N9.92billion and N2.28 billion respectively.