All over Africa, there are many reasons owning a decent house is still an unattainable goal for many households. These reasons are the barriers to tapping the estimated N1.4 trillion investment opportunity in residential real estate where demand is reasonably high.
Lack of affordable housing finance, high costs of urban land and weak tenure security, rising construction costs, and prevalence of slums have been identified as some of the major challenges to efforts at alleviating housing crisis by both private and public sector operators.
Besides finance, which is largely unaffordable in most African countries, especially Nigeria, land is a major obstacle to profitable investment in residential real estate on the continent.
“In Africa, the significant urban population and substantial housing deficits highlight the underdevelopment of residential real estate, necessitating an estimated $1.4 trillion to bridge the gap. The unmet demand for residential real estate in Africa presents a lucrative investment opportunity for both local and foreign investors,” Timothy Nubi, Director, University of Lagos Centre for Housing and Sustainable Development, affirmed.
According to Nubi, land title tenure is a major reason tiny mortgage markets exist, explaining that land cannot be secured and this happens in Sub-Saharan Africa. He explained that without secure land tenure, there is poor housing investment by households who fear eviction.
“This leads to slums development in Nairobi, the capital of Kenya where slum landlords use political clout to maintain rental stream,” Nubi noted in his keynote speech at a forum hosted by the African Real Estate Society (AFRES) in Lagos. He spoke on ‘African Estate Outlook: Find Value After the Great Reset.’
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He noted that, in house construction, absence or high cost of development finance leads to small housing projects while upfront payment limits affordability, pointing out that few developers means little competition which explains why houses are expensive in Nigeria, DRC and Zambia.
Another reason gap persists in residential real estate, according to the university don, because building materials are imported which means prices fluctuate while standards that don’t accommodate affordability are never met.
This explains why quality is not achieved. Majority of people, including the wealthy, in Nigeria and other African countries, build their houses incrementally by themselves, making large-scale development difficult, if not impossible, to achieve.
More than ever before, Africa needs to invest in this segment of real estate as reports from the Economist Intelligence Unit (EIU), the research and advisory unit of the Economist Group, have projected that the continent will emerge as the second-fastest-growing major economy globally in 2024, adding that the African real estate market will play a catalytic role in this regard.
“African population was estimated at 1.4 billion in December 2023 by the United Nations. 44.7 percent of that population resides in the urban areas of the countries that make up Africa. These figures represent both strengths and weaknesses, depending on how the African political and economic leaders manage the growing African population,” Nubi noted.
He hopes that, going by the EIU’s timely predictions, even in the midst of the growing economic and political challenges that are bedevilling the African continent, Africa will be the second largest economy.
“No doubt, this sounds paradoxical, but it is very possible if the congenial economic and political environment for economic activities is provided by the key actors of the African continent,” he said.
