Although property market in Sub-Saharan Africa (SSA) has been making gradual progress in the area of market transparency, progress in the region is yet to pace up with growing expectations of investors, businesses and communities.
Highly transparency markets account for 70 percent direct real estate investment with about 75 percent of it being cross-border investment according to Jones Lang La Salle (JJL), an American-based real estate investment company.
Market transparency is the foundation that allows investors and corporate occupiers to operate and make decisions with confidence. It ensures government and public agencies function efficiently and helps create a more productive and competitive environment.
A report titled “The Path to Real Estate Transparency across Sub-Saharan Africa” compiled by JJL Investment Inc. revealed the region registered the least growth in transparency compared with other regions in the world.
Two-third of the markets in the region including Nigeria, Ghana, and Rwanda has low transparency or opaque, with the average transparency index points standing at 3.86.
Nnnenya Awoyokun, lead consultant at Awoyokun Consulting, hinged SSA underperformance on lack of authentic data that covers every activity in the industry, saying this brings uncertainty which is a disincentive to investors.
“There are no data to help investors make informed decisions. Data on real estate transactions are unavailable. Even the available ones are not reliable. Data is critical for investment decisions” said Awoyokun.
Sub-Saharan Africa remains the global region with the least level of market data availability behind Europe, Asia-Pacific, and America. According to JJL, challenges for data collection in the region range from the absence of industry forum for sharing information, meagre public listed real estate investment trust (REIT) and few independent research firms.
The Global Real Estate Transparency Index (GRETI) is an essential guide for cross-border investors, developers, and occupiers of real estate as well as government and international bodies seeking international benchmarks.
The index assesses 100 countries and 150 city markets on a score of 1 to 5 based on six broad indicators namely performance management, market fundamentals, governance, regulatory, sustainability and transaction process. Higher transparency level relates to low index points.
Damilola Ijalade, real estate broker at PWAN Homes, positioned that region lags because a regulatory mechanism is weak. “Using Nigeria as a benchmark for others, regulations are not strong enough. This is why you find dealers selling a piece of land to three or four people, without sanctions or appropriate penalties”
The SSA region is yet to leverage its rapidly growing population and urbanization to attract foreign investment.
According to the United Nations, about 472 million people reside in the urban areas in the region and are expected to double in the next 25 years. Also, the global share of urban residents in the region is projected to grow from 11.3 percent in 2010 to 20.2 percent in 2050.
Based on city analysis a significant number of cities in the region including Lagos, Accra, Luanda, and Kigali are either low transparent or opaque while Johannesburg, Capetown and Gaborone leading the pack.
To have the narrative re-written, experts say the region must improve data availability, strengthen regulatory mechanism and leverage property technology (proptech).
Awoyokun urged players to collaborate with their respective governments to ensure timely publication of data required to support investors. “No informed business decisions can be made without data”, she said.
On his part, Ijalade called for more stringent regulatory reforms to minimize unethical practices that may scare investors in the region. He also noted that the region is yet to leverage proptech compared with other developed markets, saying it is quite disheartening considering the potentials the region has.
“Proptech has not gained prominence in Nigeria and other markets in the region I want to believe.
“This is an area we really need to work on to be able to compete favourably with other regions”, said Ijalade.
