Expert predicts growth in Nigeria’s real estate investment beyond $13.65 billion in 2016

In view of the progress recorded in the real estate investment REIT’s in Africa in 2016, financial experts and real estate practitioners have all expressed the hope of an improved development in 2017, next year and beyond.

This optimism was expressed at the just concluded inauguration of Real Estate Investment Trust (REIT) in Sub–Saharan African conference, held in Lagos, last week.

The event that had as its theme: ‘Real Estate Investment in Sub-Saharan Africa: The Role of Capital Market,’ hosted by the Nigerian Stock Exchange, examined how Nigeria’s real estate sector will benefit from the impending prospects.

Addressing the participants,  Chief Executive Officer, the Nigerian Stock Exchange, Mr Oscar N. Onyema, citing Ernest & Young’s report of 2016, noted that global market capitalisation of REITs now stands at approximately $1.7 trillion, up from $734 billion in 2010, and that the United States of America’s REIT market has grown by almost 150 per cent, while the market capitalisation of non-USA REITs has more than doubled.

According to Onyema, the two fastest growing markets in the last five years have been Australia and Japan, both of which have now overtaken France and the United Kingdom, to be the second and third largest global REIT markets, respectively.

“Globally, 16 jurisdictions have introduced REIT or REIT-like legislation since 2006, although not all have fully functioning active participants.

“It gladdens to know that Nigeria’s real estate sector has recorded steady and consistent growth over the last decade. PwC in its report titled, ‘Real Estate: Building the Future of Africa,’ predicted that Nigeria’s real estate investment will rise by about 49 per cent, from $9.16 billion to $13.65 billion in 2016, which had come to pass.

“The report attributes this to a growing middle class driving demand for residential property development and indirectly, retail, industrial and commercial real estate development.

“We believe that this growth can be accelerated by deploying capital market tools such as REITs, listing of real estate companies, and creation of real estate ETFs to unlock capital in the sector.

According to SEC’s CEO, since 2007, when the Securities and Exchange Commission (SEC) introduced the framework for the establishment of REITs, the Nigerian investing public has been given an opportunity to invest in a diversified portfolio of choice real estate assets.

“Whilst the Nigerian market may not be as developed as other emerging markets such as Mexico, South Africa and Singapore, this asset class has definitely come to stay.

“Today we have about N40 billion in REITs market cap listed on the NSE and a total of N96 billion in the construction/real estate sector of our equity market.

“In spite of the challenging economic head winds in Nigeria and other commodity based economics, the capital market (including the NSE) remains one of the main vehicles to promote sustainable economic development and wealth creation,” he said, noting that the  conference is in line with the Exchange’s strategic initiative to promote and create the enabling environment for sustainable development of Real Estate Investment Trusts (REITs) in Nigeria and sub-Saharan Africa.

To create a more transparent, liquid and accessible market structure in line with global best practices for REITs, Onyema stated that SEC recently notified the capital market ecosystem and other stakeholders of the proposed changes in the market regarding the reporting and valuation of Real Estate Investment Trusts (REITs); and other collective investment schemes listed on The NSE.

The proposed changes, which will be implemented over the next three quarters of 2017 are aimed at promoting transparency, disclosure, visibility and liquidity of listed REITs and Closed End Funds in our market.

The changes, he said, will also make it easier for existing and potential investors to access information required to make investment decisions thereby contributing to the growth of these products in the Nigerian market.

He also informed that REITs and Closed End Funds listed on the Exchange will be reclassified from the Main Board to a separate board specially created for the purpose under the Equities Market.

“Through our growth agenda, the NSE will continue to engage other regulators, market operators, investors and other stakeholders towards delivering a culture of service excellence, intimate knowledge of clients, innovative products and world class market infrastructure,” he concluded.