Real estate.........a subject which is very close to my heart as well as many other investors with multiple streams of income. When it comes to Africa, real estate remains a great investment opportunity and a good stream of additional revenue. Smart investors are going in now and taking advantage of the opportunities before it becomes virtually impossible.
In fact, Africa is viewed as such a significant investment that over 70% of the Chinese direct foreign investment is in African cities. Other countries like India, Turkey, and Russia, are also following close behind China and increasing their investments on the continent, so do not be the only one left out in the cold. With thousands of Africans moving to the cities on a yearly basis for better opportunities, the bottom line is that the lack of good quality and affordable housing is becoming too big for the government to handle. The growth of African cities alongside the forever growing middle to upper class is creating a demand for high-quality, safe housing, which is becoming overwhelming. Therefore, those who can, really need to assist with this crisis. Africa as a whole has shown great signs of economic growth in recent years and real estate is no exception.
In its report on housing, the African Development Bank (AfDB) estimates affordable housing gap in Côte d'Ivoire of 600,000 housing units, one third of which is in Abidjan with an additional 50,000 units needed each year. To address this, the GOCI has reaffirmed its commitment to access to housing and opened thenational market to international private developers with financial capacity. The GOCI has since adopted new measures to satisfy consumers, housing developers and financial institutions. The GOCI also introduced new incentives in 2017 by Ordonnance to encourage real estate developers. It has put in place a 50 percent reduction of taxes on profit for developers that dedicate 60 percent of their production to very low income groups (social housing). The government is also encouraging institutions and corporations to participate in housing development for their employees as well as foreign countries to invest in the national housing market.
Development is not uniform across the continent, but the appetite for developers and lenders is becoming broader. Development in Africa is not without its difficulties, however, and there are hurdles to be overcome when investing in, or financing, a commercial real estate development.
In terms of sectors, in offices Africa is experiencing growth in manufacturing, technology and telecoms, finance and business services, as well as continued investment in its natural resources sector – both in terms of exploration and exploitation of reserves but also in processing to capture greater downstream value. International companies investing in these sectors expect international-grade office space from which to run their businesses. The continent is drastically undersupplied with high-quality commercial property, particularly with the continuing rise in demand.
Across Africa there is an expanding population – and, in particular, a young population that is increasingly brand conscious. South African retailers, such as Shoprite, Game and Pick ‘n’ Pay, are extending their operations across the continent and are at the forefront of the international players seeking to take advantage of this captive consumer market. They are typically seen among the anchor tenants in the wave of retail mall developments coming to market. Other international retailing brands such as Topshop, Zara and Walmart are also looking to expand into Africa. This combination of consumer demand and ability to pre-let units are two fundamental pillars supporting mall development in Africa.
Finally, the growing middle class in Africa and increased overseas travel to Africa has exacerbated the supply-and-demand imbalance for luxury hotels. Africa is currently experiencing the fastest pace of hotel development in the world, with Marriott International, Starwood Hotels & Resorts Worldwide and Hilton Worldwide all targeting rapidly growing urban centres, and have some of the highest room rates in the world. The challenges investors face include a lack of transparency, poor infrastructure, the difficulty in obtaining permits and approvals, currency risk, political risk and cost control.
The real estate market in Abidjan is considered as one of the largest in the West African region and has grown by 18 percent annually since 2011. As far as new businesses, signals show increased competition, both in high-end and low-end distribution markets, and the 8-10% growth rates in high-end distribution may provide room for more expansion in the future. Nonetheless, ongoing challenges, such as compensating traditional Ivorian owners, along with the cost of construction raw materials and supplies must still be overcome.
With a combination of demand and market participants keen to address the shortage in supply, the next few years look set for substantial growth in the sector. The residential market is in its early stages, but there is a growing middle class, so residential units still offer a high return on investment. So now is the time to join in.
Green Eco Group has offices in Abidjan and Assinie-Mafia, Cote d'Ivoire, and is currently planning a sustainable eco residential and commercial development, including a boutique beach front hotel, in the Assinie-Mafia area.
