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The Challenge of Money Laundering, Illegal Practises in Nigeria Real Estate Sector

Regulators and governments are increasing their focus on the real estate sector in their fight against financial crime. Anti-money laundering (AML) and counter-terrorist financing legislation is beginning to expand into real estate transactions in key jurisdictions around the world, including Nigeria.

The Nigeria real estate sector has almost become a melting point of money laundering, scam and all kinds of financial crimes. Multiple investigations by the Economic and Financial Crimes Commission (EFCC) has shown that corrupt politicians and businessmen fancy the real estate sector as a safe haven for stolen funds.

Money laundering is the process used to camouflage the illegal origin of funds generated by illicit or criminal activities. By successfully laundering the proceeds of criminal activities, the illicit gains can be enjoyed without fear of their being confiscated. In real estate, money laundering involves using such funds to pay for the transaction (predicate offence of money laundering). Real estate plays a role (mainly) in the third and final stage of the money-laundering cycle, after the placement and the layering phases.

According to an EU report, abuse of the real estate sector (property in the form of land or buildings) has long been described as one of the oldest known ways to launder ill-gotten gains. Real estate is as attractive to criminals as it is to any investor (prices being generally stable and likely to appreciate over time) and is also functional (the property can be used as a second home or rented out, generating income). Real estate also provides a veneer of respectability, legitimacy and normality. This applies to both residential and commercial properties as part of a reliable and profitable investment strategy.

Real estate transactions can involve large sums and are subject to more limited scrutiny with regard to money-laundering risks than financial sector transactions, as non-financial sector rules are much more limited.

In many Nigerian cities, you will find a lot of mansions unoccupied, largely because they have been tied down with ill-gotten funds.

Apart from money laundering, another dimension of illegalities in the real estate sector is small arms procurement using the sector to fund some bandits and insurgents.

Other Illegal Practises and Scams in Real Sector

With high demand for accommodation and its subsequent short supply, there are increasing rates in property scams in the nation’ s real estate market spaces, thereby sending shivers up the spine of investors and would be investors.

Fraudsters are exploiting the desperation of prospective homeowners and tenants to have roofs over their heads and secure cheaper accommodation to defraud victims.

There has been an upswing in the fraud schemes since the coming of online platforms and money transfer in the banking sector. The social media has also been badly hit, as different groups have been created to fleece members. Most victims have been tricked to wire down payments to an account for pending real estate transactions.

Globally, the wire fraud schemes, especially E-mail Account Compromise (EAC) has turned into a $12.5 billion industry, according to United States’ Federal Bureau of Investigation (FBI). In Nigeria, senior officials of the EFCCC couldn’t ascertain the amount lost over a five-year period, but believe that the financial loss is huge.

In major cases, some claim to be marketing consultants with mandate to sell property in choice areas such as Banana Island, Ikoyi, Asokoro and Lekki worth billions of naira. Others collude with unscrupulous elements to market non-existing landed property. They also hand out allocation letters, but in reality, the land has encumbrances.

The common cases involve tenants paying for rental apartments without taking possession of the property. Such matters abound with security agencies, and over N200million may have been lost in that process yearly. Most of these fraudsters use known property platforms on the internet and social media to perpetrate their crimes.

Hackers also break into e-mail account to obtain information about upcoming real estate transactions. After monitoring the account to determine the likely timing of a close, the hacker will send an e-mail to the buyer, posing either as the title company representative.

A lot of Nigerians abroad have fallen victims in the process of buying property at home. Advanced fee fraudsters have cornered substantial part of the money transferred. FBI says, a total non-U.S. exposed dollar loss was $671,915,009. According to World Bank report, Nigerians living abroad sent home $22bn in 2017, a 16.4 per cent increase from the amount they repatriated in 2016.

Potent Risks of Illegal Practises to Real Sector and the Economy

The socio-economic effects of criminal financial flows on the legal economy and society are enormous. They cover the following elements: distortions in resource allocation from high-yielding investments to investments that run a low risk of detection, distortion of prices, notably in the real estate sector, unfair competition, risks of supplanting licit activities, negative impact on direct foreign investment, corruption, risks of real sector volatility, and strengthening of skewed income.

Distortions of real estate prices and the concentration on limited sectors may have an impact beyond those areas and lead to increases in real estate prices, thus pricing people with legal sources of funds out of the market. Driving up the prices of real estate reduces housing affordability, something that has been witnessed in several cities in both developed and developing countries.

This impacts not only those people rendered unable to purchase housing but also renters. In both cases, this can affect decisions about where to live, among other factors, resulting in a change of neighbourhood and the related displacement of less affluent households.

Tackling the Problem

Speaking to HousingNews, the President of Real Estate Developers Association of Nigeria, REDAN, Ugochukwu Chime revealed how the association is working with the Economic and Financial Crimes Commission EFCC and Special Control Unit on Money Laundering – SCUML since 2010 in making sure that the Nigerian real estate sector which was rated in 2016 by international assessors as a medium high risk area for terrorism financing and for money laundering is sanitised.

Chime mentioned that in recent years there has been an increase in that collaboration.

He said; ‘’In Abuja and many cities in Nigeria, there are a lot of houses abandoned by the owners because of the source through which the money was gotten. So because of the high level of illicit funds that are flowing into the sector, it became necessary that REDAN will arise and work together with SCUML to put in place a mechanism to control in the inflow of funds, both for developments and for the purposes of those who are buying those houses, so that we will be able to ensure that our sector does not become the preferred sector for such illegal activities.’’

In tackling the issue of arms procurement and funding of insurgents through the real estate sector, he said, ‘’what we have done is to have a provision in our membership form that requires every member to be registered with SCUML and to be able abide with the policies and regulations and the procedures of SCUML in terms of control of money laundering and in terms of suspicious activities reporting,’’ he added.

Housing Development

REDAN is working collaboratively to find a mechanism to ensure that both SCUML and REDAN have an alignment of internal mechanisms. Under this arrangement, any developer that wishes to register with SCUML will also be required to register with REDAN.

‘’REDAN will do proper due diligence in our form and be able to ensure that we know your office. If you are developing an estate, we will be able to endorse it and know the source of your funding, and ensure that you comply with the extant laws, especially the anti-money laundering and terrorism financing act 2011. And we will also be able to ensure you understand the risk to which you are putting your organisation because if your company is found to be a source of money laundering, it has very serious legal consequences. And that is why we are working with SCUML and other agencies to make sure that we enhance training of our members so that they know the risk of non-compliance and be motivated to comply,’’ he said.

He said that one of the key information they have shared with SCUML is the knowledge about the three groups that operate in the real sector. These groups are the professional estate surveyors and valuers; the brokers who intermediate between sellers and buyers of properties, e.g lawyers, estate valuers, estate agents etc; the third group are the business investors who came in a few decades ago to build mass housing, affordable housing, and high end housing.

‘’So what we are doing is to ensure that we anticipate this growth and paradigm shift in home ownership approach and the sectorial activities in the real estate sector with a view to ensuring that developers are compliant with extant laws and are complaint with that which will ensure not only that we will have shelter but that will have employment, economic growth and above all, we do not become a conduit for money laundering and for political exposed persons to take away public money through the sector,’’ Chime said.

For defaulters and developers who fail to register with REDAN, the government has established effective mechanisms that will clamp down on them. Going further, Chime said, it will be illegal to develop properties without having an association to regulate what you are doing.

‘’Many have been duped, houses are collapsing and all kinds of indecent activities are happening in the sector because the perpetrators are not part of the guidelines that are being issued. This is what we want to change.’’

In tightening the noose at REDAN, Chime stated that every member of the association must renew their membership every year, and for that to happen they must have done some professional development in terms of training to know what is expected of them by various regulatory agencies operating in the sector.

 

Real Estate Attracts Investors to Nigeria, Ghana Markets

As Nigeria and Ghana’s economies continue to diversify, the countries property sectors are once again attractive to regional and international real estate investors, says Kfir Rusin, the Managing Director of API Events, the host of the 5th West Africa Property Investment (WAPI) Summit.

According to him, “these markets have progressed and evolved amid tough trading conditions,” adding that this year’s theme, ‘Uncovering the Next Real Estate Investment Cycle’, was developed with buy-in from local and international stakeholders, who believe that West African Real Estate is now increasingly attractive to DFI’s, private equity firms, institutional and global investors.”

With more than 400 delegates attending and 70 speakers confirmed, including several globally respected thought leaders, this year’s WAPI Summit will again advance the real estate agenda across the West African real estate value chain. This year’s global investment keynote speaker is REITWAY Global’s Chief Investment Officer, Garreth Elston.

With more than $75million under management, Elston said while REITWAY Global’s investment strategy is focused on global listed property stocks, he is beginning to prioritise emerging asset classes.

“We invest across the full spectrum of global listed property companies, currently this is in excess of 20 sectors and sub-sectors. We have a particular focus at the current moment on logistics and warehousing, as well as technology sectors such as data centres and communication towers,” he said.

With investment in warehousing and data centres by WAPI Summit, stakeholders such as Agility Africa and Rendeavour; the region’s real estate ecosystem is increasingly diversified and sophisticated, yet requires transparency, regulatory and policy certainty to attract and retain investment, Rusin said. A process of formalisation, which is a key focus for API Events across Africa and a measurable outcome of each successive WAPI Summit over the past five years.

Despite growing sophistication and development in the regional market, West Africa’s markets need to take note that competition for investment is hyper-competitive and jurisdictionally agnostic says Elston.

Source: Sunnewsonline
Nigeria

Housing: Stakeholders Seek Injection of N500bn Into Sector


Worried by  shortage  of affordable homes in the country , concerned stakeholders have  called on the Federal Government to inject N500 billion into building 100,000 housing units across Nigeria.

According to them, government should apply the money to build 50,000 units in Lagos, 25,000 units in Port Harcourt, 15,000 units in Abuja and 10,000 housing units in Kano to revamp the economy.

This was coming as a response to the recent United Nations’ (UN) report, which rubbished the acclaimed Federal Government’s progress in the housing sector.

Canvassing big bang injection of N500 billion into the sector, Managing Director, Rock of Ages Investment, Mr. Francis Onwuemele, said the housing units should be completed in 15 months, while mortgage should be created for each.

Apart from the fact that the initiative would yield a minimum of 500,000 new jobs, Onwuemele proposed a mortgage payment of N600,000 per year or N50,000 per month, saying this would yield an inflow of N50 billion monthly.

He said: “This inflow (unlike the error in FESTAC) will be ploughed back monthly and immediately into another tranche of 100,000 housing  units.

“In a year, you would have injected same N500 billion into achieving another 100,000 units of homes. By the third year, you would have created 200,000 mortgages and 200,000 mortgagors and easily rake in a monthly inflow of N100 billion or N1.2 trillion yearly with one million jobs created.”

If government adopted the strategy, he said that the multiplier effect by workers would be incredible, adding that the Gross Domestic Products (GDP) would move up rapidly and that crime rates would drop, while kidnapping would disappear.

Co-Founder, A-ZSME, Mr. John-Bede Anthonio, maintained that government must use Bonds with long-term tenure of 30-50 years from both local and international markets for affordable housing production.

He, however, warned that there must be transparency.

“Jakande, in 1980, took World Bank finance to execute all the low cost housing estates in Lagos and now the state government is about to finish the repayment. Prudent spending, not used for buying cars of 5.5 billion,” he said.

Anthonio, a former Managing Director of Lagos State Development and Property Corporation, urged government to put its house in order, decrying closure of border instead of removing subsidy of fuel.

Another housing professional, Okupe Adewunmi, said that if prices of houses were right, there would be effective demand, urging government on the need to help with infrastructure so that people could have better accessibility and productivity.

A report presented in Abuja by UN Special Rapporteur, Ms. Leilani Farha, revealed that the country’s housing sector was in a precarious condition to the extent that government needed to immediately declare a national emergency in the sector.

The report said that the huge government budget for the sector had no commensurate impact on the lives of the population that needed shelter in the country.

Farha, who stated that she completed her 10-day long fact-finding visit to three Nigerian urban cities of Abuja, Lagos and Port Harcourt with utmost shock seeing the realities on ground, also noted that the prevalent inhumane conditions of poor informal settlement amounted to gross human rights violations.

She said: “Nigeria’s housing sector is in a complete crisis. There is no current national housing action plan or strategy. Coordination and communication between federal and state governments seem lacking. Private market housing is unaffordable for most, rental housing is scarce, requires tenant to have one to two year’s rent in advance and there is no rent control or caps.

Poor remuneration, high interest rate, collateral’s bottleneck, unfavourable conditions of loan’s repayment, short-term nature of money and high cost of housing units have been adduced among other factors  low-income earners are not benefiting from mortgage.

Lagos’ Chairman of the Nigerian Institute of Town Planners (NITP), Mr. Bisi Adedire, stated that apart from low-income nature of many Nigerians, stringent conditions attached to mortgage loans and collateral’s requirement were hard to comeby by low-come people.

“People cannot meet up with collateral requirement to guarantee their payment. Also the condition of payment is not favorable, couple with interest rate.”

affordable housing

Adedire explained further that high cost of houses was another obstacle, adding that workers in the informal sector were not captured by most mortgage institutions.

According to report from Festus Adebayo-led Abuja Housing Show, a major requirement for getting mortgage loan facility that would enable borrower to own a home was by having a good job with regular income, but that has become a challenge when people’s earning is low.

He said: “At N18,000 per month minimum wage, public sector workers cannot afford mortgage loan. Even with the yet to be implemented new minimum wage of N30,000, this class of people will not still be able to afford mortgage loan.

“Therefore, for many years to come, unless a drastic change occurs, homeownership through mortgage loan, will continue to elude workers who earn the national minimum wage.”

Sustaining the argument, Adebayo said it was based on the term of mortgage’s structure, which required not less than one third or 33.3 per cent of N30,000 per month.

Source: newtelegraphng

‘Innovation Will Drive Change Needed in Real Estate Industry’

Increasingly, innovative ideas are coming into all facets of real estate—development, investment, marketing, leasing and even advisory—all reflecting the realities of today.

Real estate is the largest asset class in the world said to be worth more than all the stocks and bonds combined. Experts say that, in the last three years, there has been an increased interest in PropTech and other innovations.

Experts and chief executives in the industry recognize the impact of innovation and are progressively adopting digital solutions for their organizations, believing that it is innovation that will drive the needed change in the industry.

“It is common knowledge that innovation has changed the way business is done in the 21st century and there is no doubt that real estate has benefited from improved efficiencies,” Udo Okonjo, CEO, Fine and Country West Africa, confirmed to BusinessDay.

Okonjo said that, given the days of online listings, virtual tours, and e-signing, there has been a significant shift in how things are currently done. With the move towards mobile, emphasis has shifted from efficiency to another dimension.

“Not only are paperless transactions the norm, but mobile-centric technology has essentially transformed the landscape. Access to information, customer expectations, and client service are more different now than they were 5-10 years ago. And there are more changes to come,” she said.

She quoted Alan Watts as saying, some time ago, that “to resist change, to try to cling to life, is like holding your breath: if you persist you kill yourself”.

Okonjo is of the view that with little resistance to change, there are many lessons to be learned, adding that it is of concern that real estate practitioners will sometimes have trouble unlearning old methods and relearning.

She cited instance of mobile business transactions which are not just a new way to conduct business, but a fundamental change in the way things are done.

“It will be hard to find a real estate enthusiast today without a smartphone and a tablet but the new mobile world is filled with apps and capabilities that may be as impactful as the internet itself,” she said.

According to her, “real estate users and owners are faced with challenges that digital enablers and innovations may provide the answer; a clear approach to these challenges will be to redefine the companies; financial, business and operating models in order to embrace innovation and becoming more digital.”

She said that these and other disruptive strategies would be discussed at the Innovation and Entrepreneurial Thinking in Real Estate which is a 3-day programme organized by Lagos Business School in collaboration with Fine and Country West Africa October 15 to 17, 2019.

Source: Businessdayng

Residential Vacancy Rates In Lagos, Others Hit 41 Per Cent

Although the Nigeria real estate market has continued to witness improved activities from last year’s performance, a new report released by Northcourt has shown an increase in the vacancy rates.

In the half year report known as Nigeria Real Estate Market Review, released at the weekend, Ikoyi and Katampe in Abuja topped the list of residential vacancy rates in the country with 41 per cent and 37 per cent respectively.

Also, Victoria Island had 23 per cent, followed closely by Lekki with a 22 per cent vacancy rate.

Oniru, and Apo, Abuja also had 15 per cent and 14 per cent respectively, while vacancy rates in Port Harcourt moved slightly when compared with End of 2018.

Old Government Reserved Area, GRA Phases 1, 2 and 3 recorded vacancy rates of 7 per cent , 9 percent , 9 percent and 15 per cent respectively, while Magodo Phase 11, Lagos has one of the lowest vacancy rates of one per cent.

The low vacancy rates recorded in many parts of Ogun State, South-West Nigeria, the report said was largely due to the affordable cost of housing in its capital city – Abeokuta. High to mid-income areas such as Ewang Housing Estate, Ibara Housing Estate, and Asero Housing Estate have vacancy rates of 1 per cent, 9 per cent and 14 per cent respectively.

Affordability, serene environment, adequate infrastructure, and proximity to both federal and state secretariat offices have been identified as major drivers of the high occupancy levels.

Low-mid income area, like Kuforiji, is a promising residential neighbourhood with a number of pipeline projects such as government-led Orange Valley Estate and AAK Degun Mitros.

Oyo’s leading gated community in Ibadan (another South-Western state) – Samonda Estate (Aerodrome) – is comprised mostly of 4- & 5-bedroom houses and is 98 per cent owner-occupied. Other prime locations such as New and Old Bodija have lower occupancies.

On the Office space, the report said, rents have continued to gradually decline in the Grade A office market. Three towers – Cornerstone, Greystone, and Kingsway brought 12,000sqm, 11,190sqm and 13,317sqm of leasable office space to the market. With Heritage Place, Wings Complex and Alliance Place recording vacancies circa 55 per cent.

In Maitama, rental values are considerably higher than in other areas in the nation’s capital – Abuja. Office spaces on average go ₦45,000 – ₦60,000/sqm. Major tenants include pharmacies, boutiques, and travel agencies. Commercial vacancy rates currently stand at 12 per cent. Rentals in the Utako area average ₦35,000/sqm with commercial vacancy rates at 52 per cent . More development pipelines are in the area as land prices average ₦112,000/sqm. In Wuse 1, rentals for office spaces go for ₦36,000/sqm on average. Shops go for slightly lower – ₦35,000/sqm.

The growing demand for coworking spaces, especially in Lagos state, has also encouraged conversions of grade B officers. Service providers are moving more into the ‘Space as a service’ model – upgrading, fitting out and managing grade B spaces to meet client specifications.

Strong occupancy levels in mainland areas like Yaba have only mirrored demand on the Island where spaces in Victoria Island and Lekki lead the charge.

The millennial demographic, tech start-ups, women-led enterprises and SMEs have remained the leading drivers of demand for coworking office space.

The recently launched Delta State Innovation Hub has also increased the demand for co-working in South-Eastern Nigeria. Leadspace partnered with FCMB to open Hub One, a co-working space in Yaba, Lagos. Grade
Year over year (YoY).

According to the report, security has also grown as a critical selector tool in the residential market.

Secure gated communities are priced higher than estates perceived to be less so as investment thinking in property continues to shift.

The residential real estate market is also gradually picking up as tenants pushed for better deals.

Landlords, the report said, is making little or no reductions. Mini flats, 1 and 2 Bed flats remain favourites.

According to the report, Coworking has continued to grow as business owners are unable to meet up to the dollar rent obligations for Grade A office space.

Most ongoing prime office developments or those that have been delivered in recent years are a testament to the fact that green buildings have come to stay.

Also, demand for Grade A warehousing, the report said has continued to be the case, especially in Lagos state as retailers look to circumvent the economic loss from the city’s traffic situation.

The land has continued to reprise its role as a stable investment, rising YoY in almost all the areas considered. Average prices in Ikoyi, is N450,000 Lekki Phase 1, is N200,000, Victoria Island, N340,000, while it goes for N30,000 in Sangotedo.

In his summary of the report, Northcourt Chief Operating Officer and Director, Real Estate Research & Advisory Lagos, Nigeria, Ayo Ibaru Noted that the demand for property assets will continue to mirror general market conditions fuelled by the efficiencies gained through technological advancements.

Artificial Intelligence, Virtual Reality, and Proptech, he said are changing our interaction with the real estate value chain – from design to construction and completion.

“As materials science breakthroughs force their way into existing construction frameworks, we can safely expect improvements.

Green buildings continue to feature in conversations, waiting for a general traditionalist market to catch up”, he noted. Ibaru stressed that land values have continued to appreciate and the Grade A office market’s struggle with unhealthy vacancy rates remains the case.

“Coworking models are also evolving and, for the first time, we will be including property prices from emerging cities for your investment consideration”, he added.

Source: Guardianng

Nigeria Lags Peers in Home Ownership Rate at 25% for 200m Population

… housing, construction sector accounts for only 3% of country’s GDP

 

Despite its large-size population and self-acclaimed biggest economy in Africa, Nigeria is literally crawling behind its peers in terms of homeownership level in the country.

Whereas home ownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, it is only 25 percent in Nigeria whose population is estimated at 200 million. Going by United Nations projection, the country’s population will be as high as 400 million in 2050.

This implies that the country’s current housing deficit estimated officially at 17 million units will be worse unless there are concerted efforts by all housing sector stakeholders to address identified obstacles to development and delivery.

“The major issues that continue to affect housing delivery in Nigeria, which also account for the wide demand-supply gap, include constraints related to high cost of securing and registering secure land title,” said Nasir El Rufai, Kaduna State governor.

El Rufai who was keynote speaker at a one-day conference organized in Lagos by the Royal Institution of Chartered Surveyors (RICS) Nigeria Group, also listed inadequate access to finance, slow administrative procedures and high cost of land as other major issues affecting housing in Nigeria.

Kola Ashiru-Balogun, managing director, Mixta Nigeria, had in an earlier interview, told BusinessDay that several intervention attempts have been made by private sector operators and agencies of government to improve housing in the country, but such efforts were not succeeding because they are not harmonized.

This, he said, explained why the contribution of the housing sector to GDP is so small and the impact so minimal when it is supposed to be more. El Rufai agreed, saying that in economies like the USA, Britain and Canada, the housing sector contributes between 30-70 percent of their GDP.

“Investment in housing accounts for 15-35 percent of aggregate investment worldwide and the sector employs approximately 10 percent of the labour force worldwide,” he said.

The governor said that the real estate sector could play a much bigger role in the Nigerian economy. He explained that, carefully done, investments in the housing sector could drive economic vitality and create jobs.

“In many developed nations, the property sector in general, and the housing segment in particular, is a bedrock of the economy and an important tool for stimulating growth. Housing construction indices are some of the most common measures used by analysts to gauge economic trends in Organisation for Economic Co-operation and Development (OECD) countries,“ he said.

In addition to growing mortgage finance where much of the economic opportunity in housing can be unleashed, El Rufai also canvassed the development of social housing that must be led by government.

According to him, the federal housing budget was declining as only N30 billion was budgeted in 2019, from N35.4 billion and N141 billion in 2018, and 2017 respectively. “The World Bank estimated in 2016 that Nigeria will need over N59 trillion to close the housing deficit of over 23million.

“The Centre for Affordable Housing Finance in Africa reports that housing production in Nigeria is at approximately 100,000 units per year, while what is needed to bridge the deficit is a minimum of 1,000,000 units per annum,” he said.

Panel discussants at the conference with the theme, ‘Unravelling the Real Estate Sector Challenges in Nigeria’ said regulation as it relates to titling and documentation was also part of the major problems of housing as it places too much burden on developers.

“To acquire land for development, an investor is faced with two critical issues which include the certainty of land title and the process of obtaining the title,” said Hakeem Oguniran, CEO, Eximia Realty.

Oguniran advised that state governments should do something around governor’s consent. He stated further that the states should also reduce their charges on land titles to make it business-friendly and also attract more people who are presently scared by high charges.

Source: Businessdayng

Foreign Investment in Real Estate Nearly Doubles in Greece in 2019

According to official data published recently by the Bank of Greece, foreign investment in Greek real estate grew by a stunning 94.6 percent during the first half of 2019, compared to the same period last year.

Between January and June of 2019, more than €736 million was invested by non-Greek nationals in the country’s real estate market.

This becomes even more impressive if we take into consideration that 2018 already was a record-breaking year for Greek real estate, as it recorded a jaw-dropping 172-percent increase over the numbers for 2017, reaching €1.72 billion.

Since the total of direct foreign investments in Greece totaled a mere 4.25 billion euros in 2018, it is clear that real estate investment attracts nearly a quarter of all foreign investment in the country.

The rapid development of short-term-renting platforms such as Airbnb, along with the increase in tourism to Greece and the country’s steady path to economic recovery, has played a crucial role in this positive trend.

 

Approximately four out of five non-Greek real estate investors are other EU nationals, with Germans, Dutch, British, French, and Italians among the top.

The remaining 20 percent of the investors, who are not EU nationals, are mainly comprised of Russians, Chinese and citizens of Arab countries.

The Greek government’s recent announcement that it will cease imposing a 24-percent VAT on real estate for a span of three years is expected to boost the already rapidly-expanding sector even further.

Source; greekreporter

Low Confidence In Real Estate Drives Banks’ Credit To 4-year Low

…loan to sector slips 21%

Nigerian commercial banks intensified their risk-averse attitude and cautious stance in the property industry as credit to the sector dropped to a four-year low in the second quarter of 2019.

Sectoral credit allocation to real estate shed N13.43 billion quarter-on-quarter and N161.6 billion year-on-year, the half-year data by the National Bureau of Statistics (NBS) has shown.

“Banks’ unwillingness to provide credit to the real estate sector reflects low confidence in the sector, and people’s disposable incomes remains stifled,” Rotimi Olu-Steven, a broker at International Real Estate Partners, said.

Of the N15.48 trillion combined credit given out to 17 sectors by the Nigerian deposit money banks, real estate got N582.96 in the second quarter to June 2019, 2.25 percent lower than N596.39 received in the preceding quarter.

According to industry sources, commercial banks are not ideal or suitable medium for financing real estate projects because whereas commercial bank deposits are short-term in nature, real estate is for long term which is usually vulnerable to the vagaries in the economy such as changes interest rates, exchange rates, and the rate of inflation.

“Nigeria is still a viable market. Capital is a challenge,” Andrei Ugarov, partner at PwC said, adding that “deals are however happening. Players in the industry are making use of other financing options to fund real estate development projects.”

More than 90 percent of new homes that are built in the country utilise funds from personal savings, a statement by the Association of Housing Corporation of Nigeria (AHCN), an umbrella organization for all federal and state housing agencies read.

An analysis of the H1 2019 data by the state-funded Bureau revealed that bank lending to Nigeria’s property industry in the review period is the lowest since the N548.21 billion credited to the industry in the second quarter of 2015.

With a deficit of more than 17 million units, Nigerian property industry contributed 6.44 percent to real GDP in Q2 2019, higher than the 5.57 percent it recorded in the preceding quarter but lower than the quarter before.

After exiting recession in Q1 2019, the first growth from its negative mode, the real estate sector in the second quarter of this year turned back to contraction to post -3.84 percent growth in Q2’19.

“There is no liquidity in the market; no one is releasing the money,” Tosin Ajose, Lead Advisor at DealHQ Partners said. She added that “it will take two to three years for the sector to fully recover.”

A key culprit of the housing industry is the low level of mortgage penetration in Nigeria, industry sources have said.

“Banks run away from mortgage industry now but players in the space understand that it is a sleeping giant; by the time the right antidote is given to the sleeping giant, you will see the potential unleashed,” Banjo Obaleye, CEO, Infinity Trust Mortgage Bank, said.

With single-digit interest rates in some other countries, mortgage industry contributes significantly to economic growth and development. This is, however, not the case in Nigeria as the roaring inflation rate and the attendant high mortgage rate have not only dampened housing demand but has blunted developers’ investment appetite.

Nigeria has one of the world’s lowest mortgage-to-Gross Domestic Product (GDP) rate at 0.6 percent. This lags Ghana’s 2 percent, South Africa’s 30 percent and crawls after the U.S and UK rates of 60 percent and 70 percent respectively.

“The biggest problem in the sector is the high cost of the very limited mortgage that is available. If they can develop a policy to ease housing finance, it will be impactful,” Wole Olabanji, the CEO of CoBuildIT, a Lagos-based real estate firm said.

The typical mortgage interest rate in Nigeria ranges from 7 to 10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15 and 25 percent for commercial mortgage institutions, making it one of the highest in the world.

On September 6, 2019, the Central Bank of Nigeria said in a circular signed by Kevin Amugo, Director, financial policy and regulation department that the “maximum MPR + 5%” is no longer applicable to all financial institutions in Nigeria.

According to Obaleye, the move by the apex bank is in line with the plans to drive down the mortgage rate to a single digit.

Source: Businessdayng

Key Things to Consider When Investing in Real Estate Investment Trusts

One of my avid readers has asked me about how he can get into investing in Real Estate Investment Trusts. He even asked me why he should and whether he should invest directly in real estate properties or in Real Estate Investment Trusts (REITS). I like the audacity, though, because, “my people perish because of lack of knowledge”.

What Is A Real Estate Investment Trust

Traditionally, a Real Estate Investment Trust (REIT) is essentially a closed-end fund created exclusively for holding real properties, mortgage-related assets, or both. In most cases, the purpose of REITS is to provide investors with the opportunity to invest in real properties while at the same time, enjoying the benefits derivable from investment trusts.

Before the advent of REIT, investors could only invest in real properties from the property market by buying completed houses or building one from scratch. Now, with REIT it has become possible to trade units of real properties in the stock market. REIT has afforded the small or retail investor the rare opportunity to invest in real estate.

Understanding is Key

Granting the fact that REITS are pools of properties and/or mortgages traded in the stock market, REIT investors or intending investors need to understand not only the stock market but also the property market so as to be able to make informed investment decisions. Unfortunately, while some investors have a good understanding of the property market, and some understand the workings of the stock market, only a few, if at all, have a proficient understanding of both. That is what makes investing in Real Estate Investment Trusts a little tricky.

Actually, the property market differs from the stock market in many ways. The pattern of price movements in the stock market differs from what it is in the property market. while prices move or change rapidly in the stock market, they do not change so rapidly in the property market. The good thing about REITs, however, is that, like mutual funds, and unlike direct ownership of real estate properties, they (REITS) are managed by professional REIT fund managers that understand the nitty-gritty of both markets (the stock and property markets).

In spite of the fact that they are being managed by professional fund managers in deciding on which REIT to invest in, investors should pay attention to the investment strategy of the REIT, and ensure that such strategies jive with such investor’s overall investment strategy and goal.

Investors should find out if the REIT they are interested in is diversified in both geographical location and property type. On the contrary, investors may be well-served if they buy into REITS that concentrate in a special type of property spread over different geographical locations.

Advantages of a focused REIT strategy

a focused REIT strategy provides a better understanding of specialized markets. it reduces the number of markets a REIT needs to worry about and it enables both the investors and managers to understand the REIT better. Furthermore, it grants both the manager and investors the freedom from having to be experts in all markets and it reduces increased management cost due to the need to take care of many property markets.

 

Disadvantages of focused REIT strategy

Though focused strategy has some advantages, it comes with some disadvantages too. It offers poor-risk reduction and does not allow for better property diversification. It does not offer customers or investors multiple locations that may satisfy their needs and it may increase susceptibility to regional market trends and economic swings/changes which may result in the possibility of large fluctuations in income streams.

 

How to know whether a REIT is focused or diversified

There is no hard and fast way to know whether a REIT is focused or diversified but one way of knowing is to look at the percentage of investment in property types. The norm is that if a REIT has more than 75% of its assets concentrated in one property type, it can be classified as a REIT with a focused strategy.

REITs in Nigeria

Someone reading this article may have asked, are there REITs in Nigeria? there are, but because they have not been that popular, you are not mistaken into thinking or even believing that there are no REITs in Nigeria. There are three major Real Estate Investment Trusts in Nigeria, UPDC Real Estate Investment Trust, Sky Shelter Fund and Union Homes Real Estate Investment Trust. UPDC is the largest of the REITs by asset, having an asset value of N33.2 billion as at June 28th 2019, followed by Union Homes’ N9.9 billion and then Sky Shelter’s N2.4 billion.

 

Union Homes appears to be a focused REIT in that out of its 9 properties, only 2 are located in Abuja, with the rest located in Lagos. Those in Abuja have very low occupancy rate ranging from 0 to 20% while those in Lagos have occupancy rates of between 80% to 100%.

Sky Shelter also appears to be a focused REIT, again, out of its 7 properties, 2 are in Abuja with unknown occupancy rates and they are available for sale. On the other hand, those in Lagos are fully occupied.

Is Real Estate Investment Suitable for you and Your Portfolio?

Diversification, they say, is the milk and honey of investing. This is because a well-diversified portfolio gives an investor exposure to upside potentials as well as shield against downside risk. One investment that improves portfolio diversification is real estate investment. The good news actually is that many are involved in real estate investing, in one way or the other, either as owner-occupied or commercial.

Real estate investments have proved profitable in the past and continue to be profitable today if done right. Performance analysts, worldwide, have noted that real estate investments at times outperform equity investments. Unfortunately, irrespective of the profitable return profile of real estate investments, it may not be suitable for everyone, except of course, when it is for owner-occupation. However, a lot of people, in most investment forums online, advise people to go into real estate, as soon as they ask for advice on the best way to invest a given amount of money.

To invest in real estate, one needs to answer some questions, some of which I am posing in this article.  If you answer yes to these questions, then you are suited for real estate investing.

Can you tie up the needed capital for a minimum of several years?

Real estate investing, unlike investments in equities and bonds require sizable amount of money to build or buy the property in addition to money required to cover unexpected repairs or damages, howbeit contingent. By their nature, real estate properties are relatively difficult to sell within a short period, they are not as liquid as stocks and bonds, as a result, you should be prepared to hold the properties for as long as it takes to sell, which may run into several months depending on some factors.

Are you willing to remain in a certain location for the foreseeable future?

Due to the lack of portability of real estates, it tends to tie the investor down to a given geographical location. In addition, the fact that real estate properties require attention, which may be often frequent, you may need to be near enough to the property for the required supervision or repairs.

Do you have the time and expertise to manage the properties effectively?

Rental property often requires a lot of maintenance, new tenants must be found as vacancies arise, rents must be collected, bills relating to the rental property must be paid and, in most cases, records must be kept. All those demands full-time attention which, if given, may imply forgoing one’s full-time job unless the investor decides to hire a management company to manage the rental property. That option too, has its own pros and cons.

 

If you answered no to any or all of the above questions and still desirous of investing in real estate, then direct investment into real property, except for owner occupation, may not be for you and as such, a better option will most likely be to go through Real Estate Investment Trusts.

Source: nairametrics

Nigeria Losses $6t In Real Estate Investment to Dearth of Data

Nigeria may have been losing an average of $6 trillion inflow yearly as a result of dearth of data and professionals not equipped with current and globally competitive real estate skills for negotiation and relevant data gathering.

This was the position of the Principal, World Citizen Consulting, Chicago, Bill Endsley, on the sideline of the FIABCI International Real Estate Consultant (FIREC) programme held in Lagos.

He spoke to a cross section of experts including Estate Surveyors & Valuers, property financiers, developers and facility managers.

He said huge real estate investment running into billions of dollars daily may have eluded Nigeria for so long as a result of insufficient information on the market, such as interest rate, negotiation skill, policy inconsistencies of government and the ever changing monetary and fiscal policies. He said the average American investor desires to have the necessary information before putting in his money on any investment though they desire high return on investment they are deterred according to him by insufficient information that can attract them to the country.

He said: “What investors want is what is called ‘Clean Window,’ people will prefer to invest where they can see clearly and can prize the risk before investing. There must be market analysis of what the market want and how long it will take to reap on investment, most times this information is not available in Nigeria.”

Director of Operations and Finance, Micheal Consults, Thomas Cardman, in his contribution said investors look out for analysis and the quality of the story behind the numbers in making decisions in real estate investment. According to him they will also look at the return on investment characteristics and cost approach to decide for a particular property.

Earlier, FIABCI president, Nigerian chapter, Adeniji Adele said the workshop is in line with their pursuit towards ensuring that Real Estate Professionals are fully equipped to up their ante in the nation’s built Industry, and compete with their contemporaries globally.

Source: thenationonlineng

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