Foreign investors prominent for playing in Nigeria’s premium residential and commercial segment of the property market are looking to increase their investment and grow their asset portfolios in the country.
For this purpose, they are shifting their focus to Abuja, the nation’s capital, even as the naira drops against the dollar.
The property investors who regularly price their projects pre-construction in dollars, BuisnessDay investigations show, could become the front runners in a rebounding market, as indigenous developers continue to drag their feet towards any major investments, given the current economic and political uncertainty in the country.
Currently grappling with unprecedented exchange rate volatility, Nigeria, Africa’s biggest economy, is spinning a host of investment opportunity for off shore real estate investors, who industry analysts say are in possession of a stronger currency, and can conveniently deliver projects at a reduced budget within the expected time frame.
“Our outlook for the Nigerian market remains very positive, even as we plan to commence with the construction of another retail mall in Abuja very shortly,” Hein du Plessis, project manager, Lekki Mall, told BusinessDay in an exclusive interview.
Plessis who is part of the team that oversees Novare Africa Property Fund – a Mauritius domiciled private equity fund, which has South African Pension funds as investors , in Nigeria, is confident that despite the recent economic headwinds, the dynamics driving the growth of the commercial segment of the real estate market is still active.
“There is no doubt that the property market is currently the choice destination for private equity firms, considering the recent economic headwinds,” Adetokunbo Ajayi, Chief Executive Officer, Propertygate, told BusinessDay in a phone interview.
Ajayi explained that given the current uncertainty in the Capital and Money market, the real estate sector conveniently offered a leeway for savvy investors where their wealth could hardly be windswept.
According to him, even-though the recent devaluation might have slightly raised construction cost of projects, the property market still offered a better hedge against funds volatility.
He pointed out that with the economy likely to rebound in the near future, a smart investor who started a project; a retail or office space development, could likely deliver such project just at the‘right time.’
It is common knowledge that while prices of imported materials have slightly adjusted upward, it is still very marginal, compared to how much the naira has lost in value against the dollar in the past five months.
BusinessDay findings reveal that in real economic terms, the major gainers of the devaluation are foreign investors seeking to acquire land, because land values have not surged and documentation fees have not been increased.
Hence, it will cost these investors much less in dollars, than what they paid previously.
The limited number of modern shopping malls and prime grade office space for major retailers and prospective tenants has soared foreign developers confidence for the commercial segment of Nigeria’s property market.
Michael O’Malley, Founding Partner of RMB Westport – a real estate investment management and development firm, focused on creating top notch developments in high-yield geographies in sub-Saharan Africa said the recent economic challenges have not dampened tenant appetite to enter Nigeria’s market from his firm’s perspective.
“Although the naira and Nigerian GDP growth are under pressure currently, due mostly to oil price volatility, most forecasts see the oil price stabilising over the next 18 months, and Nigerian growth recovering from next year.
“The market fundamentals that drive our business, such as the supply/demand mismatch and a growing urbanising population is still very much intact,” O’Malley further said.
Obi Ejimofo, Managing Director of Lamudi Nigeria, had in a February 3 note to BusinessDay, said that “the slide in the value of the naira means that foreign investors are now able to purchase more than they could previously afford.
“Furthermore, the costs of foreign components for construction have gone up, which is impacting local investors.”
Meanwhile, Quantum Global- the African investment and private equity specialist- is seeking to exclusively target African delegates at the prestigious international gathering of the world’s largest Real Estate convention scheduled for Cannes next week.
The group which is undergoing a period of rapid growth seeks to add to its burgeoning African footprint, and it is rapidly expanding its raft of mandates across the continent, with analysts tipping Nigeria as a major attraction.
ODINAKA MBONU
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