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Real estate sector anticipates $13.6bn investment value rise by 2016

Barring fundamental changes in macro-economic indices and unforeseen political risk, the value of investment in real estate sector of Nigerian economy is expected to rise 4 percent to USD13.65 billion by the turn of 2016, up from its current value of $9.19 billion.

The sectors growth of 8.7 percent per annum which makes it the fastest growing and sixth largest sector in the economy is driven by a number of factors prominent among which are democratic boom, strong spending power of a rising consumer class, and fast-paced urbanization.

A  reputable research, accounting and auditing firm,  PricewaterhouseCoopers (PwC), which gave these hints in its latest report titled Real Estate: Building the Future of Africa, says the reasons for the expected growth are not far-fetched, explaining that  notwithstanding the volatility in crude oil price since July last year,  high networth individuals (HNWIs) invest over 20 per cent of their assets in real estate.

The report which also reveals that infrastructure spend across Africa will grow from US$ 70 billion in 2014 to US$180 billion per annum by 2025 for same real estate growth fundamentals, adds that this HNWIs in real estate investment is seven per cent more than the 18 per cent or less investors in this category that invest in equities and other instruments.

“While the continents infrastructure currently lags well behind that of the rest of the world with some 30 percent in a dilapidated condition”, there is widespread recognition of the vast business opportunities on the continent as a growing consumer market as well as the vast opportunities for infrastructure investment and development”, the report notes.

It notes further that in commercial real estate, the influx of institutional, foreign and private businesses into the country and the growth of indigenous businesses and multinational oil companies in Lagos, Abuja and Port Harcourt have kept the segment vibrant, adding that rents in Lagos are among  the highest in the world with annual achievable rents of more than $1,020 per square metre, about N200, 000 per square metre.

In an earlier study titled ‘Into Africa’ which was a comparative research study of 20 African cities of opportunity, PwC ranked Lagos as seventh while the  overall ranking of cities by the real estate report placed the top five cities as Cairo, Tunis, Johannesburg, Casablanca and Algiers in Egypt, Tunisha, South Africa, Morocco, and Algeria respectively.

The study, based on the methodology, research, and analytical framework of PwC’s global Cities of Opportunity report – the seventh edition of which will be released next year, ranked the 20 cities on 29 variables grouped into infrastructure, human capital, economics, society and demographics.

Jonathan Cawood, Capital Projects and Infrastructure leader for PwC Africa, observed that from the study, a strong correlation among infrastructure, human capital and economics is noticeable, saying that  cities that score well in infrastructure also score well in human capital and, expectedly, in economics.

He explained that with city infrastructure under pressure, many of Africa’s cities cannot maintain their current levels of population and economic growth without enhancing their infrastructure.

”The demands for infrastructure vary from city to city based on stage of development, priorities and affordability. The basic needs for power, water and sanitation, transport and logistics, housing and ICT top the list for most”, he noted.

Continuing, he said, “the wisdom in the choices Africa’s cities make in balancing political, social and economic agendas will become even more critical in managing finite financial and environmental resources,” adding that smart, creative, ambitious human beings will congregate and invest their labour and capital where it is most advantageous and livable for them to do so.

Originally published in Businessday

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