Real estate funds grow AUM to N45b in April
Even though the real estate funds (REFs) has the least investment options among the listed asset classes on the Security and Exchange Commission (SEC), it has been able to grow its asset under management to N45.26 billion.
The asset managed by the real estate funds has appreciated by 145 percent in the last eight years, SEC data analyzed by BusinessDay shows.
The funds by the Nigeria property industry grew by N26.84 billion from N18.42 billion in December 2011 when BusinessDay started tracking the data to 45.26 billion as at the week ended April 12, 2019.
This accounts for 6.26 percent of the mutual funds in the entire market which has Net Asset Value (NAV) of N723.15 billion, and also represents the third highest NAV after money market and fixed income funds.
“Real estate investment trust (REITs) is very liquid, and it is very difficult to see people go to floor to buy REITs, as such one hardly sees any trade in any of the REITs,” Paul Uzuma, MD of Halo Nigeria Capital Limited said.
According to the Lagos-based analyst, people don’t trade what they do not know and what they are not sure of, he said, adding, “the real estate funds do not really give adequate financial reporting to update you on what is going on and so activities there are streamlined to, maybe, the issuers.”
REF is an investment vehicle that pools resources together to invest in real estate, therefore, allowing individual investors to partake in the benefits of the underlying properties.
According to BusinessDay estimates, Nigeria may require, in monetary terms, between N170trillon to N200trillion to bridge the housing gap if each unit cost is estimated at N10million.
“Real Estate Fund is an investment vehicle that can be used to address Nigeria’s housing shortage and encourage economic activity in the real estate sector,” said Ayo Akinwunmi, head of research at FSDH Merchant Bank
For the past 10 years, Nigeria’s housing deficit has widened to more than 17 million units fueled by lack of patient capital for developers to build affordable housing for the growing low income earners who account for the larger populace of Africa’s most populous nation.
Thus, real estate developers are in search of viable alternative sources to funding real estate projects in a country where cost of funds has made bank credit inaccessible, unaffordable and unattractive to the sector.
Figures by the National Bureau of Statistics (NBS) for the third quarter of 2018 as analyzed by BusinessDay revealed that the property industry was among the least attractive industries to the country’s commercial banks as it got one of the smallest portions of loan in the review quarter.
Real estate sector only attracted N710.2 billion credits from banks in Q3 2018 as against the N744.56 billion and N784.2 billion it got in Q2 and Q1 in 2018 respectively.
“Real Estate Fund is an investment vehicle that can be used to address Nigeria’s housing shortage and encourage economic activity in the real estate sector,’ FSDH Research told BusinessDay in a mail response.
A further analysis of the data from SEC, the industry regulator, revealed that UPDC real estate investment fund raked in the highest share of the real estate funds having NAV of N22.97 billion, 72 percent of the entire N45.24 billion.
Managed by both SFS Capital Nigeria Limited, Union Homes REITs and Skyle Shelter Fund shared the remaining asset in the real estate funds.
For the week ended April 12, 2019, Union Homes REITs reported a higher unit price at N85.50, followed by Skyle Shelter Fund with a unit price of N40.70 while UPDC real estate investment fund reported a unit price of N12.36
According to the data from the state funded NBS, Nigeria real estate sector, as at Q4 2018, contracted by 3.85 percent (year-on-year). This is 2.07 percent points better than the -5.92 percent growth rate for Q4 2017.
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