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Real estate in Africa as profitable investment vehicle
Real estate is promising and highly profitable sphere for investing money. Real estate investments are among the most reliable assets that the invest market has for a long time.
By: Hermes-Sojitz Investment Fund
Europe and USA are traditionally the most popular places for construction and purchase of real estate. However, high cost of project implementation and rather high market competition are serious disadvantages of purchasing real estate in these areas.
Experts tend to pay more and more attention to West African countries when searching for alternative areas for real estate investments.
Apart from inner African countries where political conflicts are quite usual, such countries as Nigeria, Senegal, Guinea, Ghana, Cameroon and other West African states have captured attention of investors worldwide owing to the fact that political and social situation in these countries is stable and they are rich in natural resources. As far as real estate investments are concerned, this investment vehicle becomes more and more popular among investors.
Major advantage of West Africa area related to construction of residential and commercial real estate is high economic rate of return for such projects. It is based on several factors, e.g. cheap work force and building materials. Large cement plants are located within the territory of West Africa. Thus, construction expenses are significantly reduced.
High demand for high quality real estate is another factor that implies high economic rates of return for real estate in West African countries. As far as premium residential and commercial real estate is concerned, demand is higher if a foreign company carries out construction ensuring implementation of European standards in its projects.
Major customers are citizens of African countries, mostly people from inner states who want to have better living conditions in better places. West African countries are quite stable and are less subject to market changes.
Due to current demand for high quality residential real estate constructed in accordance with European standards and low construction expenses economic rates of return for investment projects are high.
Naoki Matsumura, Chairman of Hermes-Sojitz's Board of Directors, who is responsible for implementation of real estate construction projects in Africa comments, "Situation at real estate market in Africa is as follows: capitals of West African Union countries lack high quality residential real estate, especially premium real estate. Due to this fact demand for such projects is rather high. As a rule, about 90 % of luxury real estate is sold before construction is over. It is necessary to point out that if, for example, project implementation period is 1.5 year and price of premium real estate is from 3 to 10 thousand euro, marginal revenue for projects implemented in West Africa is several times higher than marginal revenue for projects implemented in Europe."
Africa has become an interesting place for investors in various spheres worldwide. Residential and commercial real estate market in West Africa is a promising investment vehicle that can be highly income generating and profitable for investors. Taking into account the fact that the sphere is currently not occupied, demand is high, work force and building materials are cheap soon real estate investments can become key investment vehicle for businessmen.
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