Africa's Real Estate Booming: Africa's Real Estate Sector Is Booming and the Continent's Construction Industry Is Thriving. Reflecting the Continent's Greater Economic Activity, Demand for Housing and Industrial Property Has Never Been Higher - and Africa's Financial Institutions Are Busy Underwriting a Massive Increase in Investments. Neil Ford Has the Details

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After many years of slow growth, the African real estate sector is finally beginning to take off. Local and foreign investors are developing residential and commercial property schemes, while the continent's banks are finally waking up to the benefits of joining the mortgage market. Most Africans continue to build their own homes and then pass them on to their children, but the number of property transactions appears to be increasing and governments are encouraging the emergence of vibrant rental and real estate markets.

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The lack of development in the African real estate market in the past was not generally due to a lack of demand but to a lack of access to credit. Moreover, the absence of an active market for residential property meant that financial institutions did not promote home loans to a wide customer base but focused on serving more niche markets, such as the provision of expatriate housing and commercial properties in the main cities.

In addition, many African countries lacked adequate regulatory frameworks and land ownership legislation. It is estimated that 75% of African home owners have no title deeds to the land upon which their house is built, virtually excluding their properties from the housing market. However, over the past decade, Tanzania, Zambia and the governments of a number of other countries have sought to clarify their land ownership legislation in order to instil more confidence in potential homeowners.

Large housing schemes are becoming more common in many countries and so developers are negotiating with banks to act as intermediaries for mortgages, so that the home loan is effectively tied to the property. In addition, governments offer loans to state employees to enable them to buy homes, often through government controlled housing schemes. Many of the millions of houses that were built by African governments for state employees have now been sold off, adding to the pool of available properties.

Mortgages now comprise an increasing proportion of bank business in many African countries but the real challenge will be to ensure that property loans are not just made available to the economic elite. As with other financial products, most banks operating in Africa have focused on providing services to high net worth individuals but are finally beginning to offer bank accounts and other financial services to a greater proportion of the population. This is partly in response to the growing popularity of micro-credit organisations and mobile phone banking. The emergence of the mortgage industry is considered below (see page 52).

As in the UK and US, the housing market is now regarded as a source of economic growth in Africa's more developed economies. The Central Statistics Office (CSO) of the government of Mauritius announced at the end of June that the island state's economy had grown by 3.6% in the first quarter of 2010, as a result of strong growth in the manufacturing and real estate sectors. The latter rebounded well from the global economic downturn, with both housing sales and rents recovering across the island.

The real estate sector would not have been considered a significant component of the continental economy even a decade ago. However, this year's African Economic Outlook, which is produced by the AfDB, the OECD Development Centre and the UN's Economic Commission for Africa, reported that African economies had been more resilient in the face of the crisis than expected and added: "Domestic services including real estate and telecommunications (notably mobile telephony) were generally resilient to the crisis and continued to contribute to growth."

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Nigerian difficulties

However, some national economies have been affected by the global economic crisis. The Nigerian mortgage market has been greatly affected by the general problems in the country's banking sector that forced the Central Bank of Nigeria (CBN) to take over the management of some banks last year. …