How better transparency can reshape Africa’s real estate

 —  Article by JLL Staff Reporter
people on street in Nigeria
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Across Africa, demand is growing for greater transparency in its real estate markets – and if new digital and regulatory initiatives are successful, they will potentially have big implications for investor confidence, economic development and a better quality of life.

It’s not just investors and corporates who are keen for change; around a billion people living across Sub-Saharan Africa could see a noticeable difference in their daily lives.

“Citizens across many African countries often face a struggle to carry out basic property admin – such as accessing or filing documents,” says Matthew McAuley, Senior Analyst, Global Research at JLL. “Cutting down the amount of time people spend queuing to do any sort of paperwork or pay taxes will be a welcome step.”

Creating more transparent real estate markets also has the potential to better meet the needs of rapidly expanding urban populations, whether determining the community and business requirements for urban planning and design, bringing in sustainable financing or making international investment a more attractive prospect.

Yet African countries are moving at different speeds. On the one hand, there’s South Africa, the only ‘transparent’ country in the region, according to JLL and LaSalle’s Global Real Estate Transparency Index with a sizeable base of institutional investors and an established listed sector.

On the other hand, there are the likes of Ethiopia, Ivory Coast and Senegal, whose markets remain opaque.

And while overall, African countries continue to make progress, the pace of change has slowed from previous years, McAuley notes.

“Several African countries covered by the index have had new governments making positive sounds around improving transparency and the business operating environment,” says McAuley. “Some governments are quite intent on improving their global standing. But progress is slow.”

Digital delivery

The accessibility and quality of real estate data is key to accelerating progress – and there’s the beginning of a digital drive in many countries to do just that.

Kenya is looking to improve its land registry by moving it online, while introducing an eCitizen service for property transfers and land tax payments. In Rwanda, a country which is undergoing major land tenure reform, blockchain technology will be used to digitize its land registry with the help of Microsoft and a Swiss cybersecurity company. But collaboration between the government and private sector is rare.

“For now, there’s not a great deal of joined-up thinking,” says McAuley. “A large part of any progress made has been thanks to real estate industry participants’ initiatives and better data availability.”

In Africa’s more investable markets, such as Kenya and Nigeria, “tangible transactional evidence” has helped, he says. “As more institutional funds and developers target these markets, the data improves.”

In addition, the wider digitalization of everyday services within African countries is further boosting transparency. In recent years, Kenya, for example, has adopted mobile payment systems through Safaricom and has more recently seen pay-as-you-go system, PayGo Energy – which allows users to pay for their gas via their mobile phone – attract investment from abroad.

Even Nigeria has made advances both in its real estate market and in daily life, with the launch of online ‘one-stop shops’ for carrying out queries or making tax and service payments.

“Property transaction processing and data availability have improved,” says McAuley, pointing to the modernization of Nigeria’s land registries. The federal state of Kaduna has computerised its land registry, while the Lagos state government has also taken steps towards automation. The country’s valuation standards meanwhile, are expected to improve; the Estate Surveyors and Valuers Registration Board of Nigeria last year took its first steps towards a “Green Book”, detailing expected standards for its members.

“Valuations bodies are now setting standards and that gives stakeholders more confidence,” says McAuley.

Potential for change

However, markets where data is harder to come by, such as Angola and Ethiopia, need to take a more pro-active stance on increasing the visibility of information and improving investment performance tracking if they are to attract more investment. Mozambique and Tanzania, for example, are both at the early stage of commercial market development.

“All four countries would be more alluring for investors if there was improved transparency,” says McAuley.

Angola – Africa’s third largest economy – and Ethiopia, with respective populations of 29 million and 102 million, have significant long-term potential. However, both countries have seen relatively little commercial real estate activity.

A change of political leadership for the first time in 38 years may mean reform is on the agenda in Angola yet governments alone cannot drive the necessary change; collaboration with the private sector will be essential.

“Looking ahead, deeper engagement from international service providers, a widening pool of funding sources, and, crucially, improved regulatory enforcement – particularly in building safety standards, land-use planning and financial regulations – will all be required to meet the growing demand for transparency across the region,” says McAuley.

Transparency levels in Africa won’t improve overnight but an increasing focus on the use of digital tools and better regulation can help to bring wide ranging benefits to investors, businesses and communities.

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