Experts call for more Real Estate Fund Listings on NSE to address Nigeria’s 20m housing deficit

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Experts call for more Real Estate Fund Listings on NSE to address Nigeria’s 20m housing deficit, according to the Only three REFs listed on the NSE, which are Union Homes Real Estate Investment Trust, Skye Shelter Fund and UPDC Real Estate Investment Trust.

According to the Securities and Exchange Commission, the total value of the assets of all three funds stood at N43.74billion as of January 18, 2019; this represents about 0.03 per cent of the GDP, it added.

The research noted that the assets recorded weak growth over the last five years, perhaps due to the slow activity in the sector.

The report, however, regretted that REFs have not gained much popularity in terms of the numbers available and their size relative to the size of the economy.

ONLY real estate funds can address housing shortage in the real estate sector, a report has said.

FSDH Merchant Bank stated this in its report titled: ‘’Real estate fund — Investment vehicle to address housing shortage in Nigeria’’, undertaken by its research arm, FSDH Research.

The report observed that there was a significant shortage of affordable housing in the country estimated at about 20 millions.

‘’This means that Nigeria needs to build between close to 20 million housing units to ensure that Nigerians have this basic human need,” it added.

In monetary terms, Nigeria might require between N170trillion and N200 trillion to bridge the housing gap if each unit costs N10million.

It said: “Given the rising population in the country, the housing shortage keeps increasing.

‘’Meanwhile, the developments in the real estate sector of the economy, which is where activities that will close the housing shortage will take place, have not been impressive with economic activities in the real estate sector consistently contracting since Q1 201.6.”

The report suggested that investors in the retail and high-networth segment could create wealth in real estate through regularly investing in a Real Estate Fund (REF) without investing directly in the brick and mortar.

Explaining REF, the report noted that it is an investment vehicle that pools resource to invest in real estate; therefore, allowing individual investors to partake in the benefits of the underlying properties.

The report further explained that REFs are traded on the Nigerian Stock Exchange (NSE), just like stocks/shares and could be purchased through stockbrokers, just like other stocks/shares.

The report added that every REF must have a fund manager that manages the fund to ensure the best return to shareholders and a good example of real estate working for the investors.

It said: “The holder of a REF will earn a share of the income from the real estate investment through dividends without actually having to buy, manage or finance any housing projects. It is required to distribute at least 90 per cent of their taxable income as dividend. As a result, it provides constant income for shareholders.”

The report said there was no minimum amount to invest in a REF, adding that it was suitable for all investors

On why the real estate instrument seems not to be growing or gaining attention, the FSDH report said the inadequate information on how REFs work and how investors could take advantage of the investment opportunities in them might also explain why REFs were not growing as they should.

It stated: “FSDH Research believes REFs can be used as one of the measures to boost activity in the real estate sector. As patronage for REFs in Nigeria increases, more funds would be available to buy and develop more real estate properties. Consequently, the real estate sector would begin to experience increased activity.”

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