Affordable housing in Africa as an investment is still in its infancy but the opportunities to create investment vehicles are immense.
Africa’s housing sector is not delivering at the rate and scale needed, nor is it serving the diversity of the market given varying levels of affordability and access to credit. The market is repressed because of affordability, determined by household income and high levels of household debt.
A large portion of the African population is deprived of the basic need of suitable, quality shelter. This is a problem that African Governments have been hard-pressed to solve due to the variety of logistical problems involved in the provision of bulk, affordable housing.
For example the Kenyan government’s affordable housing initiative is viewed as an opportunity for property developers to diversity, as the commercial and high-end residential property markets are cooling down due to oversupply and constrained consumer spending.
The government had aimed for 500,000 new affordable homes by the end of 2022 and provided funding, tax incentives and exemption from stamp duty for transfers. The initiative was, however, initially hampered by a lack of funding and court cases against a national housing development levy.
It’s not all doom and gloom. In fact, as of late last year, the Kenyan state raised Shs 536.5 million in n deposits from the sale of its 1,370 low-cost houses on Park Road in Nairobi, which feature one, two- and three-bedroom units.
The Park Road project whose construction started in April 2019 is the first low-cost housing development to be completed by the national government under the Big Four’s 500,000-unit Affordable Housing Programme.
The low-cost houses consist of 546 three-bedroom units of 60 square meters selling at Sh3.55 million. There are also 260 three-bedroom units measuring 80 square meters each selling at Sh4 million each.
In February, Pan African Housing Fund (PAHF) a US$41.5m project entered into an agreement with Africa Reit Limited (Africa Reit) to secure a six-acre property located in the Karen-Lang’ata area of Nairobi.
Developers are now seeing the recent listings as an opportunity to develop affordable rental stock and are also seeing this as an opportunity to balance their current portfolios giving a spread of annuity income producing assets and assets for sale. So much that global investors have also recognized the value in investing in affordable housing.