BusinessDay 24 May 2017

8 BUSINESS DAY C002D5556
Wednesday 24 May 2017
NEWS
Experts push for proper taxation, regulatory policies to grow REITs market
CHUKA UROKO
Experts at a one-day
conference on ‘Real Estate
Investment Trusts
(REITs) in Sub-Saharan
Africa (SSA) organised by the
Nigerian Stock Exchange (NSE)
in Lagos Tuesday pushed for
proper taxation, favaourable
regulatory policies and transparent
corporate governance
which they considered as major
impediments to the growth of
REITs market in SSA, especially
in Nigeria.
Globally, the REITs market
has seen some momentum
which speaks to relative growth
and development. According to
Ernest & Young report of 2016,
global market capitalization of
REITs now stands at approximately
US$1.7 trillion, up from
US$734 billion in 2010.
In the US where REITs started
in 1960, the market has grown
by almost 150 percent, while the
market capitalization of non-US
REITs has more than doubled.
The two fastest-growing markets
in the last five years are Australia
and Japan, both of which have
now overtaken France and the
UK to be the second- and thirdlargest
global REIT markets respectively.
In Africa, the market has not
done so well, though not without
encouraging story. According
to Oscar Onyema, NSE’s CEO,
African REITs market is presently
valued at US$29 billion and is
available in four countries including
Ghana, Nigeria, South Africa
and Kenya.
“There are only 32 REITs in
Africa with South Africa being
the largest REIT market having
27 REITs and Nigeria second with
three REITs listed. In 2015, an
estimated $265 million worth of
transactions were concluded in
Kenya, Nigeria and Ghana, a big
improvement on the $65 million
seen in the three markets during
2012”, he said, adding, “this
indicates an increasing market
as a larger number of investors
are beginning to take increased
interest and participation in the
real estate sector.
The African real estate markets
are well positioned for a longterm
growth phase, especially
in Nigeria, given the significant
supply deficit across the continent.
Onyma believes that the
current state of this asset class
and the huge opportunities the
sector holds make the push for
favourable policy frame work,
good tax regime and corporate
governance necessary.
As an investment vehicle
or instrument that owns and
manages portfolio of incomegenerating
real estate, REITs
comes with attractive benefits
that include higher dividend,
secured income by long leases,
inflation protection, portfolio
diversification, high liquidity, etc.
But investors don’t readily move
cash to that market, hence its slow
growth 10 years after the first REIT
was floated by Sky Shelter Fund.
The slow growth of the market
is reflected in the performance
of the six REITs that have
come to the market within this
period, including the Sky Shelter
Fund, Union Homes Hibrid REIT,
Sun Trust, UPDC, HMK REIT
and the most recent one floated
by Top Services Limited which is
targeted at retail market.
“The poor performance of
REITs as an investment instrument
in Nigeria is due to lack
of transparency, low foreign
capital inflow, the Land Use Act,
poor regulatory policies, etc”, said
Abimbola Ogunbanjo, 1st Vice
President of the NSE, who also
canvassed the establishment
of a separate land registry that
should deal with all issues related
to REITs .
Taiwo Ogundele, partner at
PwC West Africa Tax Leader, who
spoke on Regulatory Environment
and Financial Reporting to
Promote Market and Investor in
the Development of Real Estate
Assets and Investments, added
that a special tax regime should
be created for the REITs market.
“The regulatory issues by the
Securities and Exchange Commission
(SEC) and NSE should
be harmonized”, he suggested
and advised that government
should do what is expected of it
with right policies and leave the
private sector to drive and grow
the market.