In June 2021, African government representatives agreed to enhance mechanisms for the mass provision of decent and affordable housing across the continent.
With the aim of achieving social and economic development, African ministers in charge of housing and urban development, their finance counterparts, the private sector and civil society agreed in Yaoundé, Cameroon to tackle the continent’s affordable housing crisis.
But achieving this dream is not easy without the incorporation of innovation in Africa’s real estate sector.
According to The Africa Report by Knight Frank which gives the real estate market update for 2020/21, innovation offers investors exciting opportunities in the continent’s real estate markets.
It is no doubt that Africa is now firmly established as a leading destination for serious investors and with the dearth in decent housing, the real estate sector stands as one of the biggest beneficiaries if players are strategically positioned to tap into the available opportunities.
What is worth noting, though, is that there is a no one-size-fits-all approach since the continent is diverse in challenges as well as opportunities. The need for housing is likewise not similar which calls for an innovative approach to providing suitable housing for the diverse markets.
The Knight Frank report notes that Africa has been at the forefront in adopting technological innovation, laying the foundations for the emergence of a vibrant “proptech” sector.
Real estate innovation
Starting with a trickle with the introduction of online search platforms, the sector has witnessed a wave of disruptive and cutting-edge technologies that continue to improve both transparency and efficiency.
Potential in proptech is huge since the growth has barely scratched the surface so far with global investments in proptech hitting US$12 billion in 2016, up from just US$20 million in 2008. It is estimated that US$4.6 billion was invested in proptech in the first six months of 2019.
Africa’s potential in real estate technology is phenomenal since proptech companies in the continent currently account for only 1% of the global market share. On the bright side, Africa’s technology ecosystem is among the fastest-growing in the world.
The World Economic Forum (WEF) notes that proptech is playing a huge role in transforming the global real estate sector. The three key ways through which proptech has become part and parcel of the real estate sector is by promoting greater transparency, enabling increased efficiency and encouraging a notable shift away from traditional uses.
In Africa, these key trends continue to be mirrored through innovations including the digitisation of land administration processes by a number of countries, continued growth in online retail and the rise in co-working spaces.
Proptech solutions range from transaction platforms, management platforms, and data-driven services to wide-ranging digital innovations, including block-chain and virtual reality solutions.
In the commercial space sector, there are more than 500 co-working spaces across the continent at the moment. An estimated 80% of these spaces have come up in the past three years and the trend is expected to continue the rapid upward growth.
With the Covid-19 pandemic, there was an enormous shift to working from home for many companies and which accelerated the need for a shift from the old office space settings to co-shared spaces.
The dynamic shift towards space as a service demand, from individuals, entrepreneurs and corporates and the growing younger demographic have necessitated the move. The recorded highest numbers of co-working spaces in the continent are in Egypt, Nigeria and South Africa.
Notably, there is also a continued expansion of global brands like Regus currently operational in 22 African countries. WeWork is the latest entrant into the South African market, increasing the number of companies offering ‘offices on demand’.
The other sector that is benefitting from technological innovation is online retail which is continually growing in Africa. The result is the influence it has on the retail and industrial real estate sectors.
By 2025, online shopping in Africa will generate US$75 billion according to McKinsey estimates. Already, the continued growth of e-commerce platforms like Takealot, Jumia, Kilimall, Konga and Mall of Africa are testament to the potential the sector has.
Another booster to the development of online retail is the continued growth in mobile and internet penetration in the continent.
The GSMA estimates that smartphone connections will rise to an estimated 700 million by 2025. With this growth, Kenya, Nigeria and South Africa continue to dominate e-commerce sales.
Knight Frank notes that formal retail space across the continent is continually undergoing rapid transformation. This transformation is happening as “the entry and exit of various brands in the sector across the continent, retail outlets have had to adopt omnichannel offerings in order to ensure a measure of sustainability”.
The demand for sophisticated and centralised warehousing facilities across the continent is expected to grow as online retail gains traction and critical mass.
Doing business has also eased and is expected to translate into growth in the various real estate sectors. The Doing Business 2019 report by the World Bank cites a number of reforms across the continent geared towards easing the burden of property registration.
Kenya’s recent land process digitisation efforts, the Mauritius Land Registry move to a paperless system and Togo’s digital solutions for property registration and digitisation processes are some examples of the successful transition by governments. Rwanda and Ghana have also committed to introducing a blockchain-based land administration process.
As it is, these initiatives are in line with the move towards more transparent markets for investors.
The pandemic’s cooling effect
Up until 2019, economic growth was positive with hopes that some Sub-Saharan African countries would continue registering impressive growth. However, the pandemic became a damper to among others, the International Monetary Fund (IMF)’s forecasts that emerging market economies were set to experience a pick-up in growth from 3.9% in 2019 to 4.6% in 2020.
The Bretton Woods Institute had projected that Sub-Saharan Africa’s GDP would grow by 3.5% in 2019, and marginally increase to 3.6% in 2020. This growth was minimal in comparison to the rates of more than 5% experienced a decade ago.
However, the pandemic has seen Africa move from being among the fastest-growing continents in the world to creating doubt over its economic recovery post-Covid-19 if we ever get to that point and time.
Ghana, Rwanda, Ethiopia and Côte d’Ivoire were ranked as some of the fastest-growing global economies by the World Bank drawing on their improving competitiveness and macroeconomic environment to diversify their sources of growth and trade.
As it is, the real estate sector remains one of the best to invest in since affordable and decent housing remains a luxury for the millions of Africans especially those living below the poverty line.
The pandemic could be a silver lining for innovation since only innovative solutions are set to win in delivering solutions to age-old problems afflicting Africans. Affordable housing remains an elusive dream for many and the investor who manages to address this will be the one who bags the prize.