JLL’s Global Real Estate Transparency Index (GRETI) is a unique survey that quantifies real estate market transparency across 109 markets worldwide. The Index is updated every two years and has been charting the steady progress in real estate transparency across the globe for 17 years.
It is widely recognised as an essential guide for companies currently operating in or looking to establish operations in foreign markets. Real estate transparency ratings are important as there is an increasing acknowledgement by global governments that poor transparency greatly hampers foreign investment. In addition, in the world as a whole, there is a rising trend among governments, businesses and multinational corporations to encourage a culture of open data which is supported by technological advancement. The fact that the 10 highly transparent countries from the latest index account for 75% of global real estate investment is testament to the belief that transparency is key to global investment decision-making processes.
The 2016 index is the 9th edition and with growing interest in Sub-Saharan Africa (SSA) from corporates and international real estate investors, GRETI 2016 has further extended its footprint across the region to provide coverage of 15 countries, with Rwanda, Tanzania and Ivory Coast joining the 12 countries surveyed in GRETI 2014.
Nigeria ranks 83rd in the 2016 transparency index which represents a slight improvement from the 2014 edition where the country was ranked 86th. A more significant improvement for Nigeria is that it has achieved an upgrade in transparency categorisation from “Opaque” in 2014 to “Low” in 2016. This marked improvement is largely due to positive advancements in ‘Performance Measurement’ and ‘Market Fundamentals’. These general improvements are commendable, but it must be said that the advances recorded are less notable than in 2014 when Nigeria was among the top improvers in global real estate transparency. Progress in transparency appears slow and steady, but Nigeria still has some catching up to do if it is to compete with other SSA countries, not to mention global leading nations.
The question now is how can Nigeria greatly improve its transparency rating in the near future ahead of the 2018 index?
- Embrace the use of technology:
Technology is vital to transparency and is an essential tool to improve and track real estate data and indices. Technology is allowing some SSA countries leapfrog the normal transparency evolution process by introducing innovative ways of improving access to data or to faster, more reliable services. Some examples include:
- Rwanda – One-stop online centre for the development of permit applications, including mobile payments for processing.
- Ghana – Bitland is trialling a system to record title deeds with block chain technology in 28 communities around Kumasi.
- Kenya – Digitisation of land registry completed in Nairobi; land rate and stamp duty payments can now be made online or with mobile payment systems.
- Realty Africa – Crowdfunding platform for investing in real estate development projects in several Southern African countries.
Nigeria cannot be left behind if it is to advance in its quest for improved real estate transparency across the board. Lagos State for example recently reiterated its commitment to reform the real estate transaction business in the state through the Lagos Estate Management Information System (LAGEMIS). At the core of the new system is the accumulation and management of valuable data relating to real estate transactions. This is geared towards LAGEMIS transaction reforms which include a complete overhaul of its present operation, system information management, record keeping and retrieval to improve its productivity and consequently its revenue generation base. This effort is commendable, however more states in the country need to embrace the use of such methods to improve real estate transparency across the nation as a whole.
- Improve currency and liquidity risks:
Since the 2014 index, one of the main issues currently clouding investor and corporate appetites and SSA market sentiment more broadly is currency and liquidity risk as a result of the slump in oil and commodity prices. There is significant uncertainty, especially in Nigeria owing to acute U.S. Dollar illiquidity and lack of direction on monetary and central bank policies to alleviate this. There is particular uncertainty and speculation in these markets on how the regulators (and intervention from the likes of the IMF) will facilitate capital importation and repatriation of funds for international investors and corporates. Dual and unofficial U.S. Dollar markets have emerged in Nigeria which is problematic for transactions, be it paying rent or buying and selling assets. One such example is in the payment of rents for Grade A residential and commercial properties in Lagos. The Central Bank insists that these payments be made in Naira while landlords have traditionally charged rents in U.S. Dollars. Since the CBN has further enforced this rule, landlords now accept payments in Naira but pegged to a Dollar amount. However, the question consistently arises at what exchange rate, bank or unofficial? This increasingly creates great challenges in determining transaction costs. In addition, on a larger scale, the instability of the Naira to the U.S. Dollar means that rents have inadvertently been increased for occupiers and tenants simply due to foreign exchange challenges in the country.
The recent devaluation of the Naira has provided little relie, however further government intervention is needed to stabilise the country and improve investor sentiment for an economy which was not long ago the largest on the African continent.
- Reforms and improvements in industry practices:
There is a need in general for the real estate industry in Nigeria to embrace reforms and continuously improve industry practices if greater transparency is to be achieved. High-profile failures of regulation such as the continued building collapses in Lekki Lagos have served to highlight that a lack of regulatory enforcement can have devastating consequences. There is wide recognition among international organisations that security of property ownership (supported by functioning, clear and accessible land registry and processing systems); safe housing and workplaces (underpinned by robust legislation and consistent enforcement of standards); and being able to trust agents to act honestly and professionally (with regulatory oversight and professional bodies that enforce codes of conduct and fair treatment) are all key ingredients of well-functioning, inclusive and stable communities. The Lagos State Government has once again been active in recent efforts to curb the excesses of land grabbers (locally known as “Omo Oniles”) by announcing jail terms for those found guilty. Still, more needs to be done across the board to record the significant improvements required.
Across the Sub-Saharan region, despite the slowing of momentum in some markets, there are continuing examples of tangible advances being made in transparency:
- Kenya – Its first REIT (Fahari I-REIT) was listed in 2015 and others in the pipeline are expected to list in 2016. In addition, a National Construction Authority to regulate construction firms became operational in 2015.
- Rwanda – New building code and urban planning regulations were introduced in May 2015, and Rwanda has become the only country in Africa to have all rights to land documented, with over 10 million parcels of land entered into its Land Administration Information System (LAIS).
- Tanzania – Introduction of Estate Agency Bill 2015, which aims to regulate the sector and set up an Estate Agency Board.
While Nigeria and SSA continue to see improvements in ‘Market Fundamentals’ data availability, the provision of reliable information by private companies and governments also has significant scope to enhance transparency. Greater penetration by international real estate consultancies such as JLL and local data providers has already begun to increase accessibility of market information, An increasing acknowledgment by international organisations, national governments and local communities of the critical role that transparency can play, this process will continue to advance transparency in Nigeria and the region’s real estate markets.