What do developers need to bear in mind to source funding and to manage cash flows effectively?
First, developers need to plan how they will execute the entire deal from beginning to end, instead of starting a project and have it be frozen in the middle due to poor funding management. There are two different approaches for funding. One is for developers to find funds on their own by using their reputation and brand through the quality of the projects and the revenues they collect from these developments. The second method is to apply strategic sales through separate phases of the development that would attract new investors at each stage. In Africa, you would need letters of commitment to show investors it is a demanddriven project, which will encourage investors to get on board as the demand rises.
There are three things that make for a successful development: clearly established land policy, the actual infrastructure construction and the sourcing of funds. Unlike some neighbouring countries, Ghana’s advantage is its strong political stability. Developers should plan their projects based on the long-term security and stability of their investments, and tap into this market quickly before it becomes an in-demand country.
In what way is local oil and gas production transforming Ghana’s real estate market trends?
Even without the discovery of oil, the country is facing a huge accommodation shortage, with a deficit of homes close to 2m. This tells you that we have a very fast-growing economy, but we are running behind schedule when it comes to housing developments. Currently, Ghana has a lot of virgin land for development that has not yet been tapped into. And someone needs to break in. We have only just started exploring oil for the past two years, and we will soon reach about 120,000 barrels per day. In the coming decades, I have no doubt that Ghana will be rich in terms of resources. However, the country and the people will not benefit from this unless the proper social infrastructure is put in place.
Most foreign countries coming into Africa to invest know that the risk is around 40%, but the returns could possibly be much greater if it goes well. So, some of the revenue that will be made from oil has to be put back as added value into the country itself.
To what extent is there scope for an increase in affordable mortgage lending?
Currently, it is very difficult for the average person to even think about buying a $30,000 home. For developers, current high lending rates swallow up the margins, and this dissuades any interaction with financial institutions. We need to have a successful community development that will ultimately prove the value of banks establishing credit lines for the advancement of the real estate projects and affordable mortgage schemes. Private developers will be able to show how important it is to establish credit channels for the citizens and for expatriates alike. There has to be a way to make it attractive for local people and foreigners to stay and also decrease the housing deficit.
Ghanaians and investors need help to grow; this will only improve the country. The private sector can begin building wealth to attract the banks and start using them to develop the credit lines; they do not need to depend on the government to establish these regulations.
How much potential do you foresee for large-scale developments in Africa in the long term?
If done correctly, I see anyone with a large-scale development in Ghana benefitting through above average margins of profits, since they are working in a country that has a great need. The likes of China, the US, Europe and even Latin America are saturated markets. As a result, Africa is, and will be, an attractive continent for future investments. In the coming years, investors are going to move into this continent because the world is demanding oil, gold, or minerals, a wealth of deposits are located here. And it’s the order of the new world for investors to be guaranteed their returns.