International Housing Solutions (IHS), the global private equity investor leading investment into the affordable housing sector in sub-Saharan Africa, has created a fund, HIS Fund II, which will target affordable and energy-efficient housing opportunities in sub-Saharan Africa.
The fund has already grossed up to N67 billion capital from diverse investors, including the International Monetary Fund (IMF). One of the legal sleeves of the fund, denominated in US dollars, will invest wholly in targeted sub-Sahara African countries such as Nigeria.
Nigeria’s housing market size is estimated at N56 trillion. The country’s property market crashed recently, offering opportunities for bold investors to reap high returns as Africa’s biggest economy strives to clamber out of recession.
Stakeholders in the country’s housing sector say that government at all levels should reduce inherent disincentives in the sectors, such as impervious land laws, to lure funds to the sector.
Nigeria’s fast-growing population requires more housing and shopping malls in the long-term. Analysts believe it is time for discerning investors to step in with their funds and harvest huge returns upon exit.
The IHS fund has backed six projects to date, providing a total of 1,630 housing units. Five of the projects have used the fund’s green investment facility which is designed to improve the use of energy, water and building materials in their developments.
Having held its first close in July 2014, the HIS Fund II has attracted 11 billion naira ($30 million) from the IFC Global Environmental Facility and KfW, the German development finance institution. The European Investment Bank (EIB) is also considering 7 billion naira ($20 million) investment in the HIS Fund II, which has a primary focus on Namibia and Botswana. .
Some private equity funds, mostly from South Africa, have invested in Lagos and Abuja, the country’s capital, staking that the spending power of the country’s 180 million people will rise. Nigeria has one of the world’s fastest growing populations in the world; investors say that this means it has better long-term prospects than the rest of Africa.
“We believe Nigeria has massive potential in the retail area,” Jan van Zyl, head of Nigerian property development at South African fund Novare Equity Partners, told reporters in 2016. “The sector is in its infancy and will only continue to grow from a very low base.”
IHS’s first fund, the $230 million South Africa Workforce Housing Fund, is fully committed and has exited a number of the projects in its portfolio. The private equity manager’s website reports that the weighted average internal rate of return on these exits, based on the capital invested, is 25.2% with an average multiple of 2.47.
BY INNOCENT UNAH