Africa has a real and immediate need for affordable homes, says Phatisa, an indigenous African private equity firm speaking about its Pan African Housing Fund.
Kenya, East Africa’s largest economy, has a total housing backlog estimated at approximately 2m units and in Tanzania the annual demand for housing construction nationwide is estimated to be 200,000 units. Analysts suggest the rate of return on foreign investment in Africa is higher than in any other developing region. Over the last decade, six of the world’s 10 fastest-growing economies were in Africa. As a result, the continent boasts one of the fastest-growing middle class groups in the world. By 2060, the number of middle class Africans will grow to 1.1bn – 42% of the predicted population.
“As this population grows, the need for housing is becoming more critical. However, few have realised the investment potential in this market. Affordable housing in Africa is still underdeveloped and largely an untapped opportunity. Phatisa’s Pan African Housing Fund (PAHF), launched in 2010 and commencing investment in 2013, was developed to address this need, investing primarily in affordable middle income residential developments as well as mixed-use opportunities,” says Eton Price, fund partner for PAHF.
PAHF is a private equity investment vehicle that is focused on sustainable development by partnering with reputable local developers. The fund provides risk capital on a joint venture basis to residential projects and also to projects where commercial properties are combined with residential units. The fund also marks the first time that a pool of high profile international development finance institutions, African banks and insurance companies have partnered to drive investment in East and Southern Africa’s housing sector.
“We are pleased with the calibre of investors we have partnered with. This showcases not only the value that is to be realised from PAHF’s investment portfolio, but is also an endorsement of the investors’ commitment to the development of Africa’s middle income housing sector,” adds Price.
The fund hopes to address three obstacles to the delivery of housing in East and Southern Africa, namely: the lack of established ‘developer class’; the shortage of equity to the residential property developers in the region; and access to affordable housing for the middle income class.
PAHF provides risk capital and other resources, such as skills development to local developers who offer scalable investment opportunities in its identified geographies. The developments will be located in urban areas and the housing provided will be for both sale and rental markets. Rent-to-buy schemes that help people get on to the housing ladder may be introduced where appropriate.
Speaking of Phatisa’s commitment to real estate in Africa, Price says: “Housing in Africa is more than just about shelter, it provides for socially and economically sustainable communities. Development equity is at the heart of all our investments. Our deliverables are two fold, to deliver financial returns to our shareholders and to enhance social capital by contributing to building sustainable communities.”
Phatisa is guided by best practice, the IFC Performance Standards and the Bristol Accord, which sets out eight characteristics of a sustainable community to deliver sustainable development, economic prosperity and social development. The fund will only execute transactions where it has the capability to manage risk aspects of the investment.
While PAHF seeks to provide a superior return to its investors, community upliftment, through this fund, is a driving force for Phatisa.
The construction and real estate industries, while recognised for setting standards for buildings that enhance its residents’ lives, are essential providers of jobs to both skilled and unskilled workers. Through the fund, not only will jobs be created, it will stimulate entrepreneurship and encourage the development of healthy communities, and as a result contribute to the fiscus for the respective governments in the targeted geographies.
Private equity investors, such as Phatisa have invited us all to start playing a more active role in addressing Kenya and the larger East African community’s housing shortage by investing in the future and building business partnerships for sustainable growth.