The African Real Estate Society (AfRES) 2008 conference, through a panel discussion
concluded that access to finance is a major challenge and an obstacle in developing real estate
markets in Sub Saharan Africa. The purpose of this research was to establish the key factors
that a lender takes into consideration when financing real estate transactions in Sub Saharan
Africa, as well as the relative importance of each key factor. In addition to this, the study
reviews and examines the risk considerations and challenges involved in doing business in
Sub Saharan Africa, from a South African lender point of view.
As the research is exploratory in nature, the initial approach to gather significant information
was through literature studies and preliminary discussions with relevant representatives of the
lender. Thereafter, a self administrated questionnaire was sent to respondents in order to
bring out further factors or dynamics to consider.
The main finding of the research was that the primary factors that influence a lender’s
decision to finance a real estate transaction are: projected cash flow of a specific transaction,
pricing, lender’s Return on Equity (ROE), client risk grading, property location, type of
property, nature of business of borrower, security provided and client relationship.
Respondents included track record of borrower and term of the loan facility as additional
factors of influence.
Regarding risk concerns, important issues of consideration included cultural differences,
unfamiliarity of business environment and legal frameworks, access to data and delivery risk.
The economic environment is highly segmented, and is thus challenging to treat SSA markets
as one bread basket.
The study reveals that although SSA is riskier than RSA in terms of doing business, each risk
highlighted has a mitigating factor, which could be adopted to secure debt funding for
transactions. The adaptation of these risk mitigates may facilitate access to funding for real
estate clients in Sub Saharan Africa.
Key words: Real estate, Africa, lending, risks and challenges
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/20011 |
| Date | January 2016 |
| Creators | Katabua, Patrick T |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf, application/pdf, application/pdf, application/pdf |
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