Exploring Real Estate Investment Trust (REIT) as a housing finance option in Nigeria

Abstract

While traditional housing finance system in Nigeria could not stem the estimated shortage of 17 million, some identified modern sources had also made little impact on housing finance. Sustainable real estate financing requires a system which can be repackaged and traded for further creation of credit over time as fitting into the structure of Real Estate Investment Trust (REIT). The paper examines literature for the nature and workings of REIT. It identifies REIT types and examples as well as its benefits across its operational world. In the applicability of REIT to Nigeria, some germane considerations are explored as related to ownership structure and institutional investors among others. The study finds out that the level of appreciation of REIT is low in Nigeria. The performance of the Stock Exchange (SE) too has not been very encouraging for REITs’ operation. For the few REIT companies listed on the SE, the share prices are low partly because of a recent crash of the Nigerian stock market, from which recovery is very slow. While the national housing policy in Nigeria absolves the government from direct construction of houses, private or quasi-public housing development institutions need to find sustainable means of housing finance. This paper contributes to the discussions on alternative means of housing finance as REIT could be subscribed to even by small investors. However, improved education on REIT could also ameliorate housing finance in Nigeria.

 Keywords: Housing finance, Housing market, REITs, Stock market