-By Danlami Nasir Isah
As part of efforts to revive one of the worst-hit sectors by the Covid-19 pandemic, Pension Fund Administrators (PFAs) invested a total of N217.58bn in real estate as at the end of September 2020.
The disclosure was made by the National Pension Commission (PenCom) in its third-quarter 2020 report.
Additionally, PenCom revealed that N54.57bn was invested in infrastructure in the period under review.
In the report, total assets under management stood at N11.56tn as of the end of September.
As stated by PenCom’s guidelines on direct real estate investments by closed PFAs and approved existing schemes, direct investment in real estate involves the purchase of an already developed property or financing the development or construction of a property to generate income for the pension fund.
It stated, “Direct investment in real estate may be made only by CPFAs or AESs that operate Defined Benefit Schemes.
“The parcel of land upon which any direct real estate investment is situated shall be fully owned by the CPFA/AES, either by outright purchase or a leasehold agreement.
“Where a CPFA/AES is a DBS, it shall be fully funded based on the latest actuarial valuation report at the time of purchase or commencement of development of the property.
“Any actuarially determined deficit must be met within the 90 days prescribed by the Pension Reform Act or under a funding arrangement as may be approved by the commission.”
It stated that the CPFAs/AESs must tidy up the title of such properties, including seeking the necessary consents for consummating such real estate transactions.
Where the property was to be developed, the title to the land must be perfected prior to commencement of construction, it added.
“The value of the property at purchase or estimated cost to completion shall be such that the total exposure of the fund would still be within the portfolio limit stated in the internal investment guidelines/policy of the CPFA/AES, approved by the commission,” it stated.
The Pension sector regulator also stated that in the case of outright purchase of a developed property, the title deed must be perfected within 180 days of the purchase date.
Where the title deeds were not perfected within the stipulated 180 days, the CPFA/AES should provide to the commission, evidence of payment of all necessary fees and other relevant documentation concerning the perfection of the title deed.
Real Estate growth trajectory
For the second quarter and third quarter of 2020, Nigeria’s real estate had recorded negative growth.
real estate GDP growth fell sharply to -21.99 percent in the second quarter of 2020, its lowest level in 4 years, the National Bureau of Statistics said in the country’s gross domestic product report released in August.
The measure of the total monetary value of economic activities in the property industry in Q2 was –18.15 percentage points lower than the – 3.84 percent growth recorded in the corresponding quarter of 2019, and –16.72 percentage points relative to the -5.27 in Q2 2016.
Analysis of the NBS report shows that on a quarter-on-quarter basis, the sector declined by –2.71 percent in the review period.
However, in the third quarter of the year, the non-oil sector recorded a mild contraction than in the previous quarter as economic activity gradually reverted to pre-COVID levels.
Conspicuously, the contraction in manufacturing eased from 8.8% YoY in the second quarter to 1.5% YoY in the third quarter, with data from the Central Bank of Nigeria showing improvements in new orders as well as production and inventory levels in the review period.
The manufacturing Purchasing Managers Index (PMI) data also revealed that the sector recovered in November after a contraction of about 5months.
Considerable improvement was also recorded in real estate, education, entertainment, and trade sub-sectors.
The development corroborates assertion by experts of a possible real estate and other non-oil sector recovery in 2021.