Real Estate Investor Magazine South Africa December 14/ January 15 | Page 19

upfront High costs Building costs in many African countries are high, partly because many materials have to be imported, and also due to the high interest rates and the lack of a dynamic banking system that can provide mortgage loans at an affordable price. The costs of imports and exports are also high. For example, the average cost of exporting a container from an African country overseas is $2,000 while in Asia it is estimated at less than half that amount ($900). In general, prices of goods are high. For example, prices of foodstuffs, such as a bag of rice or a tin of beans, are close to triple in Nigeria when compared to the prices in South Africa. Property legislation and regulations Across the whole value chain of the investment process, including land acquisition, country regulations, market fundamentals affecting valuations and feasibilities, each African market offers different challenges. Laws regarding land tenure and land holding by foreigners are different in each country, and the process of land acquisition differs widely, while the taxes affecting www.reimag.co.za foreign property owners are divergent. Property investors and developers are also challenged by delays at land registries. Business structures Setting up the right legal and tax efficient structure is a challenge across the continent. Local tax legislation could dictate a change in a company’s traditional business model to ensure the investment is tax efficient. There are also widely different investment incentives schemes targeting foreign direct investors, with different criteria for qualification of such incentives various states. Furthermore, countries have differing bilateral investment treaties (BITs), double taxation agreements (DTAs) and investment protection and promotion agreements (IPPAs). Funding Among the greatest challenges for property investors is access to cost-effective funding. Debt funding remains an ongoing challenge as there are very few banks that are willing to consider property finance in multiple African jurisdictions. Furthermore, pricing on US$ December 14 / January 15 SA Real Estate Investor 17