Property Co-ownership in Ghana & Nigeria

Wouldn’t it be great if you could own shares in a property like a company on the stock exchange? This is the concept behind Property Co-ownership;  where multiple owners buy into the same property and share in the investment returns. 

This concept is uniquely innovative because it has the potential to democratize homeownership. Specifically, it will enable more people to invest in real estate in a cost-effective way. For instance, Property Co-ownership would allow people to expand and diversify their real estate portfolios through small investments. 

Though an increasingly popular topic across the world, especially in emerging markets, we are yet to see this concept take off. Let’s look into a few of the reasons that have made this difficult: 

Property Management: The presence of more owners greatly increases the importance of communication and the need for collaboration. Co-owned properties, like other types of property, require management to generate and report the returns as well as do repairs.  Furthermore, the rules of the co-ownership need to be very clear to enable owners to contribute to the management costs, upgrades, utilities, and more in a consistent and efficient manner. Even mechanisms for non-payment need to be established. These contingencies create additional barriers for administrative and transactional processes. 

Returns: As in all real estate investment opportunities, there needs to be a nice return. However, it has been difficult to work out significant return models within Property Co-ownerships. For instance, rental yields in Lagos sit between 3-6% before adding in the costs of the management and maintenance fees. By extension, if co-ownership opportunities only lead to 2% returns, it would make it relatively unattractive to investors.

Legal: In Ghana and Nigeria the laws on co-ownership are not well explored and an individual investor would not have the same rights as an owner. (Emmanuel Sackitey Mate-Kole) 

In spite of the issues with getting the model right, there are exciting innovations in the industry that are creating a bright future for the Property Co-ownership space in Africa.

In Ghana and Nigeria, startups have emerged to fill the gaps and offer solutions. Cofundi (based in Ghana) and MyyInvest (based in Nigeria) have introduced creative solutions to crowdfunding for property developers that enable them to greatly exceed the rental yields; with some gaining returns of over +10%.

NFTs and tokenization also provide a great opportunity to digitise assets and create liquid marketplaces. Tokenization is ready to be launched in Nigeria and Ghana and the outcome of the launch will be a great indicator of the real potential of such technologies.  

In summary, Property Co-ownership has great potential to make real estate investment more accessible. As long as the highlighted risks are addressed, this emerging system will boost the democratisation of property ownership and the expansion of the African real estate industries.