Focus: Real Estate

Tight-Knit Unit

Tight-Knit Unit

May. 9, 2013

Foreign companies seek to maximize the benefits of residential and commercial real estate in Mozambique, a country set to continue experiencing explosive growth.

At 4% of GDP, the real estate sector is a key factor in the development of the up-and-coming economy of cities such as Maputo and Inhambane, as well as coastal areas such as Ponta do Oura, Vilankulo, Pemba, Bilene, and Benguerra Island. In the provinces, real estate companies are seeing an increased demand for industrial property, warehouses, factories, and agricultural projects.

With the help of existing development laws and government support, access to land remains relatively easy in comparison to neighboring countries such as South Africa. As a result, many foreign developers have demonstrated interest in Mozambique, a country with a well-developed legal framework. For example, administrators in Mozambique recently adopted a double taxation treaty to make investment easier for South Africans.

However, the lack of supply in housing has led to a high price of property, making it difficult for local people to purchase or rent homes. According to 2012 prices, the average investment required for the development of commercial or residential property projects is estimated to be $850-$1,000 per sqm. The high price trend has led companies to focus on expatriates and wealthy Mozambicans as the main market.

Although new developments are constantly being built, demand continues to exceed supply. The increased demand for high-end property has led to an improvement in construction quality in the country, and a larger number of developments meet international quality standards. All land in Mozambique is state owned, with leases available for 50-year periods, after which land leases may be renewed or the property can be transferred. Despite this strict rule, inefficiencies in the Mozambican judicial system have characteristically made the protection of property rights problematic. Since land cannot be sold or mortgaged, the only vehicles the law provides for access to land are the right to use and benefit from land, or the Direito de Uso and Aproveitamento da Terra (DUAT). The DUAT is granted to domestic and foreign individuals and companies, taking into account the social or economic objective of each.

THE PLAYERS

Shifting from a focus on leisure and tourism development to more residential and commercial real estate projects in recent years, Pam Golding is the premier broker in the country. Noting the increased demand for high-end property, Gonçalo Marques, General Manager in the country, noted “Foreigners make up approximately 65% of our clients, and at this stage, 70% of our business comes from rentals." Due to the challenges associated with financing a home, much of what the company develops and sells is difficult for the local population to take advantage of. However, Marques explained to TBY, interest rates on property loans are expected to fall into the single digits by the end of 2013, opening up opportunities for lower-income segments of the population. With 300 offices throughout the African continent, the company expects to succeed on the platform of being a global-recognized brand in a largely informal market.

Although commercial real estate properties could prove to be the more lucrative investment, residential developers such as Istanbul Construction have found niche opportunities in Mozambique. One example lies in the construction of villas and apartments, which can be rented at high prices in cities such as Maputo. However, Halim Dağlar, General Manager of Istanbul Construction, was attracted to the country for more than the high price of property. “In Mozambique, when someone buys an apartment, it is not unusual to have relatives come and buy units next door," he told TBY, adding, “Then, they live in one condominium together. This is something I would like to capitalize on." To this end, the company is seeking to complete cost-effective projects such as a nine-villa plot, an 11-villa plot, and a 26-unit residential block. Seeing the shortage of housing supply, Istanbul Construction plans to launch the larger housing projects of up to 500 units in the future.

Another company focused on the residential sector is BRITALAR Moçambique. Recognizing the expected demand for middle-market housing, the company will present its investment team with a new medium-standard apartment, which will feature accessible three-bedroom houses of over 100 sqm per unit. The company is also offering financial options for working homeowners who will have the means to purchase homes in 20-25 years. On one plan, “Occupants can buy a small 90-sqm house in Maputo whatever their wage," Eduardo Samuel, Administrator of BRITALAR Moçambique, explained to TBY. “We are pondering smaller houses with more accessible pricing, as it will open up the medium range outside the city, where the land is more affordable."

Foreign investors are also coming together to fund a national real estate bank that will specialize in offering home loans and loans for residential construction projects in 2013. With an initial share capital of $800 million, the bank will be funded by investors from Spain, South Africa, and North America. If planning is approved, the bank could start operating in Mozambique as early as 2Q2013.

As forecasters predict ongoing price hikes continuing for the next five years, construction companies and real estate brokers alike are also lobbying for the creation of a Real Estate Association in Mozambique. The establishment of such an institution would mean that agents could apply for accreditation, a system that could inject needed competitiveness and professionalism into the industry.

THE PROJECTS

Carried out by Portuguese company Lucios, the construction of the Maputo Bay residential and leisure complex began in September 2012. Of the project's 15,000-sqm space, 10,000 sqm will be designated as green space or sports areas. As a luxury apartment complex, many of the units will feature views of the Indian Ocean, and each occupant will have access to the central square, a park, swimming pool, and a gym onsite. Apartments will range from 2+1s of up to 187 sqm to 4+1s of up to 491 sqm.

Through a €1 million investment, Portugal-based Barbot opened a paint factory in Maputo to serve the needs of the local real estate market. In its initial phase, production is expected to total 7,500 tons of paints and varnishes annually, which could even extend to supply neighboring markets in the near future.

Aeroportos de Moçambique is also expected to begin designing a real estate project including hotels and restaurants next to Maputo International Airport in 2013, all part of a state project. Designed to meet the needs of travelers from around the globe and rival other international airport accommodation and shopping offerings in the region, the project to develop the airport was awarded to consulting company DHV. Construction work on hotels, office buildings, and retail shops is slated to begin in 2014.

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