Tuesday, November 6, 2012

SEC gives boost to housing sector funding

The Securities and Exchange Commission (SEC) says it is developing various rules and regulations to pave the way for establishment of a Real Estate Investment Trust by next year.

The regulation, which forms part of the commission’s 5-year strategic plan for developing the capital market, is aimed at creating a deeper link between the real-estate sector and the capital market.

Ghana has a housing gap of 1.5 million units that keeps increasing every day, according to the Ministry of Water Resources, Works and Housing.

While the provision of housing has expanded over the years, most developers have gone up-market and there is a large deficit in low-cost housing requirements.

 Director General of the commission, Adu Anane Antwi, told the B&FT in an interview that SEC is seeking to promote the Real Estate Investment Trust as an instrument for real-estate investment to help solve the housing deficit in the country.

 “We need to develop the Real Estate Investment Trust so that there can be a link with the capital market which will be providing these funds through these trusts, and there will be subsequent investment of these funds in real-estate,” he said.

 This, he said, will also be targetted at addressing the funding constraints of the real-estate sector by providing the funding for developers as well as prospective home owners.

 “The product will help to address the issues of lack capital for real-estate sector and bridge the gap between the supply and demand of houses in Ghana,” he said.

He disclosed that investors have already begun expressing great interest in investing in the country’s real-estate sector, which holds huge prospects.

 “People have been coming and calling the SEC offices always, expressing their readiness to enter the real-estate sector.

 “We are encouraging people to bring in more products once they meet the standard and protect the investor. We ourselves are trying to talk to issuers -- a lot of them wanted to come out with new instruments and we are there to help,” he added.

The Securities Industry Law at present allows mutual funds to invest only 10% of their net income value in real-estate.

 “There is a restriction on how much a unit trust can invest in real-estate. The draft or new law would seek to remove that restriction,”

Mr. Anane Antwi said. He explained the operation of Real Estates Investment Trust should be different from other mutual or unit trusts. “The real-estate trust has so many things to do which may be different from the normal unit trust, and the new guidelines will seek to ensure that.”

The new rules will include the determination of how properties are valued, the frequency of property valuations, how to price the properties, and the kind of people who will be in charge of the Real Estate Investment Trust.

“Since the Real Estate Investment Trust deals in property -- which cannot be valued daily like other unit trusts -- the new regulations will stipulate how the property is to be valued,”

Mr. Anane Antwi said. Real Estate Investment Trusts have been in limited existence in Ghana since 1994.

HFC Bank, which has been at the forefront of mortgage financing in the country, established the first one in August of that year.

 HFC has used various collective investment schemes and corporate bonds to finance its mortgage-lending activities.

Collective investment schemes, of which Real Estate Investment Trusts are a part, are regulated by the SEC.

A Real Estate Investment Trust is a company that owns -- and typically operates -- income-producing real-estate or real-estate-related assets.

 Real Estate Investment Trusts provide a way for individual investors to earn a share of the income produced through commercial real-estate ownership, without actually having to go out and buy commercial real-estate.

The income-producing real-estate assets owned by a Real Estates Investment Trust may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.

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