Africa is the most profitable region in the world, and here’s why. Africa provides a low-cost labor market compared to other regions in the world as a result of its booming youth population. Six of the world’s twelve fastest-growing economies are in Africa. The continent has 60% of the world’s uncultivated arable land. By 2023, Africa’s growth prospect is predicted to be among the highest in the world.
From this, it is obvious that investing in Africa is a smart move. However, there is the question of what and where to invest in. At first glance, it would seem as though the oil and gas, banking and finance as well as telecommunication sectors are the major drivers of the African economy. No doubt, these sectors attract a fair share of foreign investments to the region. But are they the only ones?
Surprisingly, there’s a sleeping giant that is barely tapped and that’s real estate, “Land”. According to a PWC assessment, the investment returns in Africa’s real estate “exceed those achievable in almost all developed markets”. Real estate is also the leading driver of Africa’s post-pandemic recovery with over $8oo million deals taking place this year alone. So whether it is for Agriculture or infrastructure, Africa’s property market is worth investing in.
But there is a lot to learn about Africa’s property market. A good place to start is knowing what conditions come with owning a “property” in Africa. This is why we will be giving you a rundown of Africa’s free and restricted property markets.
Free Versus Restricted Property Markets
Land ownership in Africa is of two kinds; Free and Restricted (leased). In many African countries, foreigners are given access to lands on a lease. In a leasehold property market, ownership of a property is only for a specific time. The lease contract grants its holder temporary ownership and freedom to use the land for a given duration. In most African countries, properties are leased for a duration of 99 years.
During this time, the new owner (lessee or tenant) must abide by the terms agreed in the lease contract. At the end of the lease term, the original owner has the right to take back possession of his land. If need be, the duration of the lease can be extended. However, the tenant has to notify the owner before the lease expires. In this system of land ownership, the landlord has a freehold and with it the freedom to sell the land. But this privilege and many others aren’t available in a lease.
Restricted property markets do not permit foreigners the right to private ownership of the real estate in Africa. While this may be the case, some African countries permit foreigners to purchase and own real estate. However, there are some caveats and we will highlight that. That said, here are the African countries with free and restricted property markets in Africa.
African Countries With A Free Property Market
Starting with the good news, there are about 10 African countries that operate a freehold property market. Among these 10, some are more liberalized than others. The more liberal countries offer better transparency and flexible laws that permit foreigners to own real estate. These are indeed the treasure troves of real estate in Africa.
#1. South Africa
South Africa has one of the most accessible real estate in Africa where foreigners are allowed to buy and own properties with ease. This includes agricultural lands which in most other African countries is typically restricted to foreigners. However, it’s worth noting that an alternative of freehold is equally practiced in South Africa. Sectional title is no different from freehold except that it offers the owner of the property less freedom. In exchange for this inconvenience, owners of sectional titles have greater peace of mind when it comes to security.
This beautiful African country offers foreign investors a mouth-watering deal. The only hiccups are the 30% transfer tax imposed on foreign property purchases and the restriction on tribal and state lands. But properties here are still relatively cheap when compared to international standards. Also, it is important to consider the long term prospects of acquiring a property in “Africa’s 3rd freest economies”
Namibia is one African country with a satisfactory land registration system. Foreigners have full ownership of the land after purchasing it. However, land designated for agricultural use is typically restricted to foreigners. Other than this, there is little or no restriction on land ownership.
In Morocco, the “Titre de propriété” or Title deeds is the most important document. With it, a buyer has full ownership of the land. Morocco also provides land insurance. With the exception of agricultural land, foreigners are free to own any land of their choice as long as it is available. However, it is advisable to follow due process in order to avoid falling victim to fraud.
Egypt like Morocco offers international insurance to land titles. Foreigners are not only free to buy land, but the entire process is also credible and transparent. The comprehensive land records in Egypt give the buyer peace of mind, whether it’s a foreign or domestic buyer. Like most other African countries, Egypt place a restriction on the ownership of two prime real estates. These are South Sinai and Sharm El Sheikh. Land in these areas is only available on a 99-year lease.
There are different categories of land in Ghana. This could make things a bit difficult for foreigners who want to invest in the country. While some of these land titles are only available on lease, foreigners are still able to buy and own land in the country. It is all a question of knowing which land title is for lease and which is available for freehold.
Cameroon lacks a well-regulated system of land records. Although foreigners are allowed to own properties in the country, there are certain limitations. Land designated for agriculture can not be held on freehold but only on a 99-year lease. On the other hand, foreigners are free to own land designated for commercial and residential purposes.
Land ownership in Kenya follows a similar pattern as Cameroon and most other African countries on this list. Agricultural lands are only available on a lease and can not be owned by a foreigner, be it an individual or a corporation. The lease is typically for a duration of 99-years, after which it can be renewed. Commercial and residential lands are accessible to foreigners without any restrictions.
Rwanda has one of the most comprehensive land registration systems in Africa. It is also one of the easiest places to acquire real estate in Africa, but there is a clause. Every foreigner is required to invest a minimum of $500,000 in a commercial bank for a minimum of six months. According to the law, this will give the investor a permanent residence in the country and with it the freedom to invest in real estate. Also, government lands cannot be acquired by foreigners but may be leased for a duration of 50 – 99 years.
In Mauritius, foreigners needed a minimum of $500,000 to invest in real estate, this was later changed to $350,000. The investment equally grants the investor a permanent residence for a period of 20 years. Taking things a notch higher, the government of Mauritius proposed an attractive deal. Early investors are granted special privileges to invest in residential apartments around the smart cities.
African Countries With Restricted Property Market
It is still possible to run a thriving real estate business in African countries with restricted property markets. However, you need to develop a plan that involves developing the lands and selling them to the citizens. Below are some of the lucrative African countries with restricted property markets.
In Angola, land became state-owned after independence in 1975. Despite the land reforms, land ownership is still restricted within Angola. Leases are provided for residential and non-residential purposes to investors. The lease is of two types; an open and fixed-term lease. For an open-ended lease, a period of two years is assumed and the tenant is free to renew the lease before it expires.
In Mozambique land belongs primarily to the government and foreigners are only permitted to get a leasehold. The initial duration for the lease is 50 years and it is renewable. The lease duration can be increased from 50 years to 99-years. Although land belongs to the government and cant be sold, the properties on the land can be rented or sold by its owner. This law applies to both foreigners and citizens alike.
#3. Democratic Republic of Congo
Acquiring Land in the Democratic Republic of Congo is complicated. Part of the reasons for this is inadequate land records and poor land security that often results in disputes. The constitution gives foreigners the right to invest in the land but this can only be on a lease. A section of the constitution clarifies the government’s position on this stating that only Congolese have the right to own land.
The land registration system in Ethiopia is equally underdeveloped and this could be a challenge for a foreign investor. One thing is clear though and this is the fact that foreigners are not allowed to buy and own land. This privilege is only reserved for its citizens. However land is available for lease to foreigners who want to invest in the country.
Tanzania also has a restricted property market where land belongs to the government. Foreigners are only given access to land on a lease and this is where the country differs from other African countries in a way. Tanzania leaseholds tend to have shorter durations depending on where the land is located. Lease terms last between 33 to 99 years. However, areas around the capital city Zanzibar come with shorter lease terms which may not be renewable.
The Federal government of Nigeria regulates foreign acquisition and control of lands in the country. This is done under the Acquisition of Land by Alien Laws (ALAL). Under this law, foreigners are only allowed a leasehold on the land for a duration of 99 years.
Zambian’s latest land policy restricts foreigners from owning land in the country. Initially, this wasn’t the case, foreigners could freely buy and own lands. But after acquiring large parcels of land, most of the foreigners sell the land back to Zambians at an exorbitant price. Using its new policy, the government also hopes to stop the trend of customers acquiring the choicest lands. In the new policy, foreigners can only get a 99-year lease on land.
Without a doubt, real estate in African is a profitable venture howbeit it is not without some risk. Many African countries are still very volatile in terms of policies and strength of law. This makes investing in such countries a hassle as one can never be too sure of which way the government will lean next. Regardless, real estate in Africa consistently yields a great return on investment.
Also, from all indications, this bearish trend isn’t over yet. Africa’s increasing rate of urbanization shows that there is still enough room for investors who are yet to join the bandwagon. Do you have questions about investing in Africa’s real estate? You can check out some of our previous posts on the topic and if you are still not satisfied, drop your questions in the comment section below. We will do our best to provide relevant answers that can guide you through your investment journey.