Are banks shying away from real estate financing?

The real estate sector in Africa is poised for continued growth, primarily fueled by demand from key infrastructure development projects across the region. Niyi Adeleye, Head of Africa Region at Standard Bank, shared insights on the potential of the real estate market and the challenges facing banks in financing this sector. Adeleye emphasized the importance of specialized knowledge and focus in real estate financing, highlighting that some financial institutions lack the necessary scale, commitment, and understanding to support the sector long term. Despite the risks associated with real estate financing, Standard Bank remains committed to providing realistic solutions across multiple African markets. Adeleye noted that many banks shy away from real estate financing due to a lack of focus or capacity to manage the cyclical nature of the sector, opting for opportunistic deals rather than long-term strategies. However, Standard Bank sees real estate lending as a lucrative opportunity across various African countries. Adeleye acknowledged the challenges in the market, such as high mortgage rates hindering affordable housing development. He stressed the importance of addressing both the supply and demand sides of affordable housing, advocating for lower mortgage rates to enhance affordability for buyers. Standard Bank collaborates with developers and financial institutions to fund projects and provide mortgage products, tailored to the specific market conditions. Additionally, Adeleye highlighted the significance of environmental, social, and governance (ESG) factors in real estate financing. Standard Bank prioritizes ESG compliance in financing projects, emphasizing the importance of balancing environmental and social impacts to support sustainable development. Adeleye emphasized the holistic approach to real estate financing, considering the broader impacts on the environment, society, and economy. As the real estate sector continues to evolve, Standard Bank remains committed to driving growth and capital to support developers and projects that align with ESG principles.