Why Real Estate Investment In Ethiopia Is Super Attractive
Anyone who is familiar with Addis Ababa can witness that Addis is a thriving city, which is changing itself into a modern metropolis before our very eyes. One thing has also remained true about the city over the last few decades – real estate has been one of the most profitable investments an individual can make in Addis Ababa although it is not without its challenges.
Real Estate in Addis Ababa has somewhat of a checked history since the sector was not well regulated and the city lacked a highly dynamic urban planning department. Despite all the challenges, many individual investors were still able to take advantage of the immense opportunities the sector has to offer. With the right counsel and expert guidance, they were able to reduce the risks quite significantly and maximized the returns on their real estate investments. Someone who has a small 2 bedroom apartment for rent in Addis Ababa, can easily collect 2,000.00 to 2,500.00 USD per month in rental income.
It is a well known fact that the real estate sector in Addis Ababa has been marred by widespread conflicts between developers and their dissatisfied clients in the last few decades. The primary reason for the conflicts has to do with the poor performance of the developers, which were unable to meet their contractual obligations and deliver on their promises. In some cases, the developer and the people who purchased off-plan properties from them got into bloody court battles, which dragged on for many years and ended up costing both parties millions of ET Birr in legal fees. But this doesn’t come even close to the actual and opportunity costs the investors had to bear as a result of significant delays in handing over times beyond originally agreed up on. In many such cases, since the delivery dates were usually pushed forward by as much as 10 years, the final cost to the investors have been much higher than initially anticipated. In addition, developer bankruptcies, poor construction quality, fraudulent activities, and different issues in the bureaucracy were some of the other challenges that have hindered the sector from realizing its full potential.
Irrespective of all these challenges, the rewards of investing in real estate in Ethiopia far outweighs the risks. There’s evident to the enduring value that real estate investment has held in the minds of buyers throughout the years. Also, the prices have soared upwards for decades and it shows no indications of slowing down anytime soon.
For example, the following brief excerpt from a case study done by a financial analyst based in Addis can help you get some useful insights on the subject. According to the analyst, a typical two story villa at the Ayat Residential Village on a 300 Sq M plot of land, purchased for ET Birr 460,000.00 in 1996, sells for ET Birr 8,500,000.00 to 10,500,000.00 at present. That is a median two thousand percent rise in value. Yes, a considerable part of the ‘increase’ is because of the decreasing purchasing power of the Birr but even with that taken into account, the property in question is worth 650 percent more because of real appreciation. Furthermore, the rental earning from such a property over a twenty year time span would incorporate another 150 to 200 percent to the net returns from it. That translates into a yearly return rate of 38 percent per year over the life of the investment if the owner sold it now, which is totally mindboggling.
More recent developments in the country and the market have given investors much hope and renewed optimism in the promises of real estate investment in Addis Ababa. The introduction of better regulatory frameworks and the formation of more dynamic urban planning departments at city and sub-city levels is expected to play an invaluable role in restoring confidence in the real estate sector in Addis Ababa. Furthermore, the new project financing schemes introduced by the newly emerging developers, which includes international players, is likely to play a crucial part in rebuilding trust in the real estate sector in Ethiopia. Many of these new developers have either good financial standing or have the financial backings of international investment banks, which enables them to build 70-100% of the construction of the property before they start selling. This will significantly reduce the risk involved in real estate investment in Ethiopia.
If you want to learn more about how you can reap the benefits of real estate investment in Addis Ababa, you can start by getting in touch with Ethiopain Properties. The company, which has been around since 2008, is also behind the #1 property portal in Ethiopia. More than 100 Realtors in Addis Ababa, Ethiopia are working with them to get their properties listed on their professional website. Feel free to contact them on +251-911-088-114 or email them your query at [email protected] or visit www.ethiopianproperties.com
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