Access to finance is a major obstacle in developing the real estate markets in Sub Saharan Africa (SSA). The purpose of this research was to establish the key factors that a lender takes into consideration when financing real estate transactions in Sub Saharan Africa; as well as the relative importance of each key factor. In addition to this, the study reviews and examines the risk considerations and challenges involved in doing business in Sub Saharan Africa, from a South African lender point of view.

As the research is exploratory in nature, the initial approach to gather significant information was through interviews with relevant stakeholders involved in financing real estate transactions in SSA. Thereafter, a questionnaire was administered to bring out further factors or dynamics to consider.

The main findings of the research was that the primary factors that influence a lender’s decision to finance a real estate transaction are: projected cashflow of a specific transaction; pricing; lender’s Return on Equity (ROE); client risk grading; property location; pricing; type of property; nature of business of borrower; security provided; client relationship. Additional factors included track record, and term of the loan.

Regarding risk concerns, cultural differences, legal frameworks and single obligor limits were highlighted as additional issues of consideration, primarily for cross border funding into SSA markets. The economic environment is highly segmented, and is thus challenging to treat SSA as one bread basket.

The study reveals that although SSA is riskier that RSA in terms of doing business, each risk highlighted has an equally strong risk mitigant, which could be comfortably adopted to secure debt funding for a transaction. An analysis is required to establish whether these mitigants would hinder the feasibility or profitability of transactions.