Wednesday, October 21, 2020

Jefferis calls for clear mandates of BDC, BHC in property development

The Managing Director of Econsult Dr Keith Jefferis says there is need to focus on removing and reducing market distortions by reflecting real economic and social needs not artificial rules and restrictions.
During this presentation at the Botswana property market forum, the macroeconomist and financial sector specialist pointed out that in Botswana there is unbalance development as well as other gaps such as affordable housing and development outside of Gaborone.
“In terms of policy rethinking or evolution, land, zoning and planning rules are key. The role and mandate of parastatals such as BHC, and BDC should be clear,” said Jefferis.
He added that secondary impact of decisions as well as provision of public infrastructure should also be part of the policy rethinking.
Jefferis observed that Botswana property market is also active, buoyant property sector and added that it provides an investible asset. He added that it is mostly private sector driven with no evident sign of major financial imbalances.
Touching on the market concerns, Jefferis pointed out that there is alternative assets with poor returns relative to investment in property and mentioned industry and agricultural sector. He stated that the market does not directly address long term economic needs
“Property is a non tradable and Botswana needs investment in export focused activities. There is not enough property investment supports that this,” he said.
He noted that driven by rules and regulations not underlying economics, there are developments covenant on CBD plots (commercial) and also pension fund rules on local asset holdings on retail.
Jefferis pointed out that Property in Botswana has generally been a good investment with positive real returns especially attractive in an environment of low interest rates. He added that it is an important asset for both institutions and individuals
“It is still a large amount of investment in property but imbalances are appearing as markets are distorted. There is also danger of over investment or excess supply,” he stated.
Jefferis emphasised that it leads to falling rental yields and poor returns for investors as well as business failures. He added that it is also a knock on impact on banks as well as danger of excess demand.
Impact on financial sector, Jefferis said there are unbalanced lending and too much lending for retail and commercial property, not enough for residential. He noted that Gaborone is mainly being concentrated.
“The economic importance and impact of property are that property investment plays an essential role in the economy and also the significant component of fixed investment,” said Jefferis.

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