Apart from the mining and energy sectors, real estate is known to be the next most lucrative sector one can trust for investment in Ghana. As an industry practitioner and thought leader, I have personally witnessed persons who entered into this sector from humble beginnings at one sunset and woke up the next morning as multimillionaires, figuratively speaking. That is to tell you that, despite the industry’s unique challenges like any other industry, it provides an opportunity for a rapid transition of average individuals from low net worth to high net worth within a shortest possible time.

Interestingly, entry into this sector is not as cumbersome as the mining and energy sectors that are highly regulated and requires huge upfront capital to start. All it requires is the land, a little capital, reasonable industry insight and your off-takers. But to let you appreciate the enormity of the opportunities in this sector, I will like to run you through a brief but the most recent real estate investment prospects without bothering you with too much literature and historical data.  According to Statista (2024), Ghana’s real estate market value is set to reach a staggering value of USD$533.4billion, with residential properties expected to dominate at a projected market volume of USD$456.11billion in 2025. Meanwhile, the long run market growth is also expected to experience a consistent growth rate (CAGR 2025 – 2029) of 3.44% and a cumulative projected market of USD$610.56billion by year end 2029.

The above projections demonstrates the opportunity for investment in the sector this 2025 and beyond, validating the usual and consistent annual investment prospects the sector presented over the past decades even though the housing deficit still remains considerably high. This deficit has been with us since 1950, reached a peak of 2.8million in 2010 and took a nosedive to 1.8million in 2021 during the real estate boom. However, the financing of real estate development has historically posed significant challenges for stakeholders especially in a market characterized by limited access to funding, volatile exchange rate and high cost of borrowing etc.

The purpose of this article is to provide expert’s perspective on some of the most innovative financing alternatives currently reshaping Ghana’s real estate development landscape. We shall be looking at not the popular but the unconventional models that do not make the news headlines yet, can be very instrumental in changing the narrative in the real estate financing sector in Ghana, keeping in cognitive faculty, the following for today, for want of time and space; Construction Financing, Off-plan Financing, Joint Venture Financing and Barter Financing.

Construction Financing Model

Construction financing refers to a type of short-term loan facility extended to a developer usually within the project’s scope to develop a property. The developer uses the funds to cover the cost of construction from inception to completion. Unlike the traditional loans and mortgages, construction financing are specifically designed to meet the needs of the construction process and are normally disbursed in stages as the project progresses. The funds are paid to the borrower in tranches based on the completion of specific construction targets, such as substructure, superstructure, roofs and fittings installations etc. Each tranche is paid based on a satisfactory assessment report conducted by the creditor. Construction finance can be obtained for all types of property development provided the project is commercially viable. The borrower is only required to pay interest during the construction period, and the principal is repaid once the property is completed and commercialized.

It presents several advantages particularly for new industry entrants that may have viable property proposals but do not have the necessary funding. It enables developers to initiate their projects without having to secure all the capital upfront. It also helps to keep a consistent funding flow from start of the construction to finishing of the project, ensuring that developers can complete their work while minimizing cash flow difficulties.

This helps eliminate the incidence of abandoned projects which has been a common industry phenomenon. Besides, the facility can also be converted into a permanent mortgage once the construction is completed, easing the short-term loan repayment pressure on the borrower. However, one disadvantage the developer faces is the possibility of the lender repossessing the partially completed project in the event of a project failure, because the project in question is most often used as the collateral for the credit facility

However, it is important for one to note that, construction financing can easily be obtained when one is able to convince lenders that the project can generate revenue to repay the lender as quick as possible. For this reason it may be difficult to obtain even though it is one of the best financing options. Banking institutions resident in Ghana known to have played a significant role in granting construction financing facilities over the years are First National Bank, the Republic Bank, Zenith Bank etc.

The Off-plan Financing Model

It is a real estate development or financing model where a developer sells properties at discounted prices to prospective buyers before the properties are developed. The properties are most often marketed using brochures and 3D virtual impressions. The concept is such that the developer allocates the land or work-in-progress of the property to the prospective buyer together with an agreed flexible payment plan and a project delivery schedule. So as the buyer is making the installment payment, the developer develops the property for as long as it may take to complete depending on the project schedule and timelines.

This financing option has been used strategically by many Ghanaian developers and gains made satisfactorily by parties involved. The off-plan financing model presents many advantages for developers because one gets the opportunity to use other people’s money to make more money whilst the buyers who do not have the bulk sum to purchase complete property gets the opportunity to own their dream property via a flexible payment term over an extended period of time.

The limitation with this model however is that, project delays or complete failure are likely to happen that may have been caused by unforeseen circumstances as the projects travels a number years as it is a common characteristics of off-plan agreements. For a comprehensive insight into this model, kindly find our previous article titled “harnessing the potential of off-plan development model in mitigating the housing crises in Ghana”.

Crowd Funding Financing 

Crowd funding is one of the modern financing options for real estate developers. This is where funds are pooled from multiple investors to fund a real estate project through specialized online investor communities. Even though not too popular in Ghana, it is one of the most exciting developments that will soon take centre stage in Ghana’s real estate financing landscape. This financing option allows multiple investors even those with limited capital to pool their resources and collectively invest in high-value projects anywhere across the globe. With platforms such as Yieldstreet and other emerging players, developers in Ghana can easily pull funds for development which would have been unthinkable a few decades ago.

For one to secure funding from a crowd funding community, one has to prepare a proposal providing details such as project description, funding goals, investment terms, and expected returns. After this, management of the crowd funding community conducts due diligence on the developer and the project to ensure its viability. Potential investors browse the community and select a project and commit to investing some amount into it. The crowd funding community administrator then aggregates the funds and once the funding goal is met, the funds are transferred to the developer.

The developer now develops the project, commercializes it and distributes returns to investors typically in the form of rental income, interest payments, or capital gains depending on the choice and type of investment opted for by the investor. In this regard, debt-based investors earn interest on their investment whilst equity-based investors earn rental income or capital gains. This financing option brings a lot of opportunities; it enables investors diversify their portfolios by investing in multiple projects simultaneously, maximising profit whilst spreading risk. Real estate crowd funding offers a unique opportunity for investors to access real estate investments with lower minimums and greater profitability.

Even though a quick source of funding for developers, it has its own risks factors worth considering; the possibility of developers defaulting on their obligations, market fluctuations depending on the jurisdiction can affect property values leading to significant losses to investors. However, it’s essential to carefully evaluate the risks and conduct thorough due diligence before investing.

Finally, regulations either local or international may truncate the project leading to substantial losses to parties involved. To name a few of the global leading crowd funding platforms that have really made strides are in this area are EquityMultiple, Fundrise, Crowdstreet, Rich Uncles, RealtyMogul etc.

Barter Financing Model

Even though barter is known to be an outmoded trade model, it has resurfaced in the 21^st century more refined and has played a significant role in many sectors of global economy. Barter financing in real estate is a creative financing technique where a developer exchanges a property or a portion of it for goods, services, or other properties, rather than cash. With this model, the developer or property owner identifies a party with goods or services they may need, such as construction materials, labour, equipment or even the land.

The parties agree on the value of the property and the goods or services to be given in exchange. An agreement outlining the terms of the exchange, including the value of the property and the goods or services to be exchanged is signed. To illustrate this, take for example, a property developer who needs construction materials worth Ghs 2million to complete the project. Instead of raising the Ghs 2million cash to pay for the materials, the developer offers a portion of the property eg a 2bedroom unit to the supplier in exchange for the materials.

This financing option has gained momentum and many developers and building material suppliers in Ghana have made mutual gains through the instrumentality of this barter financing option. One may ask, what is unique about this model, first, it conserves cash. Barter financing can help property owners or developers conserve cash for other investments. Apart from this, it may be used to legally circumvent some taxes such as value added tax. Finally, it offers the flexibility to negotiate allowing parties to find creative solutions. The challenge however with barter financing is that, it presents property valuation challenges.

It is sometimes difficult for parties to arrive at agreed values deemed equitable to be exchanged for each other’s services. Also, the property or goods being exchanged may not be easily convertible to cash in the event the developer fails to deliver the project. The risk that the other party may not fulfil their obligations cannot be ruled out also. Overall, barter financing can be a useful tool in real estate financing, but it requires careful planning, valuation, and risk management.

Joint Venture Financing

This is similar in principle with that of the barter financing model. It is an option where investors or developers pull together resources to develop a property for mutually beneficial gains. The commonest in most instances is an individual having the land and does not have the liquidity to develop. An interested investor comes with the funds to develop the property on some agreed terms. For instance, a land owner may agree for his land to be developed where he takes 10 units out of say a total of 100 units.

Most common in multi-storey or mix-use properties, the land owner may decide to take all ground floor units as the investor takes all subsequent floors. There are many of such projects in recent times. In a dispensation where large-scale real estate projects require substantial investment; joint ventures play a significant role as essential financing model. Through joint ventures, developers and investors can pool their financial resources, share risks, and benefit from the combined synergy.

It comes with several opportunities, it is a risk sharing venture, it distributes the burden of resources required to develop the project, it provides room for flexibility in the value and cost sharing negotiations, it helps build rapport for future collaborations. However, a few challenges are imminent. It is difficult sometimes to reach a conclusion in real estate joint venture deals. The possibility of disagreements even after the deal is signed. Parties particularly the land owner who does not have the funds may lack the negotiation power to get value for his land in the agreement. It is also important to warn that, real estate joint venture disagreements may be difficult or take a longer time to resolve. This is why it is always important to seek expert’s advice in entering joint venture deals.

Conclusion

In conclusion, let me state here again and again that, these financing options are available and will take your real estate business to another level if explored, however seeking technical counsel is fundamental and this is where the expertise of the Africa Continental Engineering & Construction Network Ltd comes in. The Africa Continental Engineering & Construction Network Ltd is a leading industry consulting expert. We are always available and our doors open to assist you take your real business to another level. Do remember also, to subscribe to the Business and Financial Times News Paper to stay updated with our articles.

References

• Statista (2024): Real Estate Growth and trend Projections; Global Real Estate outlook Report.
• Ghana Investment Promotion Center (GIPC) (2022): Ghana’s Real Estate Sector Projections for the year, 2024.
• Ghana Statistical Service; Integrated Business Establishment Survey (2024): Real Estate Market Projections.
• Wikipedia (2021): A guide to Real Estate Investment, Success case studies around the world – Report.