International Confidence in Ghana’s Real Estate Remains — Dream Realty

Interview with Karim Ibrahim, Managing Director of Dream Realty

In the end of June the IMF announced that Ghana’s economic growth will continue at 3.5% in 2015, so how is the real estate sector affected by the overall economic downturn? Has the demand changed?

Yes, absolutely, the economy has slowed down dramatically in the past two years in Ghana and of course it will affect real estate. On the other hand, there are still new real estate projects coming into the country which is a good sign for the future. The downturn was expected in a way because the country has been going up and up and up since early 2008. Before then we were speculating about the oil availability in Ghana and its effect on the economy and from 2008 until the end of 2013, the economy had been growing steadily. Real estate prices have been increasing, the price of land which is the backbone of the real estate pricing, has been going up and up and up. It is time for it to slow down realistically speaking. We are not very happy as real estate people but it was expected. We are hoping that by next year, things will start moving back up and that this is the bottom of the down fall if you like.

When you said that there are new projects coming into the market, is that in any particular segment?

No, we are seeing a lot of new cranes mushrooming all around the city. They are new residential projects mainly, or mixed use projects. These are very visible to anybody coming into Accra and that is a good sign, it shows that there is still international confidence in the real estate market in Ghana.

How has Dream Realty been impacted by the economic downturn? What has been your experience since we last met in 2013?

When we met in 2013, the project was still heavily under construction. Now we are at the finishing stage. In this project we have tried to cater not only for big corporations; we are finishing a lot of small offices for small businesses or medium scale businesses and this is where we have been negatively affected. Small businesses today are not willing to invest in new offices; it is a wait and see situation because of the slowdown in the economy. Immediately the devaluation of the cedi, the local currency, affects small businesses.

I had this vision that small businesses have to start moving into better office buildings with better standards and it will come, I am sure it will come but for now this is what has affected The Octagon project we are building right now.

On the other hand, one of the three main blocks in the building is being turned into a four star hotel, which will all be suites and have about 200 keys. This will be completed within a year from today. As for the offices, people can start moving into the building by early 2016. We are hoping to open sales and rentals by September of this year so that we are ready for the beginning of the year. The demand for large office space for phone companies and oil companies is still there. It is not increasing as we hoped it would but the demand is still there, which is good for us. I am really hoping that by next year small businesses will pick up some more spaces.

Octagon is open for the public to come and check it out so we are hoping to start renting by September.

Is there any particular way that you are tackling this decreased demand from small businesses?

Well we can’t do anything, it is a building that we are finishing so the offices are still there. The only way we can try to attract small businesses this coming September is by lowering the prices for the first year rentals. It will literally be a price oriented campaign.

You haven’t sold anything yet?

We have sold, yes. We have sold in one block about 40%. The idea was not to build and sell the whole project; the idea was to rent most of it. We are hoping that rental will start soon. It is hard to rent office space that people can’t see. Now the building is open for the public to come and check it out so we are hoping to start renting by September.

Is there any other project that you will be launching soon after this?

I am hoping that by mid-2016, once the project is starting completion, we should start doing the Riviera project. It is on the high street, very close by to The Octagon in Accra’s centre. It consists of four residential buildings, of very high end large apartments. We are not going for one and two bedrooms, we are going for three and four bedroom apartments and they are all overlooking the ocean. There will be a small 68 suite boutique hotel in the middle also.  There used to be a hotel there called The Old Riviera and we purchased it in 2008. This is our second project in Accra.

Could you sum up your current challenges?

The challenge is to finish the project on time, finish it well, attract people to it and try to get small businesses into the project so that it will create some movement in the project because it is a really massive development. Of course we want to finish the hotel to the best possible standards because we have very strong competition across the street from Novotel to the Kempinski. The idea is to offer the same price as the hotels across the street but give better services and more comfort, particularly in room size.

What are the strong points of The Octagon building?

Definitely the size and its location. We are the only new project of this scale in Accra centre which is downtown where all the Ministries, major hotels and all the banking headquarters are. There are some other buildings around the airport but we think that business will always go downtown and the location of The Octagon, in the roundabout of downtown is what makes it very special. In addition, the finishing from the inside and outside uses the best materials possible, from imported granite all over the main facades, to the entrance halls and the office spaces.

How about in terms of the amenities?

It is a self-contained commercial project because we are going to have a hotel, offices and 22 very large show rooms on the ground floor. We already have some that are taken as banking halls and restaurants. There are also obviously the amenities in the hotel from the gym to the swimming pool to the three restaurants in the hotel that will also cater for the whole project.

Are they going to be part of a certain chain?

We are still negotiating with three so I cannot talk about it just now.

Is there anything else you would like to add? Are you looking to attract investors in other fields to partner with?

The office business in Accra is new. People only started building good office buildings in 2008-2009, so some of them are just finishing now mainly in the airport, myself included. The office market is still young. People can’t quite see the exact returns yet; investors can be put off offices because it is rent versus purchase but I think this will change within a year because the supply in Accra of good office buildings is low and that is why I think investors will invest in office buildings in Accra. They have to wait and see for the prices as they are still fluctuating a lot, from 25 US dollars per m2 per month up to 45 US dollars. It has to stabilise so investors can be comfortable to see what the return on their investment would be. This should be possible within the next year.

How do you see yourself in two years’ time?

I hope the project will be completely functional and filled and we should be half way through the Riviera project.

What is your dream for five years’ time?

I would like to be doing at least four or five projects at the same time in Accra; that would be my dream. It was the initial plan when we came to this country because as I mentioned last time, we are our own contractor, we don’t subcontract our work. We are here, we have a large company that has started with The Octagon, and obviously the overheads and the material and equipment that we have invested in are not only for one project. The investment is done to cater for at least three or four massive projects like this one in Accra. That is what I hope for.