Load shedding increasing real estate cost

Business News of Saturday, 14 February 2015

Source: Lamudi

Estate Gate2

Real estate developers are to absorb costs associated with the load shedding exercise in Ghana, according to industry experts.

Kwesi Anderson of Whitewall Properties said most real estate developers were faced with this dilemma due to the rising need to purchase fuel for generators to ensure productivity is at its maximum.

Unlike other industries that push their costs to final consumers, real estate developers, especially those in the mid-to-high end range, usually absorb this related cost due to their pre-purchase agreements with clients.

With the load shedding exercise in place, it has forced sub-contractors of real estate companies to levy higher than expected charges, costs that real estate companies are forced to absorb. Reports of an imminent shortage of cement may burden the sector further, according to Mr Anderson.

“Sub-contractors [of real estate companies] rely on electricity to produce materials needed to finish building projects. Due to the load shedding exercise, they incur higher costs with the use of electricity generators and pass down this cost onto us. Unfortunately, we end up absorbing the costs due to the pre-purchase agreements that we have with clients,” he said

“If the load shedding exercise is going to drive cement prices up, invariably it means increased costs to us.”

Mr Anderson also added that some real estate companies incur further costs from the purchase of fuel to power generators. He said that although many companies factor this cost into their service charge, it would not suffice in present conditions.

However, the marketing manager of White Wall Properties said that his company, as part of an agreement with tenants, purchased fuel with the cost passed onto them.

“We are forced to buy fuel to power our generators for tenants’ use and this costs us between GH$2000 and GH$4000 at least every two days. The unfortunate part is that tenants are made to pay between GH$800 and GH$1000 each as contribution towards this,” he said.

According to the Ministry of Energy, Ghana has an installed power capacity of 1960 megawatts with a demand of about 1400 megawatts. This demand is said to be growing at an annual rate of 10%.

The growing demand, coupled with intermittent interruptions in supply has led to pressure on the nation’s grid.

Global technology leader, General Electric, is to invest over a billion US Dollars into adding 1000 megawatts of power to Ghana’s electricity generation capacity within a period of seven years.

The investment is expected to begin in the third quarter of 2016 with an initial 125 megawatts of power.

Mr Anderson believes such investment bodes well for Ghana, especially the country’s real estate sector.

“The General Electric deal is a step in the right direction for Ghana. Ultimately, it would be adding on to our generation capacity, which would help us in the long run.”

The Managing Director of Lamudi Ghana, Akua Nyame-Mensah, said there was a need for more sustainable buildings to improve energy efficiency.

“We need to think about how we can design our buildings to consume less energy. We can incorporate natural light or create natural air vents. Alternative forms of energy can also be installed to heat water, run a water pump or lights. Everyone implementing these small initiatives would ultimately lead to less pressure on the national grid,” she said.

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