Real Estate vs. Renewable Energy: Where Investors See the Best ROI in Africa

Introduction

Investing in Africa today often comes down to one big question: put your money into real estate or into renewable energy? Real estate gives you something solid you can touch. Renewable energy gives you growth tied to the continent’s massive power needs. Both sectors can deliver strong returns, but they behave very differently depending on the country, timeline, and risk appetite.

Africa is no longer just about untapped potential, it’s about fast-moving markets. Urban growth, rising middle classes, energy shortages, climate pressure, all making investors wonder: real estate or renewable energy, which sector delivers better returns? Both look promising. Both have pitfalls. But depending on your timeline, risk tolerance, and impact goals, the better bet shifts. What this blog does is compare how real estate and renewable energy have been performing recently in Africa (2023-2025), where the opportunities lie, what the risks are, and which sector seems to offer stronger, more stable returns now and for the decade ahead.

The Case for Real Estate in Africa

Real estate has long held appeal across investment opportunities in Africa. Cities are swelling: people moving in for work, education, improved services. Demand for housing; commercial offices; retail; industrial/logistics space is real. The Africa Report 2024-25 by Knight Frank shows prime yields in several asset classes: industrial real estate yields are reaching ~13%, retail ~9.5%, offices ~8%, residential ~8%. 

Some hotspots are especially strong. South Africa, for example, saw investment property delivering total returns of about 11.5% in 2024 via the MSCI South Africa Property Index, combining rental income (≈8.4%) and capital growth (~3%). In Egypt, commercial properties are yielding 10-14%, and residential 7-9% annually. Cities like Nairobi, Lagos, Accra are showing residential rental yields in the 8-10% range in recent reports. 

Real estate gives something many investors like: tangibility. You see the asset. You can rent it out. Even with inflation or local currency weakness, you often have some buffer via rental income, appreciation over time, and land value. What this really means is: real estate in Africa remains the comfort zone, predictable, tangible, but slower to scale.

The Case for Renewable Energy in Africa

Now renewable energy is starting to pull ahead on many fronts. Demand for electricity is huge, hundreds of millions without reliable power. Clean energy is getting pushed via policies, donor funding, and global ESG interest. Africa’s renewables capacity grew by about 6.7% year-on-year in 2024, adding 4.2 gigawatts to reach ~67 GW. Solar and wind are leading the way in capacity additions worldwide; Africa is increasing but still lagging in absolute numbers. 

One key stat: 91% of new renewable power projects globally in 2024 were cheaper than any new fossil fuel alternative. While that is global, Africa is part of this shift. Also, the African Development Bank (AfDB) is actively funding solar, wind, hydro, green hydrogen, off-grid renewables. Recent projects: the Sokodè solar plant in Togo (~62 MW) with AfDB backing; hydroelectric work in DR Congo; transmission lines for wind energy in Mozambique.

What this really means is: renewables promise faster growth, but come with regulatory and infrastructure hurdles.

Real Estate vs Renewable Energy: The ROI Comparison

Let’s break it down side by side. If you’re exploring business opportunities in Africa, both sectors offer strong business potential, but they differ sharply in liquidity, policy dependence, and long-term returns.

Factor	Real Estate	Renewable Energy
ROI range & timeline	Typical annual total returns (rent + capital growth) in good markets: 8-13% for industrial/industrial/logistics; 7-10% for residential in many urban centres; higher (10-15%) for prime commercial or coastal/tourism‐linked properties. Returns usually realized over 5-10+ years. Based on Knight Frank and local market reports.	More variable but potentially faster return from project commissioning; lower operating costs over time. Global trends suggest renewables are now beating fossil alternatives on cost (91% of new projects are cheaper). Africa adding capacity (solar, wind, hydro), though often with long lead times. If all goes well, pay-back might happen in 4-8 years depending on incentives, feed‐in tariffs, PPA (Power Purchase Agreement) stability.
Capital requirements	High upfront cost: land, construction, infrastructure, regulatory approvals. Costs rise with urban land scarcity, imported materials, labor. Financing often involves local banks (higher rates) or foreign capital, with currency risk.	Also high initial CAPEX: solar/wind farms, grid connections, storage or transmission. But modular renewables (solar, mini-grids, off-grid) lower entry cost. Access to concessional funds, grants, international climate finance helps. Still, risk of delays and cost overruns, especially in grid infrastructure.
Risk factors	Currency devaluation; tenant default; regulatory changes (zoning, land ownership); oversupply in some office or retail markets (e.g. oversupply + weak lease rates); interest rate inflation hurting financing cost. Political risk, especially in unstable jurisdictions.	Regulatory instability (tariff regimes, permitting delays); grid reliability; off-taker risk (governments or utilities failing to pay); financing cost high; currency risk for imported components; local capacity (skills, technical, maintenance) often weak.
Long-term scalability	Steady growth in urban centres, especially in capital or large secondary cities. But scaling is slower: building new cities, developing infrastructure takes years. Also, real estate is site-specific. Scaling means more projects, more assets, more management complexity.	Big potential. Africa has abundant solar, wind, hydro resources. Off-grid and mini-grid solutions can scale quickly, especially with supportive policy. Also, renewables tie into global climate goals, green hydrogen, sustainable supply chains. If infrastructure and regulation catch up, growth could accelerate exponentially.
Government incentives / barriers	In many countries, governments offer tax breaks, incentives for real estate development (e.g. free zones, development land). But obstacles: opaque land titles, long permit times, infrastructure lag (roads, water, power), corrupt bureaucracy.	Governments increasingly offering feed-in tariffs, renewable energy auctions, concessional funding via AfDB, World Bank. But often barriers: weak regulatory frameworks, lack of reliable off-takers, risk of policy reversal, weaker legal enforcement. Also challenges in integrating renewables into grids designed for fossil fuel or hydro and scaling transmission.

What external influences matter: Africa’s climate goals (COP commitments), huge energy access gaps (over 600 million people lack electricity or reliable supply), rising urbanization (UN estimates many cities will double or more by 2050). These push renewables. But urban growth also pushes up demand for real estate (housing, offices, services), especially in fast-growing economies like Kenya, Nigeria, Ethiopia.

What this means: For those planning to invest in Africa, renewable projects may bring quicker returns (if everything aligns), while real estate offers slower, steadier growth.

What Investors Are Choosing and Why

Here are a few real examples and trends:

• The African Development Bank has been approving sizable renewable energy deals: e.g., the Togo Sokodè solar PV plant (~62 MW) financed in part by AfDB, or the Uganda Biogas and Electric Cooking Project. These are projects that combine impact + revenue streams.
  
• On the real estate side, large REITs and investment funds in South Africa are seeing industrial property yield ~15.2% recently (2024) and outperform retail or office subsectors.
  
• In Egypt, foreigners and local diaspora buying in new cities (New Cairo, administrative capitals) or coastal resorts are bidding up prices; commercial real estate offers 10-14% returns, residential slightly lower. 

Investor sentiment: many institutional investors (multilateral, climate funds) are pushing into renewables because of alignment with ESG, global funding flows, and energy security. Real estate still attracts private wealth, diaspora money, local institutional players because people understand it, see the floor plans, can rent, see value growth. But risk appetite is shifting: where regulatory risk is acceptable and off-taker risk low, renewable energy is increasingly attractive.

The Verdict

So: which sector offers more stable returns now? And which aligns better with Africa’s future growth story?

• If you want safer, steadier, tangible returns over a medium to long term (5-10+ years), real estate in major African urban centres still delivers reliably. Prefer industrial, well-located residential, commercial properties in cities with stable governance, decent infrastructure, good tenancy demand.
  
• If you are willing to accept more risk (policy, financing, execution) and want higher growth, more impact, and faster pay-back, renewable energy looks increasingly compelling. It taps into big global trends, energy transition, climate funding, technology improvement.
  

What this means for different investor profiles:

• Conservative investors, or those with lower risk tolerance and need for cash flow, may stick heavier in real estate.
  
• Growth-oriented, impact-minded investors with ability to manage project risk should allocate more to renewables.
  
• A balanced approach may be ideal: some stable real estate assets + some renewable energy exposure.
  

Both sectors reflect Africa’s evolving growth story, for those seeking real impact, the best strategy might not be choosing one, but balancing both.

Disclaimer: This article is intended for informational purposes only and should not be taken as financial or investment advice. All statistics and examples are based on publicly available data from reputable sources including Knight Frank, MSCI, IRENA, AfDB, and IEA (2023–2025). Market conditions in Africa can vary widely by country and sector, and past performance may not indicate future results. Readers are encouraged to conduct independent research or consult a licensed financial advisor before making investment decisions.

Sources:
Knight Frank UK
IOL
Zawya+1
Africa Business Insights+1
Energy in Africa
Engineering News+1
Reuters+1
RP Realty Plus+3Knight Frank UK+3Africa Business Insights+3
Zawya+1

FAQ

1. Is renewable energy investment riskier than real estate in Africa?

In most cases, yes, but it depends on how you define “risk.” Renewable energy projects in Africa often face regulatory uncertainty, off-taker issues (when utilities delay or default on payments), and infrastructure bottlenecks. The upside, though, is faster scalability and long-term alignment with global funding and ESG priorities. Real estate, on the other hand, feels steadier because assets are tangible and returns more predictable, but it carries its own risks: currency depreciation, rising construction costs, and oversupply in some markets. So, renewables are riskier in the short term, but potentially more rewarding if policy and execution align.

2. What African countries offer the highest ROI for renewable energy projects?

Right now, Morocco, Egypt, Kenya, South Africa, and Namibia stand out.

• Morocco leads in solar and wind integration, backed by strong government support and clear regulations.
  
• Egypt has large-scale projects like Benban Solar Park and growing green hydrogen initiatives.
  
• Kenya continues to expand geothermal and wind energy, attracting private IPP investments.
  
• South Africa’s REIPPPP program keeps drawing investors despite grid challenges.
  
• Namibia is emerging fast with renewables tied to green hydrogen and export potential.
  ROI varies by project type and funding model, but these countries consistently offer a mix of regulatory clarity and growth potential.
  

3. How stable is the real estate market in Africa compared to the renewable energy market?

Real estate is generally more stable, it moves with population growth, urbanization, and local demand, not necessarily with global funding cycles. Even during currency swings, rental income and land value often provide a cushion. Renewable energy, meanwhile, depends heavily on policy frameworks, infrastructure readiness, and long-term power purchase agreements (PPAs). If the regulatory environment is stable and financing is secured, renewables can outperform. But if those pieces falter, volatility spikes. In short: real estate gives you steady, slow growth; renewables give you faster potential, higher volatility.

4. What are the key risks investors should consider in both sectors?

For real estate, think: land title disputes, currency devaluation, construction cost inflation, and soft demand in oversupplied submarkets. For renewables, the bigger risks are regulatory delays, grid integration issues, and off-taker default. Both sectors share exposure to political instability and financing costs, especially where local currencies are weak. The smart move is to de-risk through diversification: combine stable real estate assets with renewable projects backed by reliable PPAs or multilateral funding.

5. Can foreign investors easily enter the renewable energy or real estate markets in Africa?

Entry is possible, but not uniform across the continent.

• In real estate, many countries (like Kenya, Ghana, and South Africa) allow foreign ownership under specific conditions, though land ownership laws can be complex and vary by region.
  
• In renewables, access often comes through public–private partnerships, IPPs, or joint ventures with local entities. Funding channels like AfDB, IFC, and climate funds have made entry easier, especially for utility-scale solar or wind.
  That said, understanding local law, currency controls, and government approval processes is critical, investors who do their homework or partner locally usually navigate it best.