Inflation is
seen to be persistent rise in the general price level of goods and services in
a country over a long period of time. It can be described as a decline in the
value of money or an increase in the quality of money in circulation, leading
to a decline in the purchasing power of existing money (Zou et al., 2011). To say that inflation
status in most advance economics is moderated to be a single digit level is to
restate the obvious. Considering the emerging economic, inflation is mostly in
a two digit figure (Nwude, 2012). For instance, in Nigeria, which is the
concern of the study, inflation rate averaged 12.34% from 1996 until 2014,
reading on all time high of 17.56 in the beginning of the Year 1996 and a
record low of 2.49% in the beginning Year of 2000 (Trading Economic, 2014).
Currently inflation rate is up to 18.42% in Nigeria. Temgbode (2011) is of the
opinion that this is role that the inflation rate in Nigeria is outstripping
the rate of return on the investments.

            Inflation
in relation to real estate are of various type; actual, expected and
unexpected. The actual inflation is the rate of increase in price over a given
period, (Oner, 2012); the expected inflation refers is change in price level
that is expected at the starting time of an asset or when the asset is
appraised. (Appraised Institute, 2008). The difference between the actual and
the expected inflation is seen to be the unexpected inflation which are all
measured using the Consumer Price Index (CPI) and the producer price index (PPI)>

       
A situation under inflation where the inflation rate of some assets are
higher than the consumer  price index
(CPT), it  suggests  that 
those  assets  are 
hedge  against  inflation and as such real estate investments
is one of them with greater advantage to other investment (Bello, 2004).   

            Real
estate investment is simply the acquisition, ownership, management, rental and
sales of direct real estate investment (land and building) and indirect real
estate investment (real estate securities) which are the various ways of
investing in real estate (Amidu and Aluko, 2016).  According to Garay and Tor Horst (2009),
investment in real estate can be done in different ways; (a) Equity where one
can invest in the equity part of real estate by buying real estate mutual
funds, example, (REITS) (b) debts where one invest in the debts part of real
estate through securitized form and lastly by acquiring real estate physically.

            The
ability of real estate invested asset to provide high rate of returns above the
rate of inflation is concerned to investors. This is known as inflation hedge
which is provided when the returns on investment increases at a commensurate or
higher rate than general price level or increase (Glascock et al., 2005). In other words, the investment could be expected to
hedge against inflation through the income produced, capital appreciation or
the combination of both which is predicated on the fact that the two basic
reason why an investor would want to hedge against inflation is first to match
future liabilities that are linked to inflation and secondly to protect the
value of an investment (Martin, 2010).

            Real
estate investment asset have long been recognized as a good hedge against
inflation. (Feng et al., 2003; Down
2009, Bello 2004; Debera 2014). The direct real estate investment provide a
good hedge against inflation than the indirect real estate investment (Amidu
and Aluko 2006; Georgier 2012; Yobaccio 1995; Amidu et al., 2008; Karley 2009; Miles and Mahoney 1997). Others view
that the indirect also provides an hedge against inflation. (Maorer and
Sebastian 2002, Lu and So 2001; Chatrath and Long 2008). 

Real estate investment
has its own risk and return profile as such an investor has to be rational in taking
decision that safeguard the investment under inflation period so to ensure
proper control of the outcome effect on the investor and the consumers of the
investment based on the fact that it involves huge outlay of both human and
capital input to carry out. The direct effect of inflation on real estate
investment which are not necessarily positive on the real value of housing is
that it induces nominal capital gains which are not real gains but are more the
less fixed when houses are sold. Another is that it affect housing process
particularly over the long term. Although rising housing prices can make it
look like the real estate market is improving. Prices, generally rise due to
the outcome of inflation where house that appear to appreciate in value with
time actually remain much the same when one consider the effect of inflation.
(Yobaccio et al., 1995). According to
Piazzesi and Schneider (2007), other effect of inflation on real estate
investment is in form of rising interest rate (Mortgage rate), housing prices,
effect of supply and demand, inflationary construction and effect on new effect
of higher rent.

            The
effect of inflation could be positive or negative or both on the side of the
investor and the occupant or tenants. This is what the research seeks to find
out which is to analyze the effect of inflation on direct real estate
investment and how it influences the rent of tenants/occupiers of the
investment on Uyo metropolis of Akwa Ibom State.