Diamond Ìlòrí is the founder of Nigeria-based Wardiere Oakmount and brain behind PEARL Holiday Homes Dubai. In this interview with IFEDAYO OGUNYEMI, he speaks about the implications of hike in cost of building materials, agreed cement price between the FG and producers and other sundry issues.
What is the overall impact of rising cost of cement and other building materials on the housing industry?
The primary consequence is a significant increase in construction costs. Cement and other key building materials represent a substantial portion of project expenses. With their prices surging, the overall cost of construction projects has risen sharply and most of developers have already collected money from the investors, we have promised to deliver projects to them, they are counting on us. We want to deliver but it will eat into our budgets for other integral parts of the business. Many developers are facing challenges in managing their budgets and timelines at this challenging time. Higher material costs can lead to budget overruns as initial estimates become insufficient to cover expenses. Consequently, project timelines may be extended as stakeholders seek additional funding or adjust plans to accommodate higher costs.
Another problem that may arise, in extreme cases, is that some developments may be halted altogether. When the increased costs make projects financially unviable or unprofitable, developers may choose to pause or cancel them, leading to stalled construction activity. The volatile situation in the construction materials market has introduced uncertainty into the industry for so many developers. Investors may become hesitant to commit to new projects or investments due to the unpredictable cost landscape. This lack of confidence can further exacerbate the challenges faced by builders and developers. The effects of rising material costs extend beyond the construction sector. Industries closely linked to construction, such as real estate and infrastructure development, also feel the strain. Higher construction costs can affect property prices, infrastructure projects, and overall economic growth.
In summary, the industry is grappling with a multifaceted challenge stemming from the surge in material costs. From budgetary constraints to market uncertainty, the impact is broad-reaching and requires concerted efforts from stakeholders to navigate effectively.
As for us at Wardiere Oakmount, over time, we had set apart a reservoir for construction and infrastructure at this challenging time. What we do is we dig into our money reservoir and add to the present one and this helps us to be able to move development forward despite the economic challenges.
Would you say the proposed price agreed between the Federal Government and cement producers will ease the worries of many stakeholders in the industry?
The proposed price agreement between the Federal Government and cement producers has the potential to alleviate some concerns within the industry. By setting a predefined price for cement, the agreement aims to provide stability and predictability in material costs, which could positively impact stakeholders. With a fixed price for cement (let us be sure and agree this is the price of cement and it will no longer increase beyond this), builders and developers can more accurately estimate project costs, reducing the risk of budget overruns and delays. This predictability can instill confidence among investors and facilitate better financial planning. Let the price be regulated! A regulated price may make cement more affordable for builders and consumers, potentially stimulating demand for construction projects and real estate development. This could lead to increased activity within the industry and spur economic growth. The agreement signals the government’s desire to address the challenges faced by stakeholders in the industry. This proactive approach may boost confidence among investors, builders, and developers, encouraging them to pursue projects with greater assurance.
However, it’s essential to consider potential drawbacks and challenges. Cement prices are influenced by various factors, including production costs, market demand, and currency fluctuations. The effectiveness of the proposed price agreement depends on its ability to accommodate these dynamics while maintaining affordability and stability. Ensuring compliance with the agreed-upon price and preventing price manipulation by cement producers require effective monitoring and enforcement mechanisms. Any lapses in implementation could undermine the intended benefits of the agreement. While the agreement may provide short-term relief, its sustainability over the long term depends on factors such as input costs, inflation rates, and market conditions. Continuous dialogue and collaboration between the government and industry stakeholders are crucial for adapting the pricing mechanism to changing circumstances.
In conclusion, while the proposed price agreement has the potential to address some worries within the industry by offering cost predictability and affordability, its success hinges on effective implementation and adaptability to evolving market dynamics. Ongoing monitoring and collaboration will be essential to ensure its long-term viability and effectiveness in easing stakeholders’ concerns.
Aside from the high cost of cement, what other challenges do real estate practitioners face?
Real estate practitioners face a multitude of challenges beyond the high cost of cement. Some additional hurdles commonly encountered in the industry include navigating complex and ever-changing regulatory frameworks can be a significant challenge for real estate practitioners. Compliance with zoning laws, building codes, environmental regulations, and land use policies adds layers of complexity to development projects and transactions.
Securing suitable land for development at reasonable prices can be challenging, particularly in urban areas where land availability is limited and competition is high. Additionally, issues related to land ownership, title disputes, and land use restrictions can further complicate the acquisition process. Access to financing is crucial for real estate projects, but practitioners often face challenges in securing adequate funding at favorable terms. Tight lending conditions, high interest rates, and stringent lending requirements can hinder investment and development activities.
Real estate markets are susceptible to fluctuations in supply and demand, economic conditions, and geopolitical factors. Practitioners must navigate market volatility, anticipate trends, and adapt their strategies to changing market dynamics to remain competitive and profitable. Beyond the high cost of materials like cement, construction projects are susceptible to delays and cost overruns due to factors such as labour shortages, weather disruptions (now that the raining season is fast approaching), regulatory hurdles, and unforeseen technical challenges. Managing construction risks and ensuring project timelines and budgets are met require careful planning and oversight.
Embracing technology and digital innovation is increasingly important for real estate practitioners to stay competitive and enhance operational efficiency. However, implementing new technologies, such as property management software, digital marketing tools, and smart building solutions, may pose challenges related to adoption, integration, and cybersecurity. The real estate industry is becoming increasingly competitive, with new market entrants, disruptive business models, and evolving consumer preferences reshaping the competitive landscape. Practitioners must differentiate themselves, innovate, and adapt to remain relevant in a rapidly changing marketplace.
What do you think the government can do to stimulate growth in the real estate industry?
To stimulate growth in the real estate industry, governments can implement various policies and initiatives aimed at addressing key challenges and creating a conducive environment for investment and development. Facilitating access to financing for real estate projects through measures such as government-backed loan programmes, mortgage subsidies, and interest rate subsidies can encourage investment and development. Additionally, promoting innovative financing mechanisms such as real estate investment trusts (REITs) can attract capital into the sector. In other developed countries where I have operated, people have very easy access to home financing and this allows everyone to be able to own their own house and even invest while the rentals from such investment services their loans and mortgages.
Governments can spur real estate development by investing in infrastructure projects such as transportation networks, utilities, and public amenities. Improved infrastructure enhances connectivity, accessibility, and livability, making areas more attractive for investment and development. Simplifying and streamlining regulatory processes related to land acquisition, zoning, permitting, and construction approvals can reduce red tape and bureaucratic hurdles that hinder real estate development. Clear, efficient, and transparent regulatory frameworks can expedite project timelines and lower development costs. Implementing incentives, subsidies, and tax breaks for developers to build affordable housing units can help address housing affordability challenges and stimulate demand in the real estate market. Governments can also partner with private developers and nonprofits to facilitate affordable housing projects. Encouraging sustainable development practices through incentives, regulations, and certifications can align real estate development with environmental and social objectives. Governments can incentivise green building design, energy efficiency improvements, and sustainable transportation infrastructure to promote long-term sustainability in the industry.
Supporting urban renewal and redevelopment initiatives in blighted or underutilised areas can revitalize communities, attract investment, and create opportunities for real estate development. Tax incentives, brownfield redevelopment programmes, and public-private partnerships can facilitate these efforts. Collaborating with the private sector through PPPs can leverage resources, expertise, and innovation to undertake large-scale real estate development projects such as mixed-use developments, infrastructure projects, and urban regeneration initiatives. PPPs can share risks, optimize project delivery, and maximize value for stakeholders. Improving market transparency and data availability through initiatives such as property registries, land information systems, and real estate market indices can enhance investor confidence, facilitate informed decision-making, and attract both domestic and foreign investment.
As a specialist in foreign real estate, do you perceive the N50million deal for Nigerians in the diaspora by the FMBN yielding positive results for Nigerians and the economy?
The N50 million deal for Nigerians in the diaspora by the Federal Mortgage Bank of Nigeria (FMBN) could potentially yield positive results for both Nigerians abroad and the economy. The initiative aims to provide affordable housing financing to Nigerians living abroad, which can help address the housing needs of this demographic. Access to affordable housing can improve their quality of life and encourage diaspora investment in Nigeria’s real estate sector. Nigerians in the diaspora send significant amounts of remittances back home, which contribute to the country’s economy. By facilitating diaspora investment in real estate through initiatives like the N50 million deal, the FMBN can further leverage these remittances for economic development. Increased investment from Nigerians in the diaspora can inject liquidity into the real estate sector, stimulate demand for housing, and spur construction activity. This can create employment opportunities, generate revenue for businesses, and contribute to economic growth. Diaspora investment in real estate can also contribute to foreign exchange inflows, which is beneficial for Nigeria’s balance of payments and exchange rate stability. It can help offset trade deficits and strengthen the country’s external reserves. The initiative demonstrates the government’s recognition of the importance of engaging with Nigerians in the diaspora and leveraging their resources for national development. By providing targeted support for diaspora investment in real estate, the government can foster a stronger sense of belonging and engagement among Nigerians abroad.
However, it’s essential to ensure that the implementation of the deal is transparent, efficient, and inclusive to maximise its positive impact. Measures should be in place to address potential challenges such as access to financing, property rights, regulatory compliance, and market transparency. Additionally, ongoing monitoring and evaluation will be necessary to assess the effectiveness of the initiative and make necessary adjustments to achieve its intended objectives.
The provision of low-cost housing for middle-income earners is still a problem the country wishes to address. Is it still possible considering the harsh economic realities and how best can the government go about?
Providing low-cost housing for middle-income earners remains a significant challenge in Nigeria, particularly given the country’s harsh economic realities. However, it is still possible to address this issue through a combination of targeted policies, innovative financing mechanisms, and collaborative efforts between the government, private sector, and other stakeholders. As I mentioned earlier, engaging the private sector through PPPs can leverage resources, expertise, and innovation to develop low-cost housing solutions. The government can provide land, infrastructure, and regulatory support, while private developers contribute financing, construction expertise, and management capabilities. The government can offer subsidies, tax incentives, and other financial incentives to developers and buyers of low-cost housing units. These incentives can help reduce the cost of construction and make housing more affordable for middle-income earners. Facilitating access to affordable financing through mortgage refinancing schemes, interest rate subsidies, and government-backed loan programmes can make homeownership more accessible to middle-income earners. Providing long-term, low-interest mortgages and flexible repayment terms can help reduce the financial burden on homebuyers.
Exploring innovative housing models such as microhousing, cooperative housing, and rent-to-own schemes can offer affordable housing options tailored to the needs of middle-income earners. These models can provide flexibility, affordability, and community-oriented living arrangements. Addressing land tenure issues, streamlining land acquisition processes, and investing in infrastructure development can reduce the cost of land and housing development. Improving access to serviced land with essential infrastructure such as roads, water, and electricity can lower the overall cost of housing projects. Simplifying and harmonising regulatory frameworks related to land use, zoning, permitting, and construction approvals can reduce administrative barriers and expedite the development of low-cost housing projects. Clear and predictable regulations can attract investment and encourage private sector participation.
Engaging communities in the planning, design, and implementation of low-cost housing projects can ensure that developments meet the needs and preferences of middle-income earners. Community participation can foster a sense of ownership, promote social cohesion, and enhance the sustainability of housing initiatives. Implementing robust monitoring and evaluation mechanisms to track progress, assess impact, and identify areas for improvement is essential for the success of low-cost housing initiatives. Regular review and adjustment of policies and programmes based on feedback and data analysis can ensure effectiveness and efficiency.
Collaboration, innovation, and commitment from all stakeholders will be crucial in overcoming barriers and realising the vision of accessible and sustainable housing for all.
