Despite the global challenges and Nigeria’s harsh economy, experts believe that the Nigerian real estate sector performed better in 2022 than the previous year. Other practitioners score the sector low due to unfavourable government policies and actions concerning the industry. DAYO AYEYEMI reports.
IN less than six days, the curtain will be drawn on the year 2022. But before this, stakeholders in Nigeria’s real estate sector have started to take stock of major activities in the industry during the year. This is to guide them in decision making, to identify areas where the government can come in and to be able to position themselves for opportunities in the new year.
While many of the experts who spoke with the Nigerian Tribune, scored the sector high in terms of performance and business transactions in 2022, others said the challenges limiting growth and investments in the sector are yet to be resolved. Above all, they pointed out that the issue of affordability has continued to be a challenge for the low and medium income Nigerians.
Other shortcomings of the sector, according to the experts, include inconsistent government’s policies, foreign exchange distortions, lack of regulation of title/land ownership and Land Use Act of 1978.
Taking the lead, the Chief Executive Officer/ Managing Director, Fame Oyster and Co, Mr Femi Oyedele, said that despite the global challenges in the business sector in 2022, especially the economic implications of the Russian-Ukraine war, the high and unprecedented inflation rate in Nigeria, the avoidable nationwide flooding, the anti-investment building collapses incidents, and the unfriendly government’s policies on the sector, real estate sector still mustered enough energy to perform well compared to other sectors like manufacturing, transport, education, among others, in the first three quarters of the year.
According to him, the real estate sector contributed over N7 trillion to the Gross Domestic Product (GDP) of Nigeria and had a growth rate of 16.3 percent compared with its 2021 Quarter-on-Quarter performance.
“The number of housing stats in the third and fourth quarters of 2022 showed improved investors’ trust in the sector, especially as this trust had earlier been battered by the uncontrolled building collapse, activities of miscreants and rogue estate agents on unsuspecting property investors and high rate of unpredictability of our economic factors especially the interest rate, foreign exchange rate and overall income.
“The insecurity in the nation which has defied all solutions did not help matters. In the quarter ended in September 2022, the real estate sector seemed to be the redeemer of the Nigerian economy as it affected the building materials market, income generation, employment generation and infrastructure development,” Oyedele said.
The major achievements of the real estate sector, Oyedele added, were in the area of the number of housing units the sector was able to contribute to deflate the existing high rate of deficit.
Besides, Oyedele, who doubles as an estate surveyor and valuer, emphasised that the sector improved in its employment and income generation in the form of salaries and wages for the workers, profit for the investors and tax for governments.
“Though our slums are growing at an alarming rate, there are indications that the sector performed better than last year and COVID-19 period,” he said.
Despite these achievements, Oyedele said the shortcoming of the sector was the poor contributions it made in terms of eradicating the housing problem of Nigeria.
According to him, the sector only contributed less than five percent overall to the housing stock of Nigeria which has a deficit of over 20 million units.
Besides, he noted that governments still remains the major contributors in this area, suggesting that there should be an improvement in the housing delivery system in such a way as to empower the private sector to be the main player in the nation’s housing delivery system.
Taking a cursory look at the sector, US-based affordable housing advocate, Mr Kunle Faleti, said the industry was characterised by activities in the upper middle to high-end market in 2022, adding that homes were selling for N25 million and above.
“Affordability continues to be a challenge for the low and low-to-moderate segments,” he said, while noting that most of the home sales were for investment or second homes.
Big win
According to Faleti, the big win during the year was the policy announcement by Nigeria’s pension regulatory body, the Nigerian Pension Commission (PenCom), allowing active workers to spend up to 25 percent of their pension savings domiciled with several private Pension Fund Administrators (PFAs) as down payment for a residential mortgage.
“Kudos to MBAN leadership and regulatory authorities for making this happen. It was on the drawing board for a while,” he said.
Going forward, Faleti said the policy of the government should focus on affordability and supply, rather than ownership.
He said, “There is a need for a very strong private sector-driven, consumer-focused advocacy drive. National housing policy should and must include a rural housing initiative that includes financing models for such. The Real Estate Developers Association of Nigeria (REDAN) should endeavour to be more independent of government and government agencies. It should seek more collaborative initiatives with the private sector.”
Former chairman, Nigerian Institution of Estate Surveyors and Valuers, Lagos chapter, Mr Samuel Effiong Ukpong, said that the year might not have delivered on expectations as prices became prohibitive and many projects could not be completed.
According to him, the entire country became a constant construction site particularly Lagos State, thus increasing transportation hardship.
“Infrastructure development by the Federal Government is endless. Lagos-Ibadan Expressway cannot be completed after over 10 years.
“Private developments are either not completed or done at great costs. Delivery costs are also high, leaving a lot of voids. Insecurity affected real estate purchases and development and purchasing power dwindled greatly,” he said.
Shortcomings
Talking about the sector’s shortcomings, Mr Ukpong said they included inconsistent government policies and foreign exchange distortions, adding that economic dislocation had made investment decisions on real estate difficult, projections unrealistic and returns uncertain.
Principal Partner, Ubosi Eleh and Co., Mr Chudi Ubosi, said that 2022 had a lot of challenges with unfavourable government’s policies and actions concerning real estate.
Interestingly, he pointed out that the real estate sector still showed a lot of resilience and came up performing better than it did in 2021.
“As at Q3, the sector contributed 9.50 percent to the nation’s Gross Domestic Products (GDP) as against 9.20 percent during the same time in 2021.
“But going to actual surveys, rentals and capital values were up between 10-15 percent in 2022.
“Despite the obvious under-performance of our economy, construction, especially by the private sector, was still very heavy; and if one took a casual drive through the Lekki Expressway towards Epe and entered the neighbourhoods on both sides of the road, it would be difficult not to marvel at the level of numerous private developments going on there,” Ubosi said.
According to him, the major achievements in the sector was the fact that despite the challenges, real estate had continued to show resilience while standing out as an asset class that serves its purpose.
On the sector’s shortcomings, he decried the fact that Nigeria is still battling with some pedestrian issues regarding land and land ownership in 2022.
According to him, getting title to land still remained a Herculean task despite its significance in the life of the average land owner.
“The Land Use Decree, which is one of the major problems inhibiting the explosion of real estate development in Nigeria, still exists despite efforts and the inevitability of needing to review the same.
“Other shortcomings include high values of rental and capital, high cost of building materials, and absence of a dynamic mortgage industry, amongst others,” Ubosi said.
Director, Valuation Office, Lagos State, Mr Kunle Awolaja, said the real estate market flourished post-COVID-19 pandemic, noting that developments had sprung up massively since 2020 while a lot of investors had been keying into the business as a sustainable means of investment.
According to him, investing in real estate could be a terrific method to build a lot of wealth.
However, he pointed out that Nigeria, like most African countries, is still plagued by numerous economic and political issues, which have had a negative impact on the country’s real estate market.
He listed Naira depreciation, increased rural-to-urban migration, rise in the price of most Nigerian homes, Environmental, Social and Governance (ESG) as most critical concerns.
The ongoing rise in the price of most Nigerian homes, he said, posed a significant challenge to the country’s real estate sector.
“Most Nigerian cities are overpriced, which discourages potential investors. Rivers, Lagos, and Abuja are the most affected cities, all of which are important commercial hubs. Furthermore, the exorbitant price tag has widened the social divide between different income earners. In short, there are some areas where a middle-income earner, let alone a low-income earner cannot afford to rent a home,” he said.
ESG
In the area of Environmental, Social and Governance (ESG), Awolaja said that most apartments in Nigeria are characterised by pollution, prevalence of waste in public areas, lack of trash bins for proper waste disposal and many more.
Defining ESG as a set standard that is used to evaluate the environmental and climate effects of housing units, he said that another important factor that contributed to the exponential increase was the high proportion of healthy residents compared to the low rate of medical cases caused by environmental factors.
