Mr. Emmanuel Efuntayo is the Principal Estate Consultant at Ibukun Efuntayo and Company, a firm of estate Surveyors and Valuers that specializes on leasing of malls and valuation for all purposes. In this exclusive interview with DOTUN AKINTOMIDE, he gives expert’s opinions on how pipelines of developments can be driven through private-public concerted efforts, to address the slowed down of activities besetting the real estate sector, alongside other sundry matters. EXCERPTS:
With the necessity of the time, are developers now considering medium, low-end developments?
The recession has affected almost every aspect of the market and real estate is actually the worst hit, especially the luxury market, but the market is still there for medium, low-end areas. Since, the business confidence has been lost, foreigners are critical to come in, and it’s the foreigners that are usually interested in taking some of the A grade complexes and luxury residential properties. It has negatively impacted on the vacancy rate and we have many void properties that are not let now. In term of sales, it has slowed down, but my observation has been that the medium and low-end market are still doing well, because people are still letting. Even for sales, people are still buying low-end properties, because the fundamentals are still there. And for community malls, I can say malls under 10,000sqm gross lease area are doing well, because it’s very easy to let them, once the anchor takes his own, the remaining spaces can be easily given out. For instance, the Maryland mall is a success because, it’s a community mall with a combination of several local brands. More so, with aggressive marketing strategy, it has become a huge success story.
Don’t you think the over concentration of developers on high end properties has further increase the housing deficit?
I cannot put all the blame on the developers, because they are there to make money and therefore they will want to take developments to where they are being needed most for high returns. Don’t forget they borrowed money at double digit interest rate and also with the stifling documentation processes which cost lots of money and time, they will want to cover their lost too. That’s why they always develop in areas where their capital will be rewarded. Before now, they were doing the high-end because the market could sustain it, but now that liquidity has squeezed, they are considering medium schemes like terrace and single duplexes. To address housing shortages, solutions must not be left in hands of the private sector alone, the federal government needs to declare emergency in the sector, and when they do that, it means extra-ordinary resources will be devoted to solving the problem. Government must come to do that, like the same way we have education tax for companies, nothing stops the government from also implementing shelter tax. That kind of money will enable adequate infrastructural provision. Also, the developers must be incentivized and motivated with the right business environment to go into medium and low-end developments and until they do that, developers will not go there.
Considering the staggering housing deficit in the country, people see the family homes’ fund programme launched last year by the current administration targeting about 100,000 housing units yearly as a drop in the ocean. Would you agree with them?
Even, if it’s a drop in the ocean, I believe it is better than having nothing, especially in the urban areas. Housing shortage is more prominent in the urban areas than in rural areas, so if they do that consistently shortages will be addressed. And if they sustain it continuously, the drop could one day become a river. Government should continue to play its part and also look at policies like housing financing, materials’ substitution, town planning and government regulations to reduce what’s being lost in getting Governor’s consent and other documentations. Those are the things they need to consider to create an enabling environment for players in form of Public Private Partnership (PPP). That’s why Lagos has been making progress in that regard. They have been giving lands to developers to develop with fair sustainability considerations which began way back during Tinubu’s tenure as Lagos state Governor. Also, there is need to put a mortgage system in place affordable for the ordinary man because for most developers, they always want to discover an exit strategy to know how to offload whatsoever they build and if they know there is an efficient mortgage system that could enable quick sale, they will always want to do more, rather than waiting for so long to sell. Government needs to do more about that, I know the federal government is trying to do something about that. Like the NMRC, FMBN and other funding programmes should be targeted at helping developers fast-track the process of developments and sales through adequate mortgage financing, for if the cost is too high, they will definitely pass it on to the buyers. We must understand that developers are not father-Christmas, they simply want to make money on every investment
What has been the bane of mortgage financing in Nigeria?
The problem with most of the banks is that majority of their assets are short termed and that cannot be used to finance long term projects, the best they can do is bridge the gap and that’s the reason why even the mortgage institutions struggle to perform their roles. Because of lack of access to long termed funding which forces them to also operate like commercial banks on short termed basis. We have a lot of money in the pension fund which can be appropriately channeled towards mortgage financing. They shouldn’t just be kept and allowed to lie fallow, but can be deployed to finance long termed developments. If developers can access pension funds at single digit interest rate, it will drive development pipelines to a reasonable extent. In other climes, Real Estate Investment Trust (REITs) serves as the backbone for real estate funding which I believe will really help, if the majority of the people can benefit from it.
As AMCON continues to take over properties from defaulting institutions and individuals, what’s the way forward for developers indebted to the banks?
AMCON could be taking away properties, but most of the properties belong to the banks as collaterals coming from those who borrowed from them. The best thing is to understand the value chain properly so as not to run into trouble and to be able to take calculated risk. Once you do that as a developer, you will not have your property forfeited. But many people go into development without having the understanding of investment, they don’t even know how to manage their cash flows, all they do is to spend money lavishly. That’s the reason why these days many prefer going for joint venture where someone donates the land, while others finance the development on it to ease off the funding pressure. The banks are having issue with AMCON because most of the properties they took as collaterals were over-valued due to some hanky-panky games on the part of the accounting officers. At times, people use non-existing properties as collaterals to take loans from banks and these are done in connivance with banks’ officials. The whole thing boils down to proper monitoring by banks and AMCON so as not to buy off over-valued debts.
What are your milestones achievement over the years?
We thank God in the area of malls consulting and leasing, we have been able to distinguish ourselves, we were part of the Ikeja City mall when it started and we were part of its leasing team. We also got involved in the Circle mall; the Galaxy mall, Kaduna which is yet to start; Ogudu mall, and also consulting for a mall in Abuja. Also, in the area of property valuation, we do property consultation for about 8 banks. At a time we were invited to do valuation for Eko Atlantic and Lagos state government, as well as quite a number of other institutions. Also, we manage the City mall at Onikan and we thank God for our humble achievements helped by God so far. Going forward, we plan to go into real estate development, specialized valuations and also lead the pack in mall consulting and leasing.