By Adewumi Ojo
Investors and developers in the Real estate sector have frowned at Lagos state new law called “land use charge” attributing it to campaign against real estate investors.
The new law which was signed into law by Governor Akinwunmi Ambode last week implies that real and landed property in the state, seeks to consolidate all property and land-based rates/charges into a single property charge and sets modalities for levying and collection of land use charge in the state. The law will see the charges being collected along with tenement rates by local government authorities and will be based on the capital values of properties rather than rental income.
Speaking during a real estate summit held in Lagos, the Managing Director of UACN Mr. Hakeem Ogunniran said “At a time when governments in other jurisdictions are putting measures in place to encourage investment in the housing sector, the Lagos State government is still piling charges on developers with their new land use charge which is now on capital values and not rental income,”
He noted that the structure of the Nigerian economy is not in favour of real estate and the investors.
He further disclosed that basing the land use charge on capital gains was inappropriate at a time when many houses were empty because they could not find buyers or tenants.
Lagos has a large chunk of vacant buildings across the various segments of the market including residential, commercial office space, retail malls and industrial warehouses. Until the last two quarters of 2017, when the economy improved, residential vacancy rate in the state was as high as 37 percent while both office space and retail malls averaged 30 percent and 42 percent, respectively.
The recent sale of high yield Treasury Bill by the federal government was also seen as a major discouragement to investment in real estate.
The CEO of Broll Nigeria, Bolaji Edu, described the development as government’s systematic way of “crowding out private investors.”
On Wednesday, January 31,the Federal Government raised N252.88 billion ($827 million) at a treasury bill auction with investors piling into the higher yielding one-year debt. The central bank sold N177.22 billion of one-year debt at a rate of 13.7 percent. It auctioned N6.09 billion of three-month debt at 12 percent, and N69.57 billion of six-month maturity debt at 13.65 percent. Total subscription stood at N355.2 billion.
Traders said some offshore funds participated at the auction, helping boost dollar liquidity on the currency window for investors to keep naira rates stable.
“This is a high-yield investment instrument and no investor would close his eyes on this for real estate which gives a maximum of 8-9 percent interest rate with its long gestation period,” Edu noted, advising that government should not see itself as being in competition with the private sector.
As at January 2017, the World Bank estimated the value of diaspora remittances to Nigeria at $25 billion.