Property
Sectoral Preview: Pre-election politicking, subsidy removal, threatens inflation-affected Real Estate sector in 2022
By Moses Adeniyi
Nigeria’s Real Estate sector hit with the scourge of inflation in 2021, is threatened with such activities as the pre-election year politicking of 2022, expected impacts of subsidy removal policies and it’s projected attendant hike in fuel prices.
The Real Estate Market was observed to have been hit hardly by inflation in 2021 which saw the cost of building materials soaring high – a situation that left the development of buildings thwarted with slow growth.
As developers were hardly affected, operators in the downstream rent and estate agency were not left out of the discomfort.
However, in as much as stakeholders in the sector would have desired better market situation for 2022, it has been observed that such expected concentration of activities as the build-up towards the 2023 General elections, the subsidy removal policy and expected associated hike in petroleum products might further worsen market situations for the Country’s built industry.
The projections however, it is presumed that such other expected development as the passage of the Real Estate Regulatory Council Bill, would infuse certain development in the sector.
Giving perspective to the market projections for the year, Real Estate Expert and Managing Director, Realty Point Limited, Debo Adejana, maintained that fuel subsidy and pre-election campaign as well as expected regulations in 2022 are major events that would shape the Real Estate Market in 2022.
According to him, however, the possibilities before the construction market amidst the pre-election activities may pose either positive chances or alternatively negative impacts.
“A few things would define the market. The fuel subsidy removal would have its own effects on prices in the market. This is also pre-election campaign year – that would also have its impact on the market. It’s a 50/50 chance; there may be more activities in the market in the construction space and in some cases, it would also be affected. But as usual during campaign years, some enjoy while some suffer for it.
“The Real Estate Regulatory Council Bill, would hopefully be signed this year. That would also have its effects on regulation. It is expected the market would be better regulated. This is expected to foster cooperation across the built industry because everybody is expected to have input in the legislation,” Adejana said.
According to him, the major challenge for the year 2021 was inflation, which at a point made construction unattractive, hitting hard on developers.
…Real Estate Regulatory Council of Nigeria (Establishment) Bill, 2021
Recall that the Senate had in November last year passed a bill to establish the Real Estate Regulatory Council of Nigeria to regulate market operations in the sector.
The Council when established would, amongst others, curb fraudulent practices to ensure that Real Estate business conforms with the National Building Code in Nigeria.
The bill tagged: “The Real Estate Regulatory Council of Nigeria (Establishment) Bill, 2021,” which scaled third reading during plenary in November would also create an innovative and sustainable environment to promote Nigeria as a real estate investment destination in Africa and the world. The bill was read for the first time on April 28, and scaled second reading on June 22, 2021.
The passage of the bill on Wednesday 17, 2021, followed the consideration of a report by the Committee on Establishment and Public Service.
Sponsored by Aliyu Wamakko (APC, Kebbi), it is expected that upon assent to become law, it would check rising cases of collapsed buildings, another symptom of poor quality structures.
Nicholas Tofowomo, who presented the Senate report on behalf of the Committee Chairman, Ibrahim Shekarau, had said the establishment of the Real Estate Council of Nigeria would provide efficient, effective and transparent administration of the business of real estate development in Nigeria.
According to the lawmaker, the Council would be responsible for prescribing minimum standards for the conduct of the businesses of real estate development across the country.
He had explained that when established, the Council would standardise the business of Real Estate by regulating the conduct of transactions; and provide enabling environment and transparency in the business of Real Estate development in Nigeria.
He had recalled that the bill seeking to establish the Real Estate Council of Nigeria was passed by both chambers of the eighth National Assembly, but was not assented to by President Muhammadu Buhari.
He said the President’s decision to withhold assent to the bill was as a result of certain observations raised by stakeholders at the time.
“Those observations have been taken care of in this report by the Committee following the engagement with stakeholders to ensure that real estate business in Nigeria conforms with the Money Laundering Act 2011 (as amended)and the Nigeria Financial Intelligence Unit Act 2018 in terms of Anti-Money Laundering and Counter Terrorism Financing due diligence compliance,” he had said.
Among other challenges highlighted, which had expanding impacts on the sector in the previous year include charges and bottlenecks in perfecting government approval for construction.
…Rent subsidy would save the day — Downstream operators
In his view, National President, Estate, Rent and Commission Agents Association of Nigeria (ERCAAN), Godwin Alenkhe, said the cost of perfecting relevant documents for building approval has been a major challenge to developers, with indirect impacts on other stakeholders in the sector.
According to him, interventions from the Government to subsidise rent would be the antidote to save the day for home seekers who are constrained to pay a full year rent from their income.
“The cost of perfection of documents, the charges by state and local governments have not been helping matters for those in the built industry and that also affected the rental performance to the fact that people have also found it difficult to get apartments of their choice.
“For the new year, we are expecting more from the Government. As much as government is trying to make housing available, they should be able to regulate rent to also make rent affordable for people. This will also assist property owners so they can easily recoup their investments.
“That is what the one-month-rent policy is all about which is subsidy in another form. It is Government intervention to alleviate the sufferings of inhabitants of Lagos and also to give fund to property owners,” he said.
According to him, the scheme can however only be applicable and accessible to salary earners.
“This can only be accessible by those on paid employment. Those in the informal sector would find it very difficult because it’s a loan and the payee must have a regular income for monitoring towards repayment.
“We are hoping as a body to see that the Government is involved more. The Government should do more than that to meet people’s needs for their homes. That is what we are hoping from the beginning of the year,” he said.
On the profitability of the one-month-rental policy to operators of the rent and estate agency, he said the policy would not affect returns for rent and estate agent operators, mentioning that the Government would only interface between the parties while the rental fees remain unaffected.
“The policy would be private sponsored backed up by the State Government. It is just to create continuity and stability in rent. The Government has discovered that most people searching for homes are finding it extremely difficult to pay one year rent. After the payment, many do not have enough to cater for other expenses as school fees and medical bills, among others.
“Government would engage with a routing management company and the bank to deal with the owners of properties and the agents that manage the properties. The Government would pay the one year upfront to the owners while the tenants would be paying the Government back in installments through monthly deductions.
“It wouldn’t affect the agents in as much as the Government is sincere with the regulations. A licensed agent should have principals who are owners of the properties and the tenants attached to the properties. The fear has been how do I collect my fee? Your professional fee is your service charge and you are entitled to collect your fee from the rents when they are paid.
“It is going to be one-off provisions for the agents, which is 10 percent of the accepted professional fee for service providers, while the tenants pay back every month with some marginal interests.
“I don’t think anybody would be sidelined, only that Government needs to do a lot of publicity and awareness to allay the fears many property owners are having.”
In his view on the challenges of the sector in 2021, he said the market dynamics in the year was not “encouraging because of the COVID-19 pandemic.”
He said: “The beginning of the year was so discouraging to Real Estate stakeholders. For the later part of the year, the market picked up with the fact that investors were having some confidence in getting their money but the challenges to those in the built industry, the estate developers, had to do with the cost of building materials which has to do with the fact that the materials were not locally fronted. The materials are largely imported and local producers such as cement had challenges of not being encouraged by the Government. The built industry was partly affected to the extent that people found it difficult to complete what they have started.
“Also, Government regulation have not been helping matters. Duplication of regularisation of papers, which has to do with what local government are charging and those the State Government are also charging in terms of processing papers, have been attracting complaints from developers.
“Those that are building are complaining that they are charged a lot in the areas of building approval and levies from State Governments.”
By Esther Agbo
Lagos State Commissioner for Housing, Honourable Moruf Akinderu-Fatai has said that the state faces a significant housing shortfall, with an estimated gap of 2.3 million homes.
This revelation was made at the Stanbic IBTC Home Ownership Summit, held on Tuesday where the Commissioner was represented by the Permanent Secretary of the Lagos State Ministry of Housing, Engineer Abdulhafiz Gbolahan Toriola.
The summit emphasised the urgent need for collaborative efforts from both the public and private sectors to address the housing deficit and foster home ownership as a pillar of economic stability in Lagos.
During his keynote address, Engineer Toriola underscored the escalating demand for housing in Lagos and the consequent business opportunities in the sector.
“In Lagos, the demand for housing is ever-increasing, and the importance of facilitating home ownership cannot be overemphasised, considering the 2.3 million housing gap that requires strategic attention from governments across board and stakeholders across the value chain,” he said.
The Lagos State government has made strides to address this deficit, delivering over 10,000 flats across 39 state-owned estates, with ongoing projects expected to add nearly 2,000 more units.
“In bridging this gap, the state government via direct intervention has delivered 39 estates across the state, amounting to 10,060 flats, with ongoing projects adding approximately 1,938 more flats.
“Lagos State has launched multiple affordable housing schemes to cater to people with different incomes, we have the low, medium, and high. The Ministry of Housing takes care of the low and medium, while the LSDPC takes care of the high.
“The program aims to provide housing at subsidised rates and enables more Lagosians to enter the property market. It includes the allocation of 40 per cent rebate for civil servants. There is the open balloting for private workers where people apply online,” Toriola noted.
The summit, themed “Building Wealth through Home Ownership,” also featured insights from the Chief Executive of Stanbic IBTC Bank, Mr. Wole Adeniyi.
Adeniyi highlighted the critical role of home ownership in financial stability and wealth creation. He said, “As access to affordable housing remains a pressing issue, our Home Loan solution offers hope. With competitive interest rates, flexible equity contribution, and personalised guidance, our bank aims to bridge the gap and make home ownership attainable for our stakeholders.”
Additionally, Prince Adeniyi Aromolaran, an Executive Director with the Lagos State Development and Property Corporation (LSDPC), proposed home ownership as a strategic approach to staff retention. “I have proposed this as a staff retention strategy. To hold a staff for five years is now very tough, but if a company were to acquire a property and say, we want to build for our staff at this level.”
“The land belongs to the organisation, but we give the apartments to individuals. If you work with us for five years, we tell you from the get-go, an amount is set every year, so that by your fifth year, when you celebrate long service award, we give you a certain amount towards house ownership,” he said.
By Esther Agbo
Lagos has witnessed significant shifts in its real estate market over the past few years, driven by economic, demographic, and infrastructural factors. Known for its vibrant economy and status as a major business hub, Lagos continues to attract local and international investors, leading to a generally upward trend in property prices.
The real estate sector in Nigeria is forecast to grow to $2.26 trillion in 2024, of which residential estate will contribute $1.93 trillion or 85.4 percent. Analysts who made the forecast observed that the growth would occur despite challenges such as a weakening currency, inadequate infrastructure, multiple taxes, high construction costs, and other issues affecting the sector.
Lagos real estate market has mirrored the city’s economic health. During periods of economic prosperity, particularly when Nigeria’s oil sector flourished, the city experienced a substantial rise in real estate prices. High demand for both commercial and residential properties, fueled by the influx of businesses and individuals seeking opportunities, drove these price increases.
However, during economic downturns, such as times of political instability or global economic recessions, the market showed resilience, although the growth rate slowed. Lagos’ ability to recover quickly compared to other regions in Nigeria can be attributed to the constant demand for housing and commercial spaces in the ever-expanding city.
Comparing current real estate prices to those a decade ago reveals a significant increase. This rise is due to inflation, higher construction costs, and the growing demand for properties in a city experiencing rapid population growth and economic expansion. Currently, the real estate prices in Lagos show either stability or moderate increases, varying across different parts of the city and types of properties.
According to a recent report by the Nigerian Institution of Estate Surveyors and Valuers (NIESV), property prices in Lagos have seen a significant uptick in 2024. The surge is most prominent in high-demand areas such as Victoria Island, Ikoyi, and Lekki, where prices for prime residential properties have increased by an average of 15 per cent compared to the previous year. This rise is attributed to the influx of expatriates and affluent Nigerians seeking luxurious accommodations, coupled with limited land availability in these prestigious locales.
On the other hand, the burgeoning middle-class population is driving demand in emerging neighbourhoods like Yaba, Surulere, and Ajah. These areas are experiencing rapid development, with new housing projects aimed at providing more affordable options for middle-income earners. According to data from the Lagos State Ministry of Housing, housing units in these regions have appreciated by approximately 10 percent in the past year. This trend is expected to continue as developers focus on constructing more budget-friendly housing to meet the needs of a growing urban population.
Prime locations like Victoria Island, Ikoyi, and Lekki, known for their better infrastructure, security, and amenities, have seen the highest growth in prices. These areas attract wealthier individuals and businesses, pushing property values upwards. Meanwhile, the city’s rapid urbanisation and appeal as an economic powerhouse have increased demand for housing in the middle and lower market segments. Unfortunately, the supply of affordable housing has not kept pace, leading to a significant housing deficit and further driving up prices.
Several key factors contribute to these trends, including Lagos economic growth, infrastructural improvements, and its position as a cultural and financial centre. Additionally, speculative real estate investments, where properties are bought with the expectation of selling them at higher prices, also play a role in the rising prices.
Despite the positive trends, the Lagos real estate market is not without its hurdles. Industry experts highlight the ongoing issues of high construction costs, exacerbated by inflation and the devaluation of the Naira. Additionally, multiple taxation and bureaucratic red tape continue to pose significant challenges for developers and investors. The Lagos State Government has been urged to streamline regulatory processes and provide incentives to attract more investment into the housing sector. Addressing these challenges is crucial for sustaining the market’s growth momentum.
Looking ahead, the outlook for the Lagos real estate market in 2024 remains cautiously optimistic. While the sector faces substantial obstacles, the underlying demand for housing, driven by population growth and urbanisation, provides a strong foundation for future expansion.
Analysts suggest that strategic investments in infrastructure and supportive government policies could further enhance the market’s potential as Lagos real estate market is poised for further growth, driven by ongoing infrastructural developments such as the Eko Atlantic City project, road expansions, and improvements in public transportation. These projects are likely to make certain areas more accessible and desirable, increasing property values.
Moreover, continued economic growth, especially in sectors like technology, finance, and entertainment, is expected to attract more businesses and professionals, boosting housing demand.
Be that as it may, several factors could temper this growth, ranging from economic downturns, political instability, or significant policy changes affecting the real estate sector could reduce demand and prices. Environmental challenges, such as increased flooding or natural disasters, could also negatively impact property values in affected areas.
In conclusion, while Lagos real estate market shows a robust upward trend, driven by economic and demographic factors, it remains sensitive to economic conditions and infrastructural developments. The city’s resilience and continuous demand for property suggest a promising outlook, notwithstanding the potential challenges that could impact future growth.
By Esther Agbo
Lagos is no doubt one of the bustling commercial states in Nigeria and it stands as a beacon of opportunity for real estate investors. Its dynamic market is deeply entwined with the broader economic and political landscape of Nigeria, a nation characterised by its oil wealth, economic volatility, and evolving policies. As we navigate through 2024, the Lagos real estate sector presents a compelling mix of promise and challenge.
Nigeria’s economy has seen its fair share of ups and downs. While oil remains a significant contributor, it’s not the sole driver. Lagos, with its diversified economy encompassing finance, services, and tourism, offers a unique stability. Despite facing hurdles like inflation and currency devaluation, the city continues to attract substantial investments, buoyed by its status as a major financial center in Africa.
Lagos’s real estate market has demonstrated remarkable resilience. From the luxury enclaves of Ikoyi and Victoria Island to more affordable neighborhoods, the city caters to a broad spectrum of housing needs.
However, a pronounced gap exists between supply and demand. The rapid urbanization of Lagos has exacerbated a housing deficit, pushing property prices upward. Efforts by successive governments to bridge this gap have met with mixed results, although recent initiatives aim to make housing more accessible for lower-income residents.
Significant infrastructural projects, such as the Lekki-Epe Expressway, have spurred real estate development, boosting property values in newly accessible areas.
Concurrently, regulatory reforms are making strides towards a more transparent market. Enhanced property documentation and efficient land registration systems are part of this drive, aiming to reduce fraud and streamline transactions.
For investors, Lagos remains a hotspot. High-end areas like Ikoyi and Lekki continue to draw interest, while emerging neighborhoods offer new opportunities. The city’s rapid growth and economic diversity promise high returns.
However, navigating the complex legal and regulatory landscape can be daunting. Foreign investors, in particular, should seek local legal counsel to ensure compliance and gain deeper market insights.
Looking ahead, Lagos’s real estate market is set to benefit from ongoing and planned infrastructure projects. Road expansions, bridge constructions, and improved public transportation are expected to enhance accessibility, making new areas ripe for development. Additionally, efforts to bolster essential services like power supply will further boost the city’s livability and attractiveness.
Investors must tread carefully. Political instability, shifting economic policies, and legal complexities pose significant risks. Environmental challenges, including coastal erosion and flooding, particularly in low-lying areas, are also critical concerns.
The forecast for Lagos’s real estate market in 2024 is cautiously optimistic. While the city’s rapid urbanization and economic diversification provide a solid foundation for growth, the inherent risks cannot be overlooked. Potential downturns could see a decline in property demand and values, and liquidity issues may arise during economic slumps.
Ultimately, Lagos offers substantial opportunities for savvy investors willing to navigate its complexities. With informed strategies and a keen eye on evolving market dynamics, the real estate sector in this vibrant city can yield significant rewards.
For those looking to invest in Lagos, the key lies in balancing optimism with caution, leveraging local expertise, and staying abreast of policy changes and infrastructural developments.
As Lagos continues to evolve, so too will its real estate market, promising a landscape rich with potential for those ready to embrace its challenges and opportunities.
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