Adeyinka Adesope is the Group Managing Director of the Palton Morgan Holdings, which has Grenadines Homes Limited as one of its members. He had earlier served as the Managing Director/ CEO of Propertymart limited. An alumnus of University of Cambridge UK, Lagos Business School and Ogun State University. He has degrees and professional certifications in Business Management, Building and Construction Management, Estate Development, Sales and Marketing, Leadership and Politics, among others. He is an international member of National Association of Home Builders, Washington D.C, United States of America; an associate member of Nigeria Institute of Directors; a Fellow of the Institute for Government Research and Leadership Technology; and a Fellow of Nigeria Institute of Marketing. The multiple award winning top corporate spoke with Business Editor, ADE OGIDAN, on the nation’s real estate business in particular, especially the Atlantic Resort project in Lagos, and the economy in general.
Shelter ranks high in the hierarchy of human needs. How can we resolve the housing deficit saga, which is presently put at 17 million in the country?
Why do we have the housing deficit in the first place? It has to do with the state of the nation’s economy. People cannot afford it. Not that we don’t have the land to build the houses and not that we don’t have the building materials for the houses. The real challenge is affordability. Our company, for instance, is trying to work with another local company to find a way of delivering three bedroom houses for less than N2million each and we are committed to funding this because the deficit keeps on growing. Resolving the housing crisis cannot be left alone to the private sector alone. Government would have to help. Norway, Kenya and Singapore have been able to resolve housing their respective housing problems by creating incentives for developers, which encouraged people to go into real estate business. The incentives include tax holidays. If you go into this industry, this is what you get. Our government should be willing to allow building materials in without any duty. Let’s look at between 1973 and 2010, Federal Housing Authority only created 4,000 housing units since 1973 while the population has been growing by the day. By 2050, we may likely have 25 per cent of the African population here. So, housing situation can’t be left to the private sector alone. I do believe it’s going to be more disastrous if the current growing population is not matched with adequate provision of housing. It has to be noted that by 2050, the rate of urbanization growth would be 50 per cent in Nigeria, meaning that the people from rural areas would have moved to the city. Where are the houses for them? So, it is time for government to start putting in place infrastructure and creating incentives for private investors to come into real estate.
Don’t you think the direct involvement of government would go a long way in resolving the housing crisis situation?
The direct involvement of the government, to me, should only be limited to policies. I will not advice the government to be directly involved. Over the years, they have recorded with due respect, collosial failures. They haven’t been successful in different schemes they have come up with. Even at a point, people had a legal battle with the government trying to get houses they paid for. So, I am not going to advice that government should go into direct development of properties and be giving to people but then, every country is looking towards creating enabling environment creating policies. The government’s involvement should be in the area of creating infrastructural facilities for real estate business to thrive. I tell you that every developer building today in Nigeria adds about 30 per cent to the cost of infrastructure, thereby raising the cost of housing delivery. At the end of the day, the end users will pay for it. if the government provides the necessary infrastructure, the extra 30 per cent being spent on infrastructure by these developers would not be necessary.
Like you said earlier, affordability is a big challenge, for people to have access to housing in this country. But your company has come up with this pool ownership concept. Can you please elucidate on this?
What we do with pool ownership scheme is what is called sales lease back concept, operated through a scheme, whereby I sell my property to you and I lease it back from you, maybe I still want to have control over the property. It’s one of the investment plans people can participate in, under our Atlantic Resort scheme. We have limited number of units, maybe about 3,000 per square meters to sell to people. This is to allow people own premium luxury projects, to be a part of it with minimal investment. We see a lot of development coming up, we see a lot of people just willing to own a piece of iconic development because of the fact that they are not earning so much, they cannot afford to buy properties or they cannot afford to buy a house. They cannot actually invest into real estate because you will agree with me that the capital for real estate is intensive. But this will actually bridge that gap. So, in our sales lease back scheme, people can be part of iconic piece with minimal investment, but this isn’t open for so long. It will come to an end by 4th of March, 2016. So, that window is going to be closed and the project becomes exclusive to those who are lovers of premium properties.
Are you encouraged that in 2016 budget, 30 per cent was allocated to projects?
I must say all of us are encouraged with about this, especially against the background of past budgets that had lower allocations for capital expenditure. I however think the allocation should have been between 60 per cent to 70 per cent because we have to move so faster to make up for the past losses.
Specifically, what are the main features of the Atlantic Resort project?
Atlantic Resort concept is basically around work and play. We are looking at a model that will achieve self-sufficiency in terms of necessary facilities that will make the residents to be productive in their respective endeavours. There will be recreational, educational, shopping and tourism facilities, among others. In other words, you can control the world from the estate. It’s already attracting foreign direct investments. The phase one alone is going to cost $15omillion. It’s a project we need at a time like this.
How are you interfacing with government to make sure that some facilities like link roads to the estate are provided?
We have been working on this project for the past three years and we’ve met with relevant government functionaries and agencies. The greater development plan of Lagos State, especially the coastal area development projects will make the estate to achieve its major objectives.
What kind of partnership have you established and who are the international partners you are working with on this project to give it that International feel.
On the part of finance, we looking at 30 per cent equity and 40 per cent debt. We are attracting international interests on the project. International investors are really showing interest in the project and this gives us joy. You would be shocked that Nigerians in Diaspora are even very much interested in this project. You find them been excited about what they see abroad coming to Nigeria.. And we have synergies with other people across the globe. We have HOK on this project and HOK is the largest and architectural firm in America and also the largest in London. We have also a Brash Brand that worked on Burj khalifa for Dubai to help with this project and with all of the synergies, we will be able to, at the end of the day, deliver an iconic project that would be a source of inspiration to Nigeria.
know a beautiful as beautiful as the city brings. So actually. All of these together you know. Together with the architect to make it iconic you know and it something that will represent. And not just Lagos but Nigeria and actually put the country on the world stage
Have you embarked on this project as a result of adequate demand level ascertained from your initial study on the project?
We talk about demand, and then we talk about the passion to ensure the nation has a pride of place in the globe. There is a demand for commercial space in Lagos. And then, we have a growing middle class. The nation is going to add about 7.6 million households in the middle class by 2030 and this is an attraction for investors all over the world and because of that, there is demand for a certain development in a place like Lagos. We are also aware of the fact that Lagos has just attracted about $460 million as investment inflow. The world is coming here, the headquarters of Africa is actually coming to Nigeria, because this is where the market is.
To an appreciable extent, whatever the government is doing even in the economy and other players in the private sector, whatever they are doing eventually will affect what we are doing. We have about three blocks in the first phase and according to our projections, we are to start just with a block and graduate until we deliver the whole project. But now, we’re thinking of starting two blocks together because we are getting interests even from foreign investors who are interested in luxury properties in Lagos and that is why the project of rebuilding the nation should be the combination of the efforts of the government in terms of policy and other things they do as well as the private Sector.
What is your view on mortgage financing in the country and what should be the policy direction in this regard?
Regretably, mortgage has not been doing too well. The contribution of that mortgage to the GDP is about one per cent, while the real estate sector is eight per cent, unlike other countries where you have mortgage powering the economy. You cannot look at the mortgage in isolation while you could have had investors who could have come into the economy and bring a lot of money to the developers. We have property protection index in Africa saying that out of 26 countries, we rank second from the lowest in terms of protection of property rights.
The policy direction cannot be just be from the mortgage sector alone, it has to be holistic. In the World Bank’S doing business report, out of about 189, we rank 170. So, all of these things are challenges that the government will have to work on. And it’s going to have ripple effects on other sectors. Whatever we are doing now is quite enviable. Foreign investors are coming, a lot of things are happening. We have to also help the policy. Whatever policy we make especially in property protection is going to affect the mortgage, whether registration whereof the title, which takes about 80 days in some states in Nigeria, whereas in some other countries, it takes about maybe two days. So, if we look at all of these, it’s going to directly affect the mortgage activities.
What are your thoughts and projections for the the year?
Whatever the country is going through now is not peculiar to Nigeria. Other developed markets have gone through the same at one point or the other. I see it basically a phase. The falling oil prices have contributed a lot to the present situation. Other oil producing nations are going through similar experience. The nation has all along depended heavily on crude oil as a foreign exchange earner. But since crude oil contributes just 10 per cent to the nation’s GDP, we should be able to resolve the current economic crisis this year, based on the disposition of the current administration. The outlook is bright, despite the current situation, based on the strategic focus in this year’s budget, which particularly planks its priority on economic diversification and infrastructure development. In tackling the economic crisis, we also need to tame our appetite for foreign goods in favour of made in Nigeria products. I see us coming out of this traumatic phase by the third quarter of this year, when the economy will begin to rebound and by mid 2017, I believe that we would have forgotten what we are presently going through.
One other major challenge is the land use act. What are your thoughts about this?
People have been clamouring for a change in the land use act. Basically, what should be done is that the involvement of government in the administration of land should be minimal, should not be as strong as what we have currently have. That has been the cry of every player in the real estate sector.
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