‘Nigeria needs incentives for real estate investors’
RUTH OBIH-OBUAH is a lawyer, real estate entrepreneur, passionate about the way people live, work and invests. She is the founder and Chief Executive of 3Invest, one of Africa’s leading real estate brands. She spoke with CHINEDUM UWAEGBULAM on the forthcoming Real Estate Unite Summit, issues of co working space and U.S. EB5 investment programme.
Real Estate Unite has been an annual flagship event that provides important platform for residential, office, retail, healthcare, hospitality and industrial sectors of Africa’s property market. How has the summit positively impacted on the sector? What are the lessons learnt over the years?
3Invest’s advocacy platform serves as a valuable source for real estate stakeholders to obtain industry information and connects with professionals in what has become the Industry flagship event. The gathering has brought a lot of impact and growth in the industry. But the challenges are enormous, as they have to do with the government regulations and policies. That’s why this year’s programme has been devoted to conversation about the real estate sector of the economy. We are looking at how the sector can move forward and yield the dividends of democracy.
We have discovered that the real estate sector lacks continuity. Ten years ago, the real estate developers present in the market are not there today, just a few of them. A lot them have left to other ventures and looking for greener pasture elsewhere. They have been subdued by challenges in the market. A lot of them have legal and other issues. That’s a huge blow for a sector that is the most transformative of any economy, and which supposed to help the nation tackle poverty and create jobs.
If government’s attention shifts to this sector as done for other sectors, it will rekindle interest among the stakeholders. Real estate has the potentials to increase the gross domestic product (GDP) of Nigeria. Since we know this truth, why are we lagging behind in transforming the industry? So, it is not encouraging for new entrants. It is easy to make money in real estate, but the sustainability of the business is not there. That’s why we are gathering people to find lasting solutions to these problems. After deliberations, we go to the government with agenda to rescue the sector.
You have tagged this year’s event as a conversation summit? . What is prompted this and what do you hope to achieve?
The property industry is one of the most valuable asset classes; a lot of people are turning to technology to use it to identify and resolve issues. The use of technology in the real estate industry is in existence, but not been utilized in the way it should be. One of the things, we would be looking at this year, is to see how we can advocate for people to use technology, show them the technology they need and teach them how to use it. For instance, in land registration, people are using block chain; we hope tap into the benefits and propose the technology for land administration in the country. Also, in property management and building technology, there are so many innovations that Nigerians and professionals need to explore during the summit. The conversation on technology is key.
We will also be looking at how to connect the dots between policy frameworks, legal and regulatory issues, and real estate growth in Nigeria. If we are saying the sector is not growing because of policy issues, what are the solutions? We now review the connection side, every investor here wants to exit, and you ask yourself, where are they running to and why are we not creating a conducive atmosphere for our investors? Other issues like debt financing, what are the terms? A problem well identified is a problem half solved. The public sector cannot do it alone, they must collaborate with the private sector. Then, we deal with collaboration among the public and private sector to plug the loopholes and redefine the sector. Another aspect of the challenge is to identify the real demand in all the markets. For us here, profitability is key. That is why there are a lot of vacant buildings in the country. Some of the investments are not sustainable. It is really a deep conversation; we’re aiming at the summit.
As you said, technology is playing a key role now in real estate. The online real estate market in Nigeria is yet to attract buyers like other economies. Why is it so?
Nigerians are not ready for this type of innovations due to trust and verification issues. A lot of people are not comfortable buying property online. They believe in seeing the property before transactions can commence. When it come to renting and short term office leasing, you can use technology to make it happen. In office market, a lot of people are turning to co-working space. Why? It is because of the flexibility and short leases. They can pay as they use; nobody wants long-term leases anymore. There is a limit you can use the technology when it comes to real estate.
The legal and regulatory framework for the real estate sector has continued to pose some challenges leading to high construction costs and mortgage interest rates. What should government do to tackle the problem?
Cost is a big factor in real estate. What make the mortgage sub-sector cumbersome is that there is a process in creating the mortgagees. By the time, you put on all the factors in creating one mortgage; the interest rate may have gone up. In other climes, people don’t buy houses in cash, but the high cost of interest rates, cost of construction, and registration of titles are driving prospective homeowners to buy property in cash. In the commercial side, like the Real Estate Investment Trusts (REITs), some firms have REITS and don’t have income producing properties to support it.
What are the prospects of investing in projects abroad, especially in the United States where investors are offered permanent legal residency under the EB-5 programme?
The U.S. Citizenship and Immigration Services under the Department of Homeland Security administer the EB5 investment programme. It allows investors who make a qualified investment to fast track permanent legal residency in the United States for themselves and their immediate family without the usual roadblocks or red tape associated with the immigration process. One of the areas that have benefitted immensely from the programme is the real estate. 3Invest partnered with Houston EB5 to raise capital for development projects for Eighteen25 Luxury Condominiums in Houston. Houston EB5 offers potential investors, the opportunity of investing in real estate development in Houston Texas. In addition to the prospect of a good return on investment on the project, investing in the project qualified investors for permanent residency in the United States through the EB-5 programme.
Houston EB5 maintains focus on helping foreign investors achieve permanent United States residency. We have achieved an important milestone: the first I-829 approvals for Astoria and I-526 Marlowe, two of our luxury residential projects in Houston. The approvals signify that Houston EB5 has created the promised number of jobs per investor for the project, and several investors are approved for permanent U.S. residency.
This is an incentive the United States government has introduced to assist its citizens to attract investment. Can’t Nigeria learn from this scheme and list the kind of programmes and incentives that could be used to attract foreign investors? It is very simple, investors are allowed to invest in projects over three to five years, and they would get their money back. What has happened is that instead of developers going to the banks to borrow money, they’re getting it from investors free of charge.
With the entire buzz around co-working spaces, what are the benefits and implications for the traditional office and facility managers in Nigeria?
Co-working is a feature of office space. It helps people to reduce cost of hiring office space. In this case; instead of one person paying for an office, about 10 persons pay and stay in an office. A lot of big firms now go to grade A office space and have offices there without paying huge sums for lease and service charges. It reduces cost. That is technology working for you. It makes it easy for people to collaborate and work together. Co working is all about managing people and ensuring efficient services. Nigerians have been embracing it; there is a lot of co working spaces around now. That also reduces the need for the commercial big spaces.
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