Why monthly rent payment will not work, by experts
The experts, comprising estate surveyors and developers who expressed divergent views say, the proposal will increase house rents, discourage property investments, engender black market dealings, others argue that the government should launch social housing programme to assist the low-earning and provide cheaper housing finance to developers at a single digit loan.
The Council which is the highest assembly of senior officials of the Federal and State Governments, and experts in the housing sector had declared that enforcement of a law on monthly rent payment across the federation would ameliorate the challenge of access to housing in Nigeria, which puts existing housing stock at 23 per 1000 inhabitant making home prices and rents to grow astronomically ahead of the nations’ general inflation. Currently,
property owners/landlords compulsorily demand between one to two years’ rents from their tenants.
Speaking on the proposed law, the Lagos State Chairman of Nigerian Institution of Estate Surveyors and Valuers (NIESV), Rogba Orimolade said the reality is that there is existing shortage of housing stocks hence bringing regulations will amount to imposing a black market situation.
According to him, the government has failed in all their projections for over a decade in housing delivery, adding that due to their failure, it is only the private sector that could be relied on to meet their yearnings for adequate housing.
He noted that the private sector in turn are not building houses for charity but to make profits from huge borrowing from the banks based on double digits loan.
“ It doesn’t work that way. Government should face the core mandate, which is involves jump-starting the housing sector especially in the area of housing finance and let sources of housing finance be cheaper for developers. We need a positive situation where they could take loans by single digit and individuals can still afford to take loans. As long as the housing deficits is still huge, and government on its own is not doing anything thing in reducing it. We have a long way to go, we can talk about social housing in which government can subsidize housing that are coming in. Government should rather focus on those areas.”
He said, although the resolution passed on to the Federal Ministry of Power, Work, and Housing is a populist song for anybody to clap for, but inherent is a bigger challenge.
He emphasized that the main issues, which revolve round the vicious circle of the challenges affecting the sectoo include finance, cost of building approvals, the cost of doing business in terms of building stocks of houses, titling, making registration of governors consent cheaper.
“Government must take social housing as more of their socially responsibility. You can’t expect the developer to take double-digit loan and be collecting rents monthly. We will look at it as professionals and take a position”, he stated.
For instance, he said less than 5per cent of all lands in Nigeria is titled due to the expensive nature of titling.
He added that this is the reason for the slow growth of the mortgage sector, “for mortgages to thrive, you must give loans withtitles. If the conditions are not right, the only thing that developer can do is to step out and move to a more friendly clime”.
For the Chairman, Faculty of Estate Agency and Auctioneering, NIESV, Mr. Sam Eboigbe, if such proposal is to be implemented, core professionals and relevant stakeholders must be consulted for effective implementation . According to him, if the cost of funding and other variables required in making housing available is still high, the reality of such resolution is in doubt for the housing sector.
“If there are so many things that the private sector cannot control like the price of cement and other building materials, government must put a law in place so that if anybody defaults in paying the monthly rent, it should be easier to get possession of the property back. There should be a legal framework for defaulters that would say for instance five days after defaulting the developer must get his property back. If there are no legal framework, the impact of such proposal could also be a lot of behind the scene dealing and discouragement for investors”.
The Managing Director/Chief Executive Officer, Tetramanor Limited, a property development Company Mr. John Beecroft observed that the initiative has been in practice in other countries such as the United States of America but remarked that Nigeria standard is not ripe for it based on some observable loopholes in Nigerian legal structure.
“For me, rent is even expensive when you pay within a shorter period, if my rent is N1.2million yearly, if you are paying per month, I would charge you N200, 000 instead of the actual N100, 000 however, the other side is that rent is more convenient to pay on a monthly basis. In one of our property, what we did was that we gave our tenants three options, you can pay one year, or six months or monthly with high premium and so a few of them opted for that but luckily for us because we have a good working relationship with our tenants, it has worked well”.
He explained that in the immediate term, nothing would change because people would just continue as usual, stressing that such proposal if implemented, would drive more people outside the legal system because the landlords and the tenants will not have the need to do any contractual agreement.
On whether the law would discourage developers from investing in the housing sector, he stated that a developer who has high-in clients with good jobs and more investment in the luxury sector of housing sector would not be discouraged from investing in the housing sector but for those in the lower segment with clients who don’t have steady jobs, it would discourage investors because such clients might not be able to pay their rents promptly.
Another developer Mr. Olukayode Olusanya of the Oaks Homes opines that government wants to implement such law as a social programme to assist the low-earning capacity of Nigerians but expressed worries that it might not be a good move for property owners who would expect to collect the one or two years rents in bulk in order to re-invest, take themselves and families on vacation and boost existing housing stock.
He said such policy might also cause fluctuations in house rents from the side of the landlords who will in turn respond to emerging hike in prices of goods and services in the market, to jack-up the price of rents to the detriments of the tenants.
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