The sharp rise in construction costs has significantly disrupted Nigeria’s housing sector, with many affordable housing developers struggling to commence new projects or complete ongoing developments within previously projected budgets. Developers warned that unless the government intervenes, escalating costs will continue to shrink the supply of affordable homes and push millions of Nigerians further away from home ownership, CHINEDUM UWAEGBULAM reports.

Nigeria’s affordable housing sector is facing one of its most difficult periods in recent years as rising construction costs, high interest rates, inflationary pressures, currency depreciation, and infrastructure deficits continue to squeeze developers and push home ownership beyond the reach of millions of Nigerians.

For many developers, delivering houses at prices affordable to low- and middle-income earners has become increasingly challenging. While demand for housing remains strong, the cost of development has risen sharply, forcing many firms to increase house prices, slow project delivery, reduce project sizes, or suspend developments altogether.

The situation has raised concerns among industry stakeholders who fear that the country’s housing deficit, estimated at 14.925 million housing units by the Federal Government, could worsen if urgent measures are not taken to reduce development costs and improve access to affordable financing.

In many cities such as Lagos, Abuja, Port Harcourt, Kano, Enugu and Ibadan, developers are contending with a combination of economic and structural challenges that have significantly altered the economics of housing delivery.

The cost of essential construction materials has surged in recent years. Cement, reinforcement steel, roofing sheets, electrical fittings, plumbing materials, tiles, paints, doors, windows and other finishing components have recorded significant price increases.

In the last three to five years, cement has moved from N3,000 to N12,000. Iron rods have gone from N450,000 to N1 million. Labour has increased from N3,000 to N11,000 per day. Collectively, this represents an increase of approximately 400 per cent in construction costs.

Developers said the depreciation of the naira has further compounded the situation, especially for materials and equipment that depend on imported inputs. The result is a sharp increase in construction budgets and project costs.

A housing unit that could be delivered at an affordable price a few years ago now requires substantially higher investment, forcing developers to revise selling prices upward. Consequently, many prospective homeowners are finding it increasingly difficult to purchase homes.

Industry operators stated that while the demand for affordable housing remains high, the purchasing power of Nigerians has weakened considerably due to inflation, rising transportation costs, food prices, and declining disposable incomes. Despite the cost of construction materials, developers are also struggling with financing challenges.

Housing development is capital-intensive and requires access to long-term funding. However, commercial lending rates remain high, making it difficult for developers to secure affordable financing for projects.

Many developers rely on short-term bank facilities to finance long-term housing projects, creating a mismatch that increases financial risks and overall project costs. The challenge is even more severe for small and medium-scale developers who often lack access to institutional funding sources.

According to private developers, the absence of long-term, low-interest financing remains one of the biggest obstacles to affordable housing delivery in Nigeria. Another major factor driving up housing costs is the burden of infrastructure provision.

In many parts of the country, developers are compelled to provide roads, drainage systems, electricity networks, water supply facilities, sewage systems and security infrastructure before homes can be occupied. These expenses significantly increase project costs and are ultimately passed on to home buyers.

Unlike developed housing markets where governments provide trunk infrastructure to support housing developments, many Nigerian developers shoulder the responsibility themselves, making affordable housing projects difficult to sustain.

Housing experts argue that public investment in infrastructure could dramatically reduce development costs and improve housing affordability. Ironically, many of the challenges confronting developers today are issues that Nigeria’s housing policy sought to address decades ago.

The National Housing Policy recommended increased access to affordable housing finance, improved mortgage systems, easier access to land, promotion of local building materials, provision of infrastructure, streamlined development approvals and stronger public-private partnerships in housing delivery.

The policy also envisioned a framework where the government would create an enabling environment for housing development while the private sector drives construction and investment. However, stakeholders argued that implementation has remained weak.

Rather than catalysing large-scale affordable housing delivery, policy objectives have often been undermined by bureaucratic bottlenecks, inadequate funding, regulatory inefficiencies and inconsistent implementation.

For instance, obtaining land titles, Certificates of Occupancy, Governor’s Consent and development approvals remains expensive and time-consuming in many states. Developers frequently complain that approval delays add significantly to project costs and discourage investment in affordable housing.

Industry operators argued that the country’s housing challenge is not merely a construction problem but a broader issue involving land administration, infrastructure provision, financing, regulation and governance. According to them, the failure to address these structural issues has made affordable housing increasingly difficult to deliver.

The consequences are becoming evident across the country. Many households that previously qualified for affordable housing schemes can no longer afford the revised prices being offered by developers. Mortgage penetration remains low, while housing loan interest rates remain beyond the reach of many workers.

As a result, home ownership continues to decline among low- and middle-income earners, while demand for rental accommodation grows. Housing experts warn that if the trend continues, overcrowding, informal settlements and inadequate housing conditions could worsen in urban centres already struggling with rapid population growth.

Currently, mortgage lending remains underdeveloped, with less than 1 per cent of GDP compared with over 30 per cent in some emerging markets. Commercial lending rates frequently exceed 20 per cent, making mortgage repayment difficult for most households. Rapid urbanisation continues to increase housing demand faster than supply, while more than half of Nigeria’s population now resides in urban areas.

Current industry estimates indicate that constructing a modest one-bedroom housing unit now costs between N12 million and N25 million, while a two-bedroom unit ranges from N18 million to N40 million. A standard three-bedroom bungalow costs between N35 million and N75 million, depending on location and finishing quality, while a three-bedroom duplex can exceed N70 million. These escalating costs continue to undermine efforts by developers to deliver genuinely affordable housing to low- and middle-income Nigerians.

In response to mounting pressures, some developers are exploring innovative approaches to reduce costs. These include the adoption of alternative building technologies, modular construction systems, precast components and greater use of locally sourced building materials.

Others are introducing flexible payment plans, rent-to-own schemes and phased development models to improve affordability and attract buyers. However, experts caution that innovation alone cannot solve the affordability crisis without broader government support and policy reforms.

Stakeholders insist that government intervention should focus less on directly building houses and more on reducing the cost of housing delivery. Among the measures being recommended is the provision of serviced land with roads, drainage, water and electricity infrastructure already in place before allocation to developers.

They also advocate reforms to simplify land administration, reduce the cost of obtaining land titles and approvals, and digitise regulatory processes, as well as call for expanded access to affordable housing finance through stronger mortgage institutions, recapitalised housing intervention funds and single-digit interest rate loans for developers and homebuyers.

The founder and Chief Executive Officer of NISH Affordable Housing Ltd, Dr Yemi Adelakun, told The Guardian that escalating costs of building materials, financing and other inputs have made it increasingly difficult for developers to deliver homes at prices earlier agreed with prospective buyers.

“Many developers are unable to commence new projects or complete ongoing developments within previously projected budgets. Consequently, houses can no longer be delivered at prices earlier agreed with prospective buyers, while many buyers lack the financial capacity to absorb the resulting price increase,” he said.

According to Adelakun, the impact of rising costs has pushed many low- and middle-income earners out of the housing affordability bracket.

“The increase in construction costs has led to higher house prices, thereby excluding a large proportion of low- and middle-income earners from the housing affordability bracket. At the same time, housing finance remains expensive and largely inaccessible to this category of homebuyers. As a result, the development of affordable housing projects has declined across the sector,” he added.

While he commended the Federal Government’s Renewed Hope Housing Programme, Adelakun argued that greater impact could have been achieved through a stronger emphasis on social housing, wider stakeholder participation, and delivery of homes at lower price points.

He suggested that social housing units priced below N15 million should have received greater priority, with more affordable housing developers engaged to deliver low-margin, cost-effective housing at scale.

To reduce development costs and expand access to housing, Adelakun called for a Social Housing Marshall Plan (SHMP), involving collaboration between the Federal Government and state governments.

Under the proposal, state governors and the Minister of the Federal Capital Territory should allocate mass housing land in accessible locations, while relevant government agencies provide supporting infrastructure such as roads, electricity, water supply, sanitation and hygiene facilities.

The Chief Executive Officer of Property Vaults Limited, Mr Andy Morka, said the current cost of building materials has affected construction prices to the extent that genuinely affordable housing is becoming rare, except where the government provides land and infrastructure at little or no cost.

He said the impact on homebuyers has been severe, noting that many housing units previously within reach of low- and middle-income earners have now been priced beyond their capacity.

“Units that were previously within reach of low- and middle-income earners have been repriced entirely out of their range. Buyers who had started saving toward a home purchase have found that their savings no longer match the new market realities,” Morka said.

He added that for many Nigerians, the dream of home ownership has become increasingly difficult without fundamental changes in how the government supports both housing supply and demand.

Morka also identified land access as a major challenge confronting developers, particularly due to delays associated with property titles.

“There is so much delay in the registration of fresh titles and transfer titles, such as a deed of assignment.

Buyers have become very sceptical of purchasing properties without perfect title documents, and this has made accessing land for fresh development a hard task for developers,” he explained.

On financing, he said commercial lending rates remain too high for affordable housing development, with construction financing reportedly attracting interest rates of about 30 to 36 per cent annually.

He noted that while the latest mortgage intervention schemes focus largely on qualified buyers acquiring existing properties with proper titles, developers of new housing projects still struggle to access affordable financing.

Morka urged the government to adopt a new town development strategy by creating fully serviced communities linked to major cities through efficient transport systems.

According to him, such an approach would open up new land areas, reduce pressure on urban centres and create conditions where affordable housing can be delivered at scale.

He also called for government intervention in the cost of building materials. “Given that construction costs have risen by 400 per cent in three years, direct intervention in material pricing is not optional; it is necessary,” he said, urging subsidies for critical materials such as cement and iron rods.

Similarly, the Managing Director/Chief Executive Officer of Glomo Homes and Properties Limited, Mr Moses Yakubu, said expensive commercial lending rates and infrastructure responsibilities have continued to increase the cost of housing delivery.

He said developers are often forced to finance infrastructure that should ordinarily be provided by the government, including roads, drainage systems, electricity, water supply and security facilities.

According to him, reliance on expensive commercial loans has increased project costs, while the shortage of long-term, low-interest housing finance has limited developers’ ability to undertake large-scale affordable housing schemes.

Yakubu acknowledged interventions through institutions such as the Federal Mortgage Bank of Nigeria and the National Housing Fund, but said access remains limited due to bureaucratic procedures, funding constraints and eligibility requirements.

He urged the government to move beyond policy formulation and focus on implementation, measurable outcomes and stronger collaboration with private-sector developers.