Experts have expressed worries that paucity of funds and high cost of credit now constitute major impediments to real estate growth. They urged authorities to boost infrastructure provision and reduce the high interest rate that hinders the cost of financing and delivery of housing projects across the country.
The experts spoke at a forum entitled: Navigating Nigeria’s Real Estate Landscape in 2024” organised by Nairametrics held virtually. Most developers have had to provide major infrastructure like roads, water and power in the housing production process, while the prime interest rate for lending to the real estate sector by commercial banks across the country varied between 23 per cent and 28.50 per cent.
The Managing Director, M&E Kaiser Limited, Jamila Faniyi, said one of the significant challenges faced in the construction and real estate sector is the inability to access long-term financing at single-digit interest rates, adding that the challenges faced also include paucity of infrastructure, which increase spending during projects.
She argued that when infrastructure is in place, every other thing will fall in line. According to her, if the nation can resolve issues such as roads and rails, single interest financing, as well as increases in building materials, challenges within the industry will be reduced.
The Deputy Chief Executive Officer, Purple Real Estate Company, Obinna Onunkwo, also lamented ideology mismatch in the industry, citing that most investors tend to approach the sector from a short-term point of view, while real estate is a long-term investment.
Onunkwo said: “Real estate, across the world, is where you store wealth. Whatever wealth you create at the retail or institutional level is stored in real estate because it is a long-term asset. Many of the players are not approaching it from a long-term perspective, they approach it from the short-term point of view, and there’s a mismatch.
“If you look at the FMDQ data on the amount raised from Commercial Papers (CPs) over the past five years compared to corporate bonds issued within the same period, it tells a story. The banks and financial institutions are more interested in 90 days and one-year transactions. In real estate, building a mall can take you a minimum of 20 to 24 months, while the bank is giving you money for 90 days.”
Other contributors, Chief Executive Officer, Nigerian Mortgage Refinance Company, Kehinde Ogundimu and Head, Strategy and Public Affairs, Nairametrics, Uade Ahimier, reiterated that absence of long-term financing constitutes a clog in the wheel of progress.
“Developers are hardly able to get any long-term financing with single-digit interest rates. What we’re able to get are mostly double-digits, and you know that as inflation rises, so does the interest rate,” they noted.
