Inflation and Economic Crisis: How policy, innovation can save real estate industry

The Nigerian real estate market has faced severe turbulence over the past five years due to rising inflation, currency devaluation, and economic instability. Once a thriving industry for developers and investors, the sector has encountered significant challenges, pushing many builders into financial distress and forcing property buyers to reconsider their investments.

The Rising Cost of Construction
Inflation has soared from 11.25% in 2019 to over 28% in 2024, with construction inflation exceeding 300%. The devaluation of the naira—falling from ₦360/$1 in 2019 to nearly ₦1,500/$1 in 2024—has further compounded the crisis. Developers who relied on imported building materials now struggle with rising costs, making it difficult to complete projects on time and within budget.

A Lagos-based developer, who requested anonymity, described the struggle: “A project we planned at ₦250 million in 2020 now requires over ₦600 million to complete. Many developers are stuck between defaulting on delivery or absorbing losses that could collapse their businesses.”

The Ripple Effect: Delays, Defaults, and Market Uncertainty

As inflation continues to rise, many buyers who initially invested in properties under construction are experiencing prolonged delays or requesting refunds. Developers unable to complete projects on time are forced to renegotiate terms or offer alternative financial arrangements. In Lagos and Abuja, a survey of major developers reveals that nearly 67% of construction projects initiated between 2019 and 2023 remain incomplete, with several abandoned altogether.

The Future of Real Estate in Nigeria

Despite the downturn, experts believe that innovative solutions can help the real estate market stabilize. Some developers are exploring index-linked pricing models, where costs adjust with inflation, while others are shifting toward locally sourced building materials to reduce reliance on imports.

Financial analyst Olamide Adeyemi believes government intervention is crucial: “Without policy support—such as lower interest rates for real estate financing or incentives for local material production—the sector will continue to struggle. Developers need relief to complete ongoing projects and restore confidence in Nigeria’s property market.”

Conclusion
The Nigerian real estate sector, once a beacon of investment security, now faces its toughest period in recent history. Inflation, economic instability, and a declining naira have made property development a high-risk venture for both developers and homebuyers. While some companies are adapting to the challenges, the future of real estate investment in Nigeria will depend largely on economic recovery, financial innovation, and stronger regulatory frameworks.

For now, developers are bracing for what could be another challenging five years—unless drastic changes occur to stabilize the industry.

Adeyemi writes from Lagos