Professionals list strategies to grow real estate sector

Professionals have restated the need to reduce interest rates and inflation and introduce policies that will increase housing stock, especially for low and middle-income earners across the country.

They lamented the high cost of construction, increased price of land, poor quality of housing, and low return on housing investment, and called for improved supervision and regulation in the sector.

The experts, who spoke at a webinar on Nigeria Real Estate Market Review H1 2024, organised by Castle lifestyle in Lagos, noted that real estate offers huge potential for investors.

President, International Real Estate Federation (FIABCI-Nigeria), Mr Akin Opatola, expressed worry about the high cost of construction, saying the situation is expected due to inflation. He urged developers and investors to benchmark prices to prevent the failure of projects.

He said: “Every time there is a shift in the foreign exchange rate (FOREX), building materials prices go up by 50 to 70 per cent and increase sales prices for end users or off-plan sales. It also affects land prices and developments in Banana Island, Ikate and Bourdillon, as well as Lekki Phase I. The demand in those areas is interesting as it cuts across the board.

“We have also seen where developers with second citizenship get funds at single-digit interest rates and come back to the country as sole developers. But the challenge is that they benchmark prices in foreign exchange.”

Despite the challenge, he said the market is strong, and resilient and there are opportunities from the diaspora market. Opatola foresees a nexus between affordability and accessibility in places like Lagos.

According to him, investors and developers are now creative and increasing numbers of Joint Venture (JV) deals in the market by creating a marriage of convenience between landowners and developers. He disclosed that the sector has also expanded to short-let apartments and event centres developments.

“Other areas like land banking are interesting, especially when in proximity to infrastructure development like the proposed fourth mainland bridge, Lagos coastal road, and Ibeju Lekki free trade zone,” he said.

Opatola said the government should allow policy and leadership to take the driving seat in the sector, and stressed the need to create a pressure group that will improve advocacy and meeting with regulators to push concerns of the real estate industry.

The Chairman, Nigerian Institution of Estate Surveyors and Valuers, Lagos branch, Mr Gbenga Ismail, who lamented the low return on investment in real estate, wants interest rates to drop.

However, he said that the interest rate might not drop because the Federal Government needs money for capital projects. Ismail said the increase in the price of houses is a result of factors such as inflation, increased demand and urbanisation. He said prices in locations like Banana Island are high because housing supplies are limited, and many people need homes.

“The variation in the cost of construction is a contract issue and causes disputes between the developers and off-takers because off-takers believe that in contractual agreements, there should not be a price increase, as they have paid upfront. However, no developer will build below its cost price. The only way to avoid such disputes is to pay 100 per cent and not in instalments,” he said.

On what NIESV Lagos is doing to tackle challenges in the sector, he said one of the biggest issues is the government’s failure to ensure quality developments and housing designs.

Ismail said: “Now, we have many charlatans in the market who have money to invest in real estate, and do not follow standards, as well as regulations. That is why we are speaking to the government to enforce regulations, building codes and monitor projects.”

The Chief Executive Officer of Northcourt Real Estate, Mr Ayo Ibaru, said some areas offer unique potential and opportunities. These areas, he said, are residential on the outskirts, warehousing, luxury segments, facility maintenance, and demand for farmlands.

He said the Federal Government needs to increase real estate assets, particularly residential like social/affordable housing for the low- and middle-income earners. Ibaru, who expressed concern about the increase in interest rates, said the government should revisit some of its policies.