‘Clamp down on graft will hurt real estate investment’
AS heavy clouds of uncertainty hovers on the Nigerian real estate market due to lower oil prices, an expert has predicted that the clamp down on corruption and money laundering will reduce real estate investment for a period of two to three years.
The economist and financial analyst said that unclear policy direction by the Central Bank of Nigeria (CBN) would give rise to persistent macro economic headwinds that would slow down construction activities while continuous forex restrictions will increase cost of building materials and lower disposable income would affect demand for property.
Mr. Bismarck Rewane, the Chief Executive Officer, Financial Derivatives Company Limited, who spoke at the International Real Estate Federation (FIABCI) maiden dinner in Lagos, revealed that the decline in government revenues have led to abandoned projects and lowered disposable income, which has affected demand for property.
According to him, private investors have adopted wait and see position as CBN may likely expand the forex trading band before the Monetary Policy Committee meeting in March to N185-N220, which will reduce cost of building materials.
Speaking on the Role of the Real Estate Sector in Reshaping the Economy, he noted that growing focus on high-end property, shopping malls are gaining traction with increased interest from private equity firms, the liquidity pressures and capacity for refinancing on the part of Primary Mortgage Banks (PMB).
BMI Research Outlook Real Estate, says that residential and non-residential building market will register sluggish growth in 2016; Government funding for housing will be restricted due to the fall in oil revenues; Eko Atlantic City and major commercial projects such as shopping centres may struggle to gain traction; domestic and international investors are likely to adopt a wait-and-see approach to their projects.
“There is still unmet demand in the commercial, industrial and residential sectors; growth will remain consistently strong especially in Lagos, Abuja and Port Harcourt.”
For Rewane, in 2016, the Gross Domestic Product (GDP) growth would remain suboptimal at three per cent, constrained by low activity levels in the economy and weak domestic consumption, which is expected to pick up in 2017 as increased government spending begins to have impact. He added that the real estate growth would move in tandem with consumption and GDP.
He is optimistic that contractor arrears will be paid, funds will be released for new projects and infrastructure development will make real estate more attractive. Rewane foresees adaptive reuse in the real estate sub sector, such as conversion of residential properties to office space, and warehouses to shopping malls. “Properties with the right pricing, suitable location, good finishing will not stay in the market for long,” he said.
In his submission, Mr. Bode Adediji disagreed that the market will rebound in 2017. He said: “In any economy, a period of mass disengagement of staff is always followed by a prolonged property crisis. Those who are laid off will default in rent payments.”
According to him, “the property market is driven by the fortunes and misfortunes of other sectors of the economy. Until, there is an overall turnaround, the market will exhibit features of worst recession ever experienced in the past decades.”
Earlier, the FIABCI Nigeria President, Mr. Joe Akhigbe explained that the organisation was established to create enabling environment for real estate professionals o acquire requisite knowledge necessary for them to make impact in the property industry.
He stated that the event was staged to seek solutions to the nagging problems in the industry through the sharing of ideas, expertise and experiences. “The institution also seeks to create a platform where professionals from various field within the built environment can network with each other for the purpose of optimizing business opportunities all over the world and to add an international dimension to their businesses, which if of great importance considering the problems that plague the industry today,” he said.