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Experts foresee year of low expectations, worst outlook


After an initial effort by Buhari administration that eventually turned out to be a ‘false start’, fresh policy changes have been recommended to rescue Nigeria out of the heavy clouds of uncertainty hovering on the Nigerian real estate sector this year.

The real estate sector as at end of third quarter 2016-recorded 8.20 per cent sectoral contributions to Gross Domestic Product (GDP), a decline compared to 8.74 per cent recorded at third quarter of 2015. With lending institutions facing their own troubles, lending to the sector was anything but cheerful.

According to the Central Bank of Nigeria’s report of November 2016, interest rate on prime lending to real estate activities from 26 per cent of lending banks is between 24per cent -29 per cent per annum and 18per cent-23per cent per annum from 52 per cent of lenders.


The maximum lending rate from most of the lending banks (87per cent) was between 24per cent-36per cent per annum. Mortgage financing to property buyers did not fare better, with unpleasant consequences for potential property buyers and real estate operators.

Apart from the perennial problems that traditionally undermine the sector, rising production costs have added to the challenges. Due to extreme volatility in the country’s currency and other economic challenges, foreign investment in the country, has also slowed down considerably.

Opinions were strongly divided on the 2017 outlook, while some built environment specialists didn’t see light at the end of the tunnel; others were cautiously optimistic.

“The major, going for the sector, is the fact that the need for real estate across strata remains extremely strong. Opportunities will therefore continue to exist. Though challenging times pose difficulties for operators, yet they present opportunities for innovations which will ultimately benefit the sector,” according to Managing Director, Property gate Development and Investment Plc, Mr. Adetokunbo Ajayi.

But the International Real Estate Federation (FIABCI) Africa President, Mr. Chudi Ubosi, told The Guardian that the biggest challenges in 2016 were investor confidence – local and international. “It does not look as there will be increased confidence in 2017, if that remains the same, we will most likely witness an economy that will remain stagnated as in 2016 and may possibly perform worse.

“The values – rental and capital will remain at the same levels of 2016. A lot of dollar denominated rents will continue to drop further as landlords seek willing tenants.  Commercial rents will also drop as people struggle with businesses that are held down by the economy.

“A lot of the dollar denominated commercial rents for the new A Class developments will be further reduced by as much as 30/40 per cent as tenants are sought.

“The sector with a glimmer of hope is the retail sector. The fundamentals in Nigeria remain strong concerning development of the retail outlets and what we may witness is a situation where development of the malls may continue but at a reduced rate and possibly undertaken in phases.”

Former President, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Bode Adediji, said the real estate landscape has been dominated by governmental pronouncements without tangible result, the property market itself has suffered an unprecedented glut as thousands of properties across the country remain unsold, abandoned and uncompleted.

He traced the problem to the era of cumulative bad governance, endemic corruption, disruption in the oil industry, and absence of any revolutionary economic blueprint. “Mass homelessness is now a common feature in all metropolitan areas, and infrastructure problems continue to escalate,” Adediji said.

“In 2016, the paucity of funds slowed down many projects while new ones could not commence for the same reasons. The year witnessed many tenants defaulting in rents payment while many houses remained vacant for very long periods especially in high rental areas of Ikoyi, Victoria Island and Lekki. Rents could not be increased while some tenants actually asked for rent reduction,” Kola Akomolede, senior member of the estate surveying profession  said.

Adediji predicts that the Year 2017 may even post a worse outlook.  “Although a large chunk of allocation has been given to the Power, Works and Housing and Urban Development sector in the budget, this quantum of allocation money in real terms amounts to little when you factor in inflation and devaluation of the naira,” he said.


“I am not optimistic about any change in the situation in the coming year unless a miracle happens. For instance, if the price of oil goes up to about $75 – $85 per barrel, that will put more money in the economy which will affect real estate positively. Even then it will still depend on if the militants will allow production,” Akomolede said.

For Kunle Awobodu, Vice President, Nigerian Institute of Building (NIOB), “2017 is pregnant with uncertainty. The unabated depreciation of the naira value will exacerbate the inflationary trend, culminating in review of bills of quantities. Foreign investors will still be skeptical of the Nigerian real estate sector.”

While calling for unprecedented political will at the highest level of leadership, Adediji recommended the appointment of a substantive Minister for Housing and Urban Development; moving the sector from the bank-bench status to the front- burner in the national scheme of things and empowerment of the private sector operators.

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