Experts optimistic as real estate sector underperforms
After the COVID-19 pandemic disrupted activities, which are at the heart of the real estate business, the industry has continued to play catch-up in 2021 as the business environment was dampened by inflation and skyrocketing exchange rates.
The National Bureau of Statistics (NBS) report shows that the economy of Nigeria advanced by 4 per cent year-on-year in the third quarter of 2021, following a 5 per cent expansion in the prior period, strongest since the last quarter of 2014.
Nigeria’s real estate sector posted 3.85 percent growth in the second quarter of 2021 and expanded by 10 per cent YoY in Q3 2021 as well as sustained a positive quarterly YoY growth trend since Q1 2021.
Despite the quarter figure reflecting a higher economic activity, the real estate and construction remained low as operatives continued their reliance on imported building materials, while inflation on local materials increased construction cost and contributed to slumping in the sector’s performance.
Industry players’ expectations that 2021 will be used to rebuild the previous year – during the COVID-19 lockdown were dashed.
According to the President, Nigerian Institute of Town Planners (NITP), Mr. Olutoyin Ayinde, the cost of construction materials affected the fortunes of the sector, as housing constitutes 70 per cent of the real estate activities.
Ayinde said the cost of housing is becoming unaffordable, but added, “it was better than last year.” He said the drivers of the economy must look inwards, especially in the real estate industry.
“Our attempts at diversification have been more of lip service. It still looks as if we are more dependent on oil, while some building materials can be sourced locally and sustainably. Improving on the security situation would guarantee more housing.”
He called for the use of available building materials such as wood for partitioning and flooring to make the buildings lighter and cheaper.
Ayinde called on the government to invest in research so that homegrown solutions could be utilised in building construction.
He urged the government to pay attention to land management and administration as well as planning, which will ensure cities are well regulated and organized.
The President, Nigerian Institute of Architects (NIA), Enyi Ben-Eboh, said the year under review has not been very encouraging for housing as the poor economy in 2020 spirals into 2021 to account for its bad performance in the year.
Ben-Eboh explained that whenever there is a downturn in the economy, it is the construction industry that suffers most because people only attend to subsistent needs while housing is considered a luxury.
He noted that policies that should have been put in place to tackle the problems of the sector in the year, took a back seat, even as development control space was neglected and a lot of things went wrong.
“The economy struggled to get back from effects of COVID-19 pandemic lockdown. That impacted a great deal on the cost of building materials. Building materials are at the centre of the housing industry and because of the lockdown, inflation tripled.
“A lot of materials that are used in the construction industry are imported or have foreign components and with the fortune of naira dipping over the last couple of months, it has also impacted the cost of building materials, which have become more expensive. The cost of cement, depending on where you are, has almost added an N1, 000 to what it used to be at the beginning of the year.
“Collapse of structures is still at the front burner and it’s a wake-up call that we need to stop paying lip service to development control. States have to domesticate the building code for professionals to have a defined role in the development of projects and for government to keep checking the compliance with rules so that when there is a problem, it can be quickly addressed.
“A lot of jobs have been lost in the sector and others because there is general slow down in the economy, as a lot of offices can’t maintain the number of staff they used to have before the outbreak of COVID-19 pandemic.”
The NIA boss urged the government and professionals in the industry to come together to chart a proper direction for the industry. He said the government should partner with professional bodies to ensure that the issue of monitoring is not left to the government alone.
He said: “We should have professional bodies serve as a watchdog to the government and the government should also trust the professional bodies by involving them in every project government is developing. Let various state governments who are in charge of development control try to domesticate the building code as much as possible.”
The President, Nigerian Society of Engineers, (NSE) Babagana Mohammed, said the society is not satisfied with the performance of the sector, stressing that a lot still needs to be done.
Muhammed said: “There has to be robust engagement with engineers and the private sector that actively participate in housing provision. It cannot be the government alone because there are competing demands and the challenge of paucity of the fund is real.
“The banks don’t have the money, we have to create mega activities so that people will come and invest in the sector. The system must also have the integrity to grow the industry. We need to grow the professions and that has to be done by the government. Engineers must lead while government should take the back seat. Government cannot lead, it is the professionals that should, to get it right.”
He lamented that houses are still expensive, while housing schemes that were designed for the common man are no longer for them.
“The private sector should participate by involving the professionals in designing and implementing housing projects. It’s not everybody’s business because we do not want houses that will collapse. We need robust engagement with professional associations and in particular the engineers because for every structure to stand, it is not about the drawing alone but the design and the calculations by engineers,” Muhammed said.
In his submission, the President, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Sir Emmanuel Wike, said it has been a difficult year for the sector, adding, “The government policies have not helped issues.”
He said, after the restrictions and palliatives for different sectors, what is needed should be a fiscal and monetary policy that enhances real estate developments and revamp the economy.
Wike stressed that government must invest in real estate and infrastructure if the housing sector must rebound. He added that the sector is a major driver for menial jobs and professional activities.
For the President of, Real Estate Developers Association of Nigeria (REDAN), Aliyu Wammako, said the year has been prosperous.
According to him, REDAN signed a Memorandum of Understanding (MoU) with Shelter Afrique to build 12,000 housing units and Family Homes Funds, a Federal Government intervention fund providing long-term housing loans for individuals on low-income as well as plans to back the government to create a housing bond in partnership with the private sector.
Wammako urged the government to sustain its present tempo in the construction and real estate sector. He, however, wants the government to collaborate with the private sector to build houses.