Experts urge practitioners to explore opportunities in real estate sector

Experts have advised built environment practitioners to take advantage of current reforms to improve the real estate sector’s contribution to economic development.

The industry continues to be resilient, and more investors are anticipated to hedge their resources against uncertainties, particularly inflation. According to them, the business environment is still unstable and vulnerable driven by rising inflation, a massive infrastructure deficit, a shallow financial environment, policy inadequacy or failure, and increasing exchange rate pressure in the currency market.

Given the prevailing economic uncertainty in the country, they also urged the government to reduce over-reliance on imported construction materials towards stabilising the sector and upgrading existing housing programmes. They also urged the government to tackle structural issues such as land fragmentation, a sharp rise in poverty and inequality, and the downward rigidity of housing prices.

Nigeria has undergone several major domestic policy shifts that have impacted the real estate market, posing challenges and unique opportunities. The experts advised industry players to leverage opportunities such as land banking, warehousing, hospitality, luxury housing, Grade B and below office spaces, as well as affordable housing.

The experts met at the third yearly UACN Property Development Company (UPDC) PLC Real Estate Summit themed: “Current Economic Reforms and their Impact on the Real Estate Sector,” held in Lagos, which was moderated by the company’s Chief Executive Officer, Mr Odunayo Ojo.

The programme attracted experts in the banking and real estate sectors, who shared insights into how to navigate opportunities and challenges that current economic reforms portend.
Founder and Chief Consultant of BAA Consult, Biodun Adedipe, said there have been six major domestic policy shifts in Nigeria: fuel subsidy removal, unified exchange rates, unbanning of 43 items from the official FX window, Tax reforms, business environment and bank recapitalisation. He said it is important to recognise the challenges and seek opportunities in them.

According to him, “there are specific things in the tax reforms relating to the real estate and the sector needs to engage more in advocacy, especially with top government functionaries and the policymakers.”

The Managing Director of Financial Derivatives Company Limited, Mr Bismarck Rewani, listed challenges that must be addressed including soaring housing prices and widespread unregistered housing developers, poor quality buildings resulting in building collapses, inadequate training of personnel and poor skills.

To help the real estate industry’s growth, Rewani said the government must promote development funding, preserve economic stability, and provide adequate infrastructure. He added that the growth of the financial sector and expanding the number of mortgage financing institutions is essential to the real estate industry.

He highlighted the need to tap into the hidden value in real estate and stressed the importance of the real estate sector to the country’s Gross Domestic Product (GDP). According to him, the real estate sector contributes 5.17 per cent to the GDP, which indicates the importance of housing and commercial property in Nigeria. However, the real estate sector underperforms the GDP due to the high cost of construction materials, reduction in demand for housing and commercial spaces and weak exchange rates.

Similarly, the Chief Executive Officer, Northcourt Real Estate, Ayo Ibaru, stated that the reforms that have been put in place are tending towards the negative even though they have brought some opportunities.

He said: “Tax reforms have made Nigeria more attractive from an economic standpoint; the concern now is that it scales through the National Assembly.”

Ibaru advised industry players to invest in cold storage warehousing and mid-market hospitality. He also urged developers to sign contracts that included contract variations and exit clauses.