‘Federal, states should map out cities’ expansion plans’
Andy Morkah is a private developer and Managing Director, Property Vault Limited. He spoke to Property & Environment Editor, CHINEDUM UWAEGBULAM on issues relating to the housing industry, especially homeownership, trends in the retail market and strategies to aid site and services schemes.
The construction industry is a major employer of labour and key to alleviating poverty. What should be done to rejuvenate and reform the real estate sector?
TRULY the construction industry is a major employer of labour and key to alleviating poverty because of the multiplier impact it has on every player and contributor to the chain of stakeholders in the sector. It involves payment to architects and other design consultants, suppliers of materials, engagement of labourers on site both skilled and unskilled and project manager’s remuneration. In the same manner, real estate cannot survive without the construction team and what drives their activity is the need for houses and the funding to construct the houses to meet the need.
In my opinion, the need for housing already exists as statistics has it that Nigeria requires between 17-20 million homes to bridge the existing gap of first home owners’ house requirements talk less of the need for speculative/investment housing need and homes or houses built and kept as a store of wealth.
Where the challenge lies is funding at the right pricing for the right tenure under the right conditions to be able to build these houses. Therefore, government, Real Estate Developers Association of Nigeria (REDAN) and Securities and Exchange Commission (SEC) should intensify efforts to set up as many Real Estate Investment Trust Schemes (REITS) as possible to attract investments from the pension custodians and administrators, international investors and general public that may be scared of losing money to random real estate developers.
Secondly, the Land Use Act and a regulatory approval process should be re-appraised to remove bottlenecks and unnecessary cost elements that make houses unaffordable eventually.
Homeownership in Nigeria remains less than five per cent despite government and private sector efforts to provide housing in the country. What’s are the challenges faced by private developers in providing affordable houses?
Every private developer is profit-oriented, therefore developing for the general masses may not be the first choice of an average Nigerian. As savings culture is still a huge issue as most Nigerians are still battling with consumption in such a manner that equity contribution for mortgage facility no matter the amount has always been a huge challenge, where couple of them scale through, the default rate has been on the increase for beneficiaries whose employers do not have regular salary payments.
The retail market accounts for 16 per cent of Nigeria’s domestic product and will hold a $40 billion growth opportunity by 2020. What are the major drivers for the market?
Depending on how you look at the retail market the $40billion projection by 2020 may be grossly understated, as the informal retail sector is yet to have precise measurable indices. However, there is a huge acceptance of the formal retail sector, especially in the urban centres, which covers commercial cities, and the 36 state capitals of the country.
You will notice that beyond the two international brands that are, Shoprite and SPAR, Nigerian entrepreneurs are beginning to put up sustainable structures that will drive local brands to profitability hence, we now have a lot more organized local retail stores such as; Hubmart, Ebeanor, Just rite, H-Medix, Market square and a lot of other new brands that are coming up with some signs of seriousness.
With this new development, you notice that street trading is gradually becoming a thing of the past as an average Nigerian housewife and shopper is now accepting the malls and shopping centres as a social infrastructure more convenient to do their shopping activities.
Financing major infrastructure projects has been the bane of the housing industry. What strategies should the government adopt in delivering site and services schemes?
One of the reasons developers have not been able to achieve affordable housing in Nigeria is the lack of basic infrastructure, which requires collecting virgin plots of land or distribute services within an estate. An appraisal of the total cost of developing residential estates by developers have shown that a huge chunk of the cost is usually spent on creating access roads, which sometimes may involve constructing bridges to cross canals and water channels, procuring power distribution lines and transformers to the estates as well as distributing within the estate. These costs are usually added to the cost of construction of the houses before the sales price of the houses is determined.
Federal and State governments through their new town development agencies should strategically map out city development and expansion plans. These plans should be backed up with city expansion budgets towards the creation of access roads and electricity distribution lines within an area identified for estate expansion projects. Private developers thereafter can be invited under joint venture development agreements or outright sales of land under site and services scheme agreements to develop houses or sell plots at a price that may exclude the cost of infrastructure. Since that has already been done by the government, developers may be compelled to pay a token as cost of infrastructure back to the government as a way of re-financing government expenditure on the infrastructure for subsequent expansion works.
There seems to be low purchasing power among Nigerians, which has affected homeownership, especially the low-income earners. How do we ensure housing delivery for these cadres of people?
An average Nigerian worker still battles consumption and other physiological needs because of the low income driven by the government’s salary structure and very weak SME performance in the economy. So far so good, the Federal Integrated Staff Housing Programme has shown some seriousness but the allocation of these houses have not been devoid of politics. Efforts should be made to sight these projects within livable environments and allocation should be made to staff without much lobby and double allocations.
The frequency of development should also improve with an annual target of about 50,000 houses per year. Beyond the Federal government, State government that has the capacity should replicate the model for staff.
The Federal Government has resolved to use cooperative societies as a tool towards achieving affordable housing for Nigerians. How do cooperatives serve as a vehicle for mass housing in the country?
Cooperative societies are considered as an association of employees of a particular organization, parastatal, industry, sector, etc. It is made up of members who have agreed to unite to achieve a common goal that has mutual benefit to members. It is usually easier to access National Housing Fund (NHF) as a group from Federal Mortgage Bank of Nigeria and most times they prefer to go into organised residential estates for monitoring of disbursement vis a vis work done is usually easier. Repayment through deductions and member’s contributions is usually considered as easier to manage.
Notwithstanding about 10,000 property portals around the world, accounting for over 60 per cent of concluded property deals;
Nigeria is still lagging behind in on-line property listing. What are the challenges bedeviling operators of property portals?
It is a combination of several factors ranging from poor management of the property listing platform where administrators do not update current properties as at when due, the unwilling tendency of property owners to pay the right fee for advertising their properties on the platform, fraudulent practices of agents and other property seekers who go behind online platform operators to seal deals without their knowledge and the general property search culture of an average Nigerian who believes in physical inspection. These factors go a long way to discourage both the promoters of the search engine platforms and property seekers.
Private developers are flocking to the Lekki-Epe corridor known as the new Lagos. Do you think the axis has the potential for prospective homeowners?
Truly, this has been the case because of the perceived business potentials of the environment of the Ibeju Lekki axis known as the new Lagos. Beyond, the Dangote refineries, the Lekki free trade zone has been reported to host Dangote seaport and Lagos state government seaport, factories and a lot of manufacturing outfits. The workers expected to work in these places shall definitely not be going to work from old Lagos. Therefore, any good residential apartment built within that corridor shall be up for grabs by these workers when the companies eventually start up. Hence, the potentials of Ibeju Lekki and its environs cannot be overemphasized.