FHA, others list challenges, prospects to real estate investment
The Managing Director of the Federal Housing Authority (FHA), Senator Gbenga Ashafa has said the emergence of new risks in the country pose new threats to real estate investment.
He stated that despite the threats, real estate sector remains the asset of choice for investment as growth and opportunities in the various subsectors are expected.
Ashafa spoke at the real estate discussions and awards forum organised by Thinkmint Nigeria in Lagos. He said the risks include insecurity, political changes in government policies, extreme dependence on natural resources/lack of economic diversity and unpredictability of local currencies against the dollar.
The forum featured the presentation of lifetime achievement awards to the minister of works and housing, Babatunde Fashola, real estate woman of the year to the Chief Executive Officer of Urban Shelter, Saadiya Aliyu, special recognition award for the growth and development of Nigeria Real Estate industry to the Managing Director of Nigerian Mortgage Refinance Company, Kehinde Ogundinmu and real estate man of the year to Babajide Odusolu of OCTO5 holdings ltd. Others are the young real estate person of the year, Babajide Adekola of HomeWork Development and Properties, luxury project of the year to Azuri Towers by Eko Atlantic and real estate investment advisory company of the year to the Northcourt Real Estate.
Represented by the General Manager, procurement at the FHA, Mr. Thomas Anetor, Ashafa, explained that the Certificate of Occupancy for property development is essentially a long-term lease subject to all kinds of terms and conditions stressing that there are usually issues of transparency and duration of processes and transfers.
This problem, he said is compounded by the fact that majority of land registries are still manually operated.
“High costs of acquisition and construction, these are as a result of high costs of building materials, high costs of skilled labour, multiple taxation, poor or non-existent infrastructure”, he said.
However, the MD noted that demand for residential real estate is expected to rise, as ‘Work from Home’ becomes a more permanent influence. He disclosed that there is an observable shift towards one and two bedroom flats in strategic locations as well as discernable demand for ‘short stay’ and apartments with flexible rent payment plans.
Ashafa said “Demand on retail properties such as malls which had been adversely affected by the effects of Covid-19 is likely to pick up, albeit slowly, due to the economic downturn. In the long run however, demand will pick up with some adjustments such as online shopping, increased use of retail apps. In the Industrial sub-sector, demand for more warehouses and logistics will increase due to the impact of COVID-19 and the shift from physical stores to online shopping.”
The demand for bare lands, he maintained would increase due to shifts across the subsectors adding that there would be a preference for mixed use development, which will be guided by the increasing demand for high quality technologically driven and eco-friendly environments.
He advised that investors should explore the potential for local partnerships as such partnership could also bring local expertise to help identify and overcome difficulties in doing business in the local environment.
“The Federal Housing Authority, which is the most visible representative of government in the Housing Sector, has a vibrant Partnership Department through which about 20 per cent of our products are rolled out. We look forward to having you as Partners as we look to open more projects countrywide, especially FHA’s Abuja New City, which is envisaged to sit on over 700 hectares.”
Speaking on, “building covid-19 resilient cities in Africa”, a senior officer at UN Habitat, Oumar Sylla explained that economic contraction caused by the COVID-19 Pandemic will impact tradable activities, particularly manufacturing and services in a city like Lagos, which is expected to experience negative growth. The urban economic contraction, he said will directly reduce municipal revenues, which in turn, leads to less financial resources to deliver urban services
He called for informal settlement regeneration and restructuration plans to be integrated into national priorities and strategies to address root causes of vulnerability as well as mechanisms to promote rapid access to housing and prevent forced evictions.
Sylla said, “African local governments, on the average, are projected to experience a drop in local finances in the order of 65 per cent under the worst-case scenario and up to 30 per cent under the best case scenario. We need to introduce measures to secure the right to housing for all through moratoriums on evictions and suspension of utility costs and surcharges in the extent possible for the duration of the pandemic.’’