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‘Finance Act will make property investing more affordable’


Ruth Obih-Obuah

RUTH OBIH-OBUAH is the founder and Chief Executive Officer, 3Invest. She spoke to CHINEDUM UWAEGBULAM on the benefits of the Finance Act to the property market; impact of the coronavirus on the real estate sector and other issues

While the real estate industry as a whole appears not affected to the same degree as the travel and entertainment industries, what impact can we expect the coronavirus to have on the real estate and housing sector?
The impact of the COVID-19 outbreak is being felt in all aspects of life with the largest impact on humans. This is already changing behaviours and responses to everything, including the real estate sector. The impact on the various segments of real estate is quite unique. Though, it is easy to assess the short-term impact of the pandemic on the total global shutdown, the long-term effects cannot be determined now.

Looking at the different segments of the market, you see that the hospitality sector is experiencing short-term volatility with low occupancy rate. Retail will experience low cash-flow due to reduced demand. The expectation is that in non-essential goods, retailers may seek rent reliefs from landlords while those retailing essential goods online orders and engaging in home delivery are beneficiaries of social distancing.

The office sector will experience short time disruption as more people work from home. Physical office use rates will fall as remote working increases, and landlords with exposure to short-term leases will be the worst hit. Co-working space operators are at higher risk. In some cases, landlords are negotiating new leases or renewals with tenants to ensure deals are executed.


The residential market will remain resilient to the effects of COVID-19. Demand for new homes and rents may rise as people may be seeking more sustainable homes post- COVID-19. However, low consumer confidence and reduced mobility will impact the demand during this period of uncertainty.

With a growing number of coronavirus cases across the country, the real estate industry is taking a hit as the pandemic prompts people to stay at home. Do you see an uptick in the use of technology? Which aspects do you think will be embraced by the sector? What will be the challenges?
Technology is an important mitigator and we are seeing an increase in online transaction platforms. One lesson, we should learn from this crisis is how to develop a resilient business model that can survive any climate. Companies that are not digitally equipped will trigger high demand for ICT solutions and this might increase the cost. The uncertainty will cause a high sense of desperation that might make brand susceptible to data theft or loss. The best mitigator here is education. Get online and learn how to get things done.

With Nigerians facing the challenges of low purchasing power, lack of functioning mortgage system and poor income level. For first-time buyer, could now possibly be a good time to buy property?
Naturally, a bear market is a buyer’s market. Developers should be less optimistic and more innovative to be able to make sales to real buyers. The new Finance Act offers support to the sector, so I believe in post-Covid19, there will be a reasonable activity in the real estate investment space before the bull market returns.

Despite increasing concern on the influence of human activities on the natural ecosystem and global climate, professionals engaged in shaping the built environment in Nigeria appears to be oblivious of the demands of the sustainability agenda. What’s the role and responsibilities of professionals in promoting and contributing towards achieving sustainable development?
As you know, sustainable development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs.The built environment and related activities have traditionally been notorious for depleting natural resources and adversely affecting the environment, economy and society, thereby compromising future generations. The real estate sector uses more energy than any other sector and is a growing contributor to carbon dioxide emissions.

Although, we have seen a shift towards the production of “more environmentally sustainable buildings mostly in the commercial sector, this, however, leads to disjointed sustainability outcome within the real estate value chain. There are noticeable differences between sub-sectors, which are at different levels of maturity in addressing their environmental and social impacts, reducing the overall effectiveness of the industry’s sustainability efforts.

To meet environmental targets, significant investment is required in both new building and refurbishing the residential and non-residential segments of the real estate industry.
I’m curious to know, if real estate organisations have statements of environmental policy, sustainability targets or commitments to combat the climate crisis. Are there coherent, common principles for achieving sustainable investment or development? Does the sector have a common view of what is needed to achieve sustainability? Are there tools like Environmental, Social, and Governance (ESG) metrics to use to manage, monitor, and report an organisation’s sustainability compliance and performance? Could the government offer better tax incentives to cover the higher cost of compliance?
Our advocacy goal at 3Invest is to advocate the urgency and benefits of sustainability to the sector through the Unite Summit. Investors in real estate assets whether they are users, operators or developers, all have interest in the relationship between financial and the environmental performance of real estate assets. There is a growing body of evidence that buildings that can deliver superior environmental performance could also deliver better financial performance benefits to all stakeholders.
For an inclusive, economic growth and shared prosperity, the built environment must begin to take the lead to plan, design and manage more resilient and sustainable communities. Sustainable global action is at the centre of a better future where humanity will enjoy peace and prosperity while protecting the planet and bringing an end to poverty and health crisis.

With the spread of the COVID-19 pandemic, it has dawned on everyone that there is a gap in healthcare real estate. What are the incentives to encourage investors in this area?
The healthcare sector in Nigeria is largely private-sector driven. There is a huge gap in social security in our society today. For us all to combat this pandemic, we need a primary health care system and  a strong commitment of all stakeholders and stakeholders being the people, the healthcare workers, the government and the real estate investor. Primary health care according to World Health Organisation (WHO) addresses the majority of a person’s health needs throughout their lifetime.  The role of the people requires that every Nigerian citizen needs to own primary health care and this can be achieved through adequate community mobilization. Just as we have voting rights and cards.


The role of the health care workers which include doctors, nurses/midwives, community health workers, laboratory scientists/technicians, and health assistants among others is to improve quality service delivery and achieve clients’ satisfaction.  This can be done through innovative utilization of available resources, encouraging patient participation in their care, and promoting healthcare worker-patient communication.  The acquisition and disposition of healthcare workers is very important in enhancing public perception and utilization of primary health care services. Commitment to duty, empathy, and professionalism that can enhance service delivery. 

The role of government at all levels is to express political commitment through funding, capacity building and system support. The government has the responsibility to develop great programmes and great services.  Primary health care services are not third-class services meant for third-class citizens. Therefore, adequate provision must be made in national, state and local budgets for quality healthcare delivery using the primary healthcare system. 
Most critical, is promoting access to essential and quality health services is to build and maintain infrastructure, training of the workforce, and provision of materials and equipment for effective health care. To attract investors, the government must first build or rebuild our primary health care system before we can have a robust healthcare real estate sector that is public sector-led.


President Muhammadu Buhari signed the Finance Bill, 2019 (now Finance Act) into law to support the implementation of the 2020 National Budget and to create an enabling environment for businesses. How will the Act benefit Nigeria’s property market?
It’s common knowledge that the real estate sector is the least attractive sector to our commercial banks today. Its also common knowledge that without proper financing almost every sector will either collapse or have poor performance. Having said that, we are also aware, that the Land Use Act of 1978 is at the core of the major financial crisis in the Nigerian real estate sector. However, the Finance Act 2020, provided a form of hope and support to the sector majorly on the issue of multiple taxation that exists in Real Estate Investment Schemes (REITS).

According to section 23 (1) of the Company Income Tax Act (CITA) as amended in the Finance Act of 2019, “the dividend and rental income received by a real estate investment company (REICs) on behalf of its shareholders” shall be exempted from Company Income Tax (CIT) “provides that a minimum of 75 percent of dividend and rental income is distributed “within 12 months of the end of the financial year in which the income was earned.”
This amendment lowers the risk associated in real estate investment through a real Estate Investment Company.

A REIT is a company owning and typically operating real estate which generates income.
The Finance Act 2020 provides a global approach to real estate investing in Nigeria. The benefits of this Act will provide more liquidity to produce more assets, it will create more enabling environment for more REIT’s, it might help rebuild our moribund mortgage sector, it will make property investing more affordable and encourage public real estate investment. In Nigerian property market, the average real estate market growth can be higher than the inflation rate.


Do you see the decline in treasury-bill rates and plummeting stock market in recent times as opportunity for the real estate sector, especially investors?
Real estate is a sectorised market. The recently celebrated finance act will that would have helped build momentum in the real estate capital market is now being overshadowed by the impact of COVID-19 especially on the capital market. A downturn is always an investors market.

As working from home and social distancing have become the new normal in a matter of weeks, the previously “shared office space” is, for many, looking increasingly unappetising. How has coronavirus pandemic affected shared workspaces in Nigeria?
This question relates to our Lagos Cowork. Well, as you can see, the social distancing short-term effects affects all non-essential businesses that require human contact. The global office sector is experiencing disruption as much as other sectors. Yes, the Cowork space operators might be at a higher risk because of the collaborative model but then, again, thanks to Proptech. The Cowork model in itself is a tech-driven. There is the human angle to it and the technology angle to it. Creativity will be a mitigator for this sub-sector.

In other climes, policymakers and government leaders have taken a range of approaches to deal with the economic fallout from the coronavirus. What will be your recommendation to Federal government on how to maintain market confidence and preserve financial stability in the real estate sector?
The truth is no one was prepared for this global crisis. There is no better time to embrace sustainable development than now. We need to look at the correlation between the global health crisis and the global economic crisis. We need a new balance of values and new ways of thinking and acting. This new thinking must transcend national and institutional boundaries and recognize that, in a globalizing world, health and disease in the most privileged nations are closely linked to health and disease in impoverished countries. Sustainable improvement in health and well-being is a necessity for all, and the value placed on health should permeate every area of social and economic activity. The greater challenge is the climate crisis. How prepared are we?
‘Finance Act will provide enabling environment for REIT’s, rebuild mortgage sector’


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