‘Government needs new policy to incentivise private investment in housing’
Mr. Laide Agboola is Chief Executive Officer of Purple Group,a real estate firm. He spoke to VICTOR GBONEGUN on rising cost of property acquisition, retail market, artisanship and challenges of technology in the real estate sector.
Many Nigerians are still grappling with high prices of homes and banks unwillingness to lend for low-income earners. How can this be solved?
Solving the problem of high prices and lenders’ unwillingness will take considerable effort from private and public actors. First, government could provide incentives to developers to build more affordable homes or establish programmes to help lower-income families access housing finance.
In addition, government could work with financial institutions to develop more flexible mortgage products and reduce barriers to accessing financing.
There are often legal and regulatory barriers to property ownership and development, which can drive up prices and limit availability of housing. Addressing these issues could help create a more favourable environment for housing development and ownership. The government should create policies to incentivise private investment in housing sector. This could help increase the supply of housing and drive down prices.
Investing in infrastructure and public services like transportation, healthcare and education could make areas outside of major cities more attractive for housing development, which could help increase supply and reduce prices.
Ultimately, solving the problem of high property prices and limited access to financing in Nigeria will likely require a combination of these strategies and sustained commitment and collaboration between government, financial institutions, developers and other stakeholders.
Fractionalisation and other tech advancements are also improving ownership prospects, providing customers with a way to own slices of real estate, which gets their foot in the door to potentially getting them started on a journey to acquire homes.
The Nigerian retail market remains fragmented and dependent on informal sales channels such as neighbourhood markets and kiosks, which account for 90 per cent of retail activity. What is your assessment of the sector and prospects for investors?
The retail market is indeed highly fragmented, with majority of sales occurring through informal channels such as, small kiosks, neighbourhood and open-air markets. This presents both challenges and opportunities for investors. However, it can be difficult to establish a nationwide presence and distribution network in such a fragmented market. On the other hand, there is significant room for growth and consolidation in the sector, as formal retailers expand their reach and capture more market share.
Investors considering entering the Nigerian retail market should carefully evaluate the competitive landscape and regulatory environment for the specific locations/markets they are looking to enter.
The Nigerian government has implemented policies to encourage foreign investment, including tax incentives and streamlined business registration processes.
However, there are also risks associated with doing business in Nigeria, including corruption, security concerns and underdeveloped infrastructure. Overall, the retail market presents both opportunities and challenges for investors. Those who are willing to navigate the market and establish a strong foothold can potentially reap significant rewards in the long term. Be that as it may, due diligence and careful consideration of the risks involved are essential before making any investment decisions.
For us, we have seen the continued drive towards e-commerce and associated newer retail models like superfast, locational coverage and delivery.
This is causing some disruption to the retail market and gives smart retailers the opportunity to access already established new channels in a relatively stress free and quick manner.
How has the current economic pressure and accelerated shift towards online shopping affected occupancy rate in the retail sector?
The current economic pressures and accelerated shift towards online shopping have had a significant impact on the occupancy rate of the retail sector. As more consumers shift towards online shopping, traditional brick-and-mortar retailers are experiencing declining foot traffic and sales. This has led to a decrease in demand for physical retail space, and in turn, a decrease in the occupancy rate of the retail sector.
In many cases, retailers are struggling to maintain their physical storefronts as they face increasing competition from online retailers. This has led to a number of store closures and bankruptcies, particularly among retailers that were slow to adapt to changing consumer preferences.
However, it’s important to note that not all sectors of the retail market have been equally affected. Retailers that offer essential goods and services, like grocery stores and pharmacies, have generally fared better than non-essential retailers. Additionally, retailers that have embraced an omni-channel approach, offering both online and in-person shopping options, have been more successful in retaining customers and maintaining occupancy rates.
Retail centres that also provide well thought-out mixed-use approach combining retail with other elements like entertainment, hospitality and office can create buzzing ecosystems / communities that can feed the retail portion on an ongoing basis and this is in part the driving force behind our mixed use assets like Purple Maryland and Purple Lekki.
Overall, the shift towards online shopping and the economic pressures of the pandemic have had a significant impact on the occupancy rate of the retail sector, and it will likely continue to be a challenging environment for retailers in the near future. However, this has caused retailers and developers to become more creative in tweaking their product offerings, which can only lead to innovation in the sector. Retailers and stakeholders that are able to adapt to changing consumer preferences and embrace new technologies and business models may be able to succeed in this evolving landscape.
You recently advocated democratisation of access to real estate ownership for Nigerians. Can you expound on this and what will be the overall benefit if implemented?
Real estate ownership is the largest contributor to wealth creation in the world in general and in Nigeria specifically. This same sector, especially in our market, only has a small pool of well-heeled players as compared to other climes, and we, therefore, believe that there is a need to expand that pool and give more people opportunity to build wealth through home ownership.
With the widening adoption of technological solutions in investment, finance and real estate, we believe that the next frontier is to find unique ways to foster participation in the retail market through crowd funding and/or fractional investments. This will also help facilitate the development of new assets that can cater to retail investors and as they will now effectively have a seat on the table and this can better help influence developers to build and manage assets more effectively.
We have seen positive impact of Protech on disposal, turnaround of assets, especially through sharing / co-living models, which take previously high cost multi- dwelling homes repurposing them into smaller more affordable slices, which have underserved markets like young professionals and families.
In addition to driving wealth creation in the middle class and fostering participation, democratising real estate will influence the supply of real estate thereby making the market more efficient and profitable.
Technology is gaining traction in several sectors, but it appears that Nigeria’s real estate industry has not really taken advantage of its potential. What are the challenges, which segment of the industry do we need technology to upscale?
There are several challenges that have hindered the adoption of technology in real estate industry. Some of these challenges include: Limited access to technology: There is limited access to technology, especially in rural areas. This means that the adoption of technology in the real estate sector is limited to urban areas.
Policies and infrastructure take time: in some cases, government policies and traditional way of doing things inhibits a lot of the advancements brought about by technology. Even when policies are changed, they can take time to be implemented and accepted by the entire market.
In some cases, policies have also created some monopolies within the business / technology ecosystem, which makes it impossible to have redundancies, meaning if one service provider is down, the whole industry is affected.
High cost of technology: The high cost of technology makes it difficult for small businesses to adopt and implement technology solutions.
Resistance to change: The real estate industry is generally resistant to change and innovation. Many industry players are used to doing things the traditional way and are reluctant to embrace new technology solutions.
Lack of trust: There is a lack of trust in the real estate industry, which makes it difficult to adopt technology solutions. Many people are wary of using online platforms to buy or sell property, especially in Nigeria, where fraud is already part of a larger problem and things like land grabbing and other disputes are still quite rampant. For context The Guardian reported over 20,000 civil and commercial real estate related disputes in Lagos alone yearly, which highlights the need for greater clarity in the process and documentation of land and asset ownership.
Limited awareness: There is limited awareness among real estate professionals and customers about the benefits of technology in the industry. This limits the adoption of technology solutions. High quality data is also really scarce in this market, which makes it difficult for decision makers to act.
In terms of which segment of the sector needs technology to upscale, there are several areas where technology can be used to improve the efficiency and effectiveness of the real estate industry. Some of these areas include:
Property management: Technology can be used to automate property management tasks such as rent collection, maintenance requests, and tenant communication.
Marketing and sales: Technology can be used to improve marketing and sales efforts through targeted advertising, virtual property tours, and online property listings.
Property valuation: Technology can be used to improve property valuation through data analytics and artificial intelligence. Real estate financing: Technology can be used to improve access to financing through online lending platforms and digital mortgage applications.
Property development: Technology can be used to improve the design and construction process through Building Information Modeling (BIM) and other digital tools.
Trust and Transparency: Technologies like smart contracts and digital databases are making ownership and transactions safer.
There are several challenges that have hindered the adoption of technology in Nigeria’s real estate industry. However, there are also several areas where technology can be used to improve the efficiency and effectiveness of the industry. The key is to increase awareness and education about the benefits of technology and to address the challenges that have prevented its adoption.
Inadequacy of skilled artisans in the real estate industry hasn’t been resolved over time. How has your firm been coping with this challenge and how can the country bridge this skill gap and promote competitiveness in the housing industry?
One way to cope with the shortage of skilled artisans is to invest in training and development programmes for existing workers. This can help to improve their skills and productivity and also encourage retention.
Companies can also partner with technical schools, vocational centres, and other institutions to provide training for young people interested in the trade. This can help to create a pipeline of skilled workers and reduce the skill gap.
Another way to cope with the shortage of skilled artisans is to leverage technology to automate and streamline certain tasks. For instance, 3-D printing and other digital fabrication technologies can be used to create building components with greater precision and efficiency. This can help to reduce the need for skilled labor in certain areas.
To bridge the skill gap and promote competitiveness in the housing industry, Nigeria can also consider implementing policies that encourage investment in the education and training of young people. This can include tax incentives for companies that provide training programmes, funding for technical schools and vocational centres and partnerships with foreign institutions and organisations to bring in expertise and technology.
Government as well as practitioners has a significant role in creating an enabling environment in the Nigerian the real estate industry. This can include providing access to financing, simplifying the land acquisition and approval processes, and ensuring that regulations and standards are transparent and consistent.
This will create a more vibrant and attractive industry for practitioners to work in, which will in turn spur young minds to join and build up that sector. The government can encourage collaboration among industry players, including developers, contractors, architects, and artisans, to share best practices and promote innovation. This can help to create a more dynamic and competitive industry that can attract investment and talent both domestically and internationally.
The problem requires a multi-faceted approach that includes investment in training and development, technology adoption, policy incentives, and collaboration among industry players.