With Nigeria among the world’s fastest-growing urban populations, the first half of 2026 has demonstrated that the real estate sector possesses considerable resilience and long-term investment potential. However, it has also exposed the widening gap between housing demand and affordability, VICTOR GBONEGUN reports.

Nigeria’s real estate sector has continued to attract investment and deliver new projects even as it operates in one of its most challenging business environments in recent years. Beneath this resilience, however, lies a deepening affordability crisis that is steadily putting home ownership beyond the reach of millions of Nigerians.

While residential demand remains robust, commercial office development has slowed as developers have become more selective amid changing workplace trends and higher construction costs. The retail property market, however, recorded cautious growth, driven by increased demand for neighbourhood shopping centres, mixed-use developments and convenience retail outlets as investors responded to evolving consumer preferences.

Logistics and warehouse assets continued to attract strong investor interest, supported by the expansion of e-commerce, manufacturing, and last-mile distribution networks, making industrial real estate one of the sector’s strongest-performing segments during the review period.

Throughout the first half of 2026, developers pressed ahead with new residential schemes, governments’ affordable housing initiatives and investors continued to view property as a hedge against inflation.

However, persistent inflation, high interest rates and exchange-rate volatility altered the economics of housing delivery.

The cost of major building materials remained elevated during the review period. Cement sold for between N12,500 and N15,000 per bag in many parts of the country, while the prices of reinforcement steel, roofing sheets, electrical fittings, sanitary wares, and other essential inputs continued to climb.

Combined with higher labour, transportation and energy costs, developers estimate that overall construction costs have increased by between 50 and 100 per cent over the past two years.

While developers have demonstrated resilience by continuing to build, the country’s housing challenge has shifted from a shortage of homes to affordability. Nigeria’s housing deficit is variously estimated at between 16 million and 28 million units, while experts estimate that about 550,000 new housing units are required yearly to meet growing demand. Current annual delivery, however, remains below 100,000 units, widening the supply gap.

Access to home ownership has become increasingly difficult. Nigeria’s mortgage-to-Gross Domestic Product (GDP) ratio remains below one per cent, among the lowest globally, while the cost of housing in major cities now exceeds eight to 12 times the average annual household income. Rapid population growth and urbanisation continue to fuel demand across Lagos, Abuja, Port Harcourt, Kano, Enugu and other fast-growing cities, but rising prices have left many households priced out of the market.

For middle-income earners earning between N100,000 and N250,000 monthly, purchasing a home has become virtually impossible. Even government-backed two-bedroom housing units are now priced between N20 million and N85 million, while more than 80 per cent of newly built privately developed one-bedroom apartments in major cities sell for over N50 million. Two-bedroom apartments in many mainland districts of Lagos and Abuja now exceed N80 million, while luxury developments start from about N250 million.

Developers attribute these rising prices largely to escalating construction costs. Beyond the high cost of cement and steel, imported finishing materials have become significantly more expensive due to exchange-rate volatility, while rising labour costs, diesel prices and logistics expenses have further inflated project budgets. The result has been sustained increases in property prices, forcing many prospective homeowners to defer their plans indefinitely.

Unable to purchase homes outright or qualify for commercial mortgages, many Nigerians have remained in the rental market. This has sustained strong demand for rental accommodation, particularly in Lagos and Abuja, where population growth continues to outpace housing supply. Annual rents in several parts of Lagos increased by between 25 and 40 per cent during the review period, although the pace of growth moderated compared with the sharp spikes witnessed in 2025.

The changing market dynamics are also reshaping developers’ investment strategies. Rather than focusing exclusively on homes for outright sale, many are expanding into rental housing, serviced apartments and mixed-use developments that provide more stable cash flows amid weaker purchasing power. Industry experts believe the build-to-rent segment could emerge as one of the fastest-growing areas of Nigeria’s property market over the next few years.

Mortgage finance remains perhaps the single biggest obstacle to expanding home ownership. Commercial lending rates remain prohibitively high, while many Nigerians employed in the informal sector cannot satisfy conventional mortgage eligibility requirements. Although government-backed housing finance programmes have provided some relief, industry stakeholders argued that their scale remains too limited to make a meaningful dent in the country’s housing deficit.

The Federal Government sought to ease access to housing during the first half of the year by expanding affordable housing initiatives, including the Rent-to-Own programme, and encouraging greater private-sector participation in housing delivery. Several state governments also continued developing housing estates targeted at civil servants and middle-income earners. However, stakeholders maintain that these interventions fall far short of addressing the country’s growing housing needs.

Meanwhile, infrastructure development continued to influence investment patterns. New highways, transport corridors and urban expansion projects boosted land values across suburban communities around Lagos, Abuja and several state capitals. Investors increasingly acquired land in these emerging growth corridors in anticipation of future residential and commercial development, while Nigerians in the diaspora maintained strong interest in professionally managed housing schemes, attracted by the long-term appreciation of property values.

Despite sustained investor confidence, developers continue to contend with multiple taxations, rising statutory charges, lengthy approval processes and regulatory bottlenecks. Smaller developers have been particularly affected, with many slowing construction activity or shifting their focus to luxury housing, where higher profit margins can better absorb escalating development costs.

Looking ahead, industry experts argued that restoring affordability will require more than an increase in housing supply. They called for stronger public-private partnerships to accelerate mass housing delivery, the expansion of joint-venture models for social housing, the institutionalisation of low single-digit mortgage financing, lower building-material costs, greater patronage of locally produced construction inputs, and broader reforms that improve access to long-term housing finance.

Without such structural interventions, they warned, the country’s housing challenge will continue to evolve from a supply deficit into a full-blown affordability crisis, leaving millions of households locked out of home ownership despite sustained activity in the property market.

Former Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos Branch, Dotun Bamigbola, said residential rents and property sale prices have largely stabilised between January and June 2026, although they remain at historically high levels.

According to him, the relative stability follows the sharp escalation recorded between January and July 2025, when property values rose by more than 100 per cent. “The key thing in the residential rental market is that rents are collected annually. In most cases, once the annual rent has been set, it is difficult to review it immediately the following year, even when inflation, building material costs, and exchange rate fluctuations increase maintenance expenses. There are exceptional cases, but generally landlords have to wait until the tenancy expires,” he said.

Bamigbola attributed Nigeria’s housing affordability challenge largely to the weak earning capacity of citizens. “The resilience of Nigerians enables them to cope despite these challenges,” he added.

On government interventions, particularly the Mortgage and Real Estate Investment Fund (MREIF), Bamigbola said the scheme has the potential to improve access to housing finance.

“It provides mortgage facilities for properties valued at up to N100 million. That is slightly below the average price of homes in city centres and middle-income neighbourhoods in Lagos, Abuja and other major cities. It is workable, provided beneficiaries have the income to repay the loans,” he said.

He advocated greater use of Joint Venture (JV) arrangements in cosmopolitan states such as Lagos, Abuja, Rivers, and Oyo to drive social housing development rather than concentrating primarily on commercial real estate.

According to him, initiatives such as the Family Homes Fund can succeed where state governments provide land at no cost for projects priced between N15 million and N20 million. “Anything above that threshold is no longer affordable for the target market,” he said.

Bamigbola also called for reforms to the Land Use Act to simplify land administration and title registration. “If you want titled land today, the process remains cumbersome. Across the Southwest, I don’t think there is any state where you can obtain a title in less than one year. Lagos has digitised the process, but it is still not fully streamlined because applicants move from one agency to another.

True digitalisation means I should be able to process my title documents from the comfort of my office,” he added.

The Chief Investment Officer, Panterra’s Ayo Ibaru, in its Nigeria Real Estate Market: H1 2026 report obtained by The Guardian, said inflation in construction materials has become structural rather than cyclical.

“Production, logistics and distribution continue to face sustained pressure as headline inflation remained around 15.69 per cent in April 2026. The major drivers include limited competition, dependence on imported tiles and fittings, foreign-exchange volatility, and diesel-powered production. Consequently, developers are delaying projects, reducing project scope or abandoning developments altogether,” he said.

Ibaru observed that housing affordability is reshaping residential development patterns, with tenants increasingly prioritising affordability over proximity to city centres.

According to him, the growth of remote work has accelerated movement to peripheral corridors such as Ikorodu, Ibeju-Lekki and border communities between Lagos and Ogun states. Similarly, Abuja suburbs, including Lugbe, Kuje, Karshi and Kurudu, are absorbing middle-income demand that the city centre can no longer accommodate.

“These satellite communities are more practical and affordable. Given lower entry prices and a persistent housing shortage in the middle-income segment, investment is increasingly shifting towards commuter-oriented housing near transport corridors. Capital is moving into income-generating residential assets, logistics parks and affordable housing, where demand remains strong, and cash flows are more predictable,” he said.

He added that infrastructure has become a major determinant of property values, with homes located within five kilometres of major highways attracting premiums of between 25 and 40 per cent, while properties close to new rail stations command premiums of between 15 and 30 per cent.

He, however, warned that escalating construction costs are beginning to compromise building quality.

“When costs become excessive, some developers resort to substandard materials to cut expenses, undermining structural integrity. Reducing the cement ratio specified by engineers can weaken buildings and increase the risk of structural failure,” he said.

Ibaru also noted that mortgage interest rates remain between 25 and 30 per cent, leaving most property transactions to be financed through cash purchases.

“Cash buyers, business owners and Nigerians in the diaspora dominate the market because conventional mortgages require household incomes running into hundreds of millions of naira to finance a N450 million property. About 70 per cent of Nigerians cannot access mortgage financing, effectively excluding salaried workers from the housing market,” he said.

President of the International Real Estate Federation (FIABCI) Nigeria Chapter, Akin Opatola, maintained that the sector has performed relatively well despite prevailing economic challenges.

He attributed this partly to improvements in housing quality, as many developers are replicating international standards after exposure to global real estate markets.

“A lot of developers are delivering premium housing across the country. However, practitioners are facing enormous challenges. Inflation has increased significantly, while disruptions in global supply chains, including tensions around the Strait of Hormuz, have made imported construction materials more expensive.
Rising diesel prices have also pushed up construction costs, leading to rent increases of over 40 per cent and making home ownership even more difficult,” he said.

Opatola said demand remains strong among technology entrepreneurs, digital content creators and Nigerians in the diaspora, many of whom continue to invest in off-plan developments and high-value residential properties.

“While developers are concentrating on luxury homes priced between N400 million and N600 million, the greatest opportunity remains at the bottom of the housing pyramid. Affordable housing may generate lower profit margins, but higher sales volumes can produce better overall returns,” he said.

To address the housing affordability crisis, Opatola stressed the need for long-term, low-interest financing for developers and homebuyers. He expressed optimism that in the coming months, the economic management team could strengthen housing affordability in the country.