How new policies will trigger growth in real estate sector
Eggheads in the nation’s real estate sector have predicted a marginal growth in the sector occasioned by the crucial roles the Family Home Fund (FHF) and the Nigeria Mortgage Refinance Company (NMRC) are expected to play in ramping up the 20 per cent reduction in the Federal Government’s spending on housing.
Given the present economic and political realities, the new tax regime and compelling trends in the real estate industry, experts said 2020 would perhaps herald the beginning of real growth in the once recessed sector.
According to them, the year would be the beginning of real growth in the sector after the recession of 2015.
The experts, who spoke at the 2020 Nigerian Real Estate Market Outlook breakfast meeting organised by Northcourt Real Estate in Lagos, include professionals in the built environment, policymakers, mortgage bankers and investors.
They noted some economic steps that will drive the growth both on the supply and the demand sides.
According to them, the Finance bill 2019, recently passed by the National Assembly would play a crucial role in the anticipated growth especially with the exemption of Small Medium Enterprises (SMEs) from the tax net.
The Finance Bill, which seeks to change Nigeria’s fiscal laws, they said, would favour Real Estate Investment Trusts (REITs) once operational.
Also, the Federal Government policies on recapitalisation of mortgage banks and insurance companies are expected to create traction in those sectors with great positives for the real estate industry.
Others include the crucial roles; the Family Home Fund (FHF) and The Nigeria Mortgage Refinance Company (NMRC) are expected to play in ramping up the 20 per cent reduction in the Federal Government spending on housing.
The $2.5bilion FHF, which has commenced residential development projects in Yobe and Akwa Ibom states in partnerships with Mixta Nigeria and Shelter Afrique towards achieving 500,000 homes by 2023 in different states.
Also, the Ministry of Works and housing is considering raising a ₦10 trillion National Infrastructure Bond, which is expected to
bridge funding gaps for infrastructure and housing construction.
However, they stressed the need for the government to come up with legislation that would make affordable or social housing a reality through easy access to land, easier approval process and control access.
The Chief Executive Officer, Craeme Blaque Group, Zeal Akaraiwe, who led discussions at the event noted the Federal Government’s desperation to raise revenue, stressing that it may affect businesses whose tax books are not in order.
Akaraiwe, who spoke on the 2020 economic outlook and effect of the finance bill on the real estate said the speedy passage of the Finance Bill by the lawmakers is an indication of the seriousness to squeeze businesses and the Central Bank of Nigeria’s support which can make the economy more volatile.
Specifically, he said, the Foreign Exchange Subsidy initiated by the CBN to stabilise the Naira, has cost the nation a record $5.5 billion and $6 billion from 2017 to 2019.
According to him, the effect of this coupled with other policies aimed at stabilising the Naira and encouraging direct foreign investment will create a healthy uncertainty in the sector.
Akaraiwe, said with these realities, many businesses would tend to avoid keeping money in Naira, while there will be reasonable pressure on property investment but with a change structure.
The implication, he said, will be an influx of foreigners in the real estate sector because of government’s encouragement on direct foreign investments through efforts on the ease of doing business.
According to him, 2020 throws magnificent opportunities for those who have the guts and liquidity to invest in property markets.
“The volatile, uncertain and complex nature of the economy will provide opportunities for investors who can make fast decisions to simplify and clarify the ambiguity in the environment”, he added.
Providing insights into the sector’s performance in 2019, the Chief Operating Officer and Director, Real Estate Advisory, Northcourt, Ayo Ibaru, said although the market showed signs of recovery, affordable housing has remained an issue while vacancy rates dropped in Abuja and Lagos.
Ibaru also noted that developers were also more flexible on their projects plans to stay afloat.
This trend, he said, may continue as only businesses with flexible plans can survive in the uncertain business environment.
Ibaru noted that Nigeria has become one of the top 10 improvers for the 2nd time in the most recent World Bank’s ease of doing business report, ranking 131st globally, which can be a big plus for the real estate sector.
He also stressed that activities in the office real estate market have reduced with a new supply of 36,507sqm office space coming on to the market in 2019 with average vacancies in Grade A offices Dropping mildly but may still be described as
“About 35,000sqm of Grade A office space is expected to be delivered in 2020. The retail market has performed better in the
past year, retail developers adjusting their offerings to balance out exchange rate fluctuations and generally sterner economic
conditions. This has been rewarded with better new uptake and renewals for most malls across the country”, he added.
For the Chief Executive officer of Northcourt, Tayo Odunsi, 2020 would present good yields with high demands for industrial and commercial real estate.
The increase in demands, he said, will lead to an improvement in construction activities and higher construction costs.
According to him, the activities and policies of the present government have significantly stimulated manufacturing activities and this expected to continue to be so.
This, he said, has led to considerable growth in the industrial sector leading to demand warehousing and logistics facilities.
“Provision of warehouse facilities will remain paramount to the retail industry as e-commerce continues to rise even as traditional retail improves in-sync with the economic and purchasing power of the public”, he said.
Odunsi stressed that access to finance for construction would also improve because of several interventions in mortgages and construction finance.
He also spoke of the emergence of a class of Higher Earners but not Rich Yet (HENRYs), which will create a change of taste and requirements and more investment in property.
According to him, these would favour operational real estate having development and business income for example in student accommodation, entertainment centres, family entertainment centres, lounges and co-working space.