How real estate reform could boost economy, by NIESV

‘Property market to expand by 5.2 per cent’
Given the challenges facing the real estate industry, the President, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr. Johnbull Amayaevbo has advocated increase in infrastructure spending at the federal and state levels, as well as reduction of bureaucratic processes in transactions.

Amayaevbo, who spoke to The Guardian and provided insights on how to ensure that the industry contributes optimally to the nation’s economy, said increased infrastructure spending and project completions would spur growth in the real estate market.

He said: “Infrastructural development amplifies growth in the real estate market. Consider also government’s initiatives to improve infrastructure and expand access to loans for real estate investment.

“For instance, if the government invests in modernising roads, utilities, and other infrastructure, this could make it easier for developers to construct new developments and for homebuyers to have access to properties.

“In addition, if the government made it simpler for individuals and businesses to secure finance for real estate purchases, this may further stimulate the market.”

According to him, lengthy time and heavy costs continue to place pressure on the ease of doing real estate business. “Professionals continue to report delays in gaining building approvals, perfecting land documents and completing transactions due to long bureaucratic processes.

“Disruptions in development activity from regulator involvement should be curtailed. The government should focus on improving both human and technological resources to reduce these processes drastically,” Amayaevbo said.

He disclosed that the performance of the real estate sector is hinged on the performance of the overall economy and the ability of the government in strengthening the economy, especially its fiscal policies would significantly increase investor confidence further positioning Nigeria as an attractive market.

His words: “This is critical to the management of the exchange rate. 2022 saw some foreign investor exit due to poor performance of the economy, providing an opportunity for local investors to increase and stabilising the economy would be pivotal for more local and foreign investments.

“The nation’s economic development should be taken into account. If Nigeria’s economy continues to expand and improve, demand for residential and commercial real estate could rise. This could lead to the construction of new developments and a rise in property values.”

While calling for increase investment in power and manufacturing, the institution noted that strong collaboration between the manufacturing and the real estate sectors would spur growth in the real estate sector.

“The government should increase investment in Small Medium Enterprises (SMEs) and create an enabling environment for the private players in the manufacturing sector. A high unemployment rate keeps looming in the labour market and this can be an opportunity for the real estate market through the investment in technical skills in construction.

Amayaevbo explained that power and manufacturing play a large influence in the real estate industry, as they are both significant economic growth and development drivers. “Access to reliable electricity is essential for businesses to run successfully, and the availability of energy can be a significant factor in luring manufacturers to a given location.

“Additionally, manufacturing firms can provide jobs and increase demand for residential and commercial real estate. Historically, the real estate market has been dominated by demand from the finance and energy industries.

“However, there has been a recent push to diversify the economy and encourage the growth of other sectors, such as manufacturing. This has led to an increase in infrastructure investments, notably power generation and distribution, and efforts to attract foreign investment in the manufacturing sector,” he stated.

Besides, NIESV president said the adoption of new technology and building techniques could have an effect on the real estate market. For instance, the use of prefabricated building materials and construction processes could make it easier and quicker to construct new projects, which could result in an increase in the availability of homes and other real estates.

“Technology has made it easier for real estate investors to get information about prospective investment possibilities due to increased transparency. This has boosted industry openness and made it simpler for investors to make educated selections. Technology has made it simpler for real estate professionals to connect with clients and other parties involved. This has streamlined and improved the process of buying and selling real estate,” Amayaevbo said.

As Nigerians head to the polls to choose the next president, Amayaevbo said many investors would adopt a wait-and-see approach to monitor the outcome of the elections before investing significantly in the real estate sector.

He said: “Real estate activity on a large scale would likely slow due to several uncertainties that election years typically bring. Despite the bearish outlook of the economy, the real estate market will attract more local investment due to its stability as an asset class. Property developers would continue to approach the market with alternative financing structures.”

He further revealed that foreign investors would continue to invest in cities with the required supporting environment as Lagos, Abuja, Port Harcourt, Kaduna, Benin, Calabar, Uyo, Ibadan and Abeokuta. Kaduna and Port Harcourt are among the cities defying the odds and proving to be investible destinations despite some of the security challenges it has witnessed in the past.

Ibadan and Abeokuta are likely to continue enjoying the spillover effects of Lagos due to its close proximity and improved infrastructure aiding connectivity. Uyo would also witness some changes provided the government continues its drive to grow tourism and invest in infrastructure.

Edo State will also see investor commitment and the openness of the government to welcome new investors would drive development in most of the core cities especially. Some of the changes would be seen in the industrial sector.

Investors would continue to enjoy capital appreciation in the land, residential, retail, industrial, hospitality and healthcare submarkets. Land markets will remain resilient. Public investment focus in the real estate market remains on solving housing supply, which would amplify more collaboration and partnerships with the private sector. Financiers are showing more resilience in funding residential projects despite their moderate growth rate. Small-sized residential units (Studio, one, and two-bedroom apartments) remain the top choice for young professionals and small families in core cities also because they can be used for hotels and short lets.

The industrial submarket is also showing strong performance potential with yields at 9 per cent in Lagos and 8 per cent in Abuja as of Q3 2022. With improvements in the logistics and supply chain sector, demand for warehousing facilities would experience substantial growth. Nigeria real estate market is projected to expand by 5.2 per cent.

Some incoming international investors have adopted a wait-and-see approach concerning new investments because of the upcoming presidential elections. This creates a gap in planned developments but also creates opportunities for local investors. An increase in the cost of building materials is expected. Some exits occurred but foreign real estate operators who stayed after the End-SARS vandalisms are more likely to yet remain in the market regardless of the uncertainty that the coming election might present. Overall, Nigeria’s high population and urbanization growth drive a positive outlook for the real estate sector whose contribution to GDP is set to increase to 6.5per cent in 2023.