‘Inadequate finance impedes investment in real estate’

Mr. Adedotun Bamigbola, is the Chairman, Lagos State Branch of the Nigerian Institution of Estate Surveyors and Valuers (NIESV). In this interview with BERTRAM NWANNEKANMA, the fellow of the Royal Institution of Chartered Surveyors spoke on the contentious Lagos land use charge, his agenda for the institution, as well as other burning issues in the real estate sector.

Recently, you were inducted as the Chairman, Lagos Branch of NIESV. What are your plans for the organisation?
My agenda for the branch is encapsulated in a programme called: ‘Agenda: Future Is Now’.

Talking about the future, we have issues regarding data, technology, research and all that. The agenda has five main components; namely, research and development. This is the first time we are moving in that direction in the branch, though, there has been researching and development committee at the national level, a lot still needs to be done.

The branch is trying to take this headlong. We also have strategic partnerships with some organisations and institutions in the public and private sectors as well as organised private sector to ensure that they have a feel of what we do and how we can support the economic system and the real estate sector.

The other elements are capacity development, which is more in-house in terms of developing capacities across various sections of our specialisations. So, the idea is to develop more capacities in those areas. This is what the element of the capacity development will focus on. We also have a resource center and library, which we are going to digitalize to ensure that our members are up-to-date.

We want to enhance that under the Head of Practices Forum (HOPS) so that it is not just a manual process of doing things, but we will also upscale to meet up with the future needs. We also have a Corporate Social Responsibility (CSR) project. The idea is to also encourage our members to promote things that would affect the lives of ordinary people and not just us alone.

The Federal Government has announced the exit from the recession. But the market is still slow in recovering. What do you consider as the major reason for the low performance of the sector?
Basically, the issue is financial capacity. That is what is slowing down the system. In all, people see fine and beautiful houses, but they are not able to even restructure their payment where off-plan buildings were being sold.

I am not saying that there are no sales going on, I am not saying that the market is not there, but it is just slow because the capacity to acquire them is not as it used to be. And these days, people are more cautious at their approach to investment because there are also other competing needs, which are much more evident now. You also look at the case of insecurity meaning that in some areas, especially outside Lagos, it is a challenge for you to travel to even invest in property in those areas.

Lagos has been relatively peaceful compared to various other parts, but then that is where the capacity comes in. So, what could be done? The government should jump-start our mortgage industry and make it sure-footing such that people can have mortgages for a long time, 15 years and above and also ensure that the interest rate will be below 10 percent. These are things that the financial sectors need to look into. There could be idle funds hiding somewhere, but what is the interest of our policymakers in using such idle funds for housing?

The last has not been heard of the Lagos Land Use charge. What are the key issues that your institution is promoting to ensure Lagosians have a fair deal from the government? Do you intend to raise these issues with the new governor?
I will say that these issues were raised by the last administration and our institution put up a very strong position on some key areas in the implementation of the Lagos State Land Use Charge. Our members have been involved. Beyond, firms in our institution are doing property assessments on behalf of the state. The feedbacks from that assessment are still being awaited. These are some of the steps we asked the government to follow. You could have more if you do a proper assessment.

The first thing is assessment, let’s even know which property is where to be able to justify that the property you are calling a five-bedroom is actually a five-bedroom or less. There may be improvement or development in several locations since the last exercise was captured in the year 2000. Definitely, you have to bring in those outside the pool so that the taxation system can be fair and spread over every property.

The second thing, we empathised on and that has been done, is the automation of the process so that it makes it easy for collation. So, you know exactly how the property is captured under the Land Use Charge and what makes property A different from property B. We have cases where one property and similar one beside it is being rated or given various charges.

The charges are not regular. So, one of the things that needed to be done which the government is doing partially is to set up a system, an office so that people can look at the rates. And people have been going there, to get some adjustments. But the process should not be limited to individuals.

The government should follow a global principle by setting up an evaluation list, which will have a proper rating process. Let people have a way that they can do a comparison, a way they can ask for redress, and away they can challenge the system. It is for transparency; once there is transparency nobody will feel cheated. So they can buy into the issue of land use charges without a fear factor.

Do you intend to engage the new government on some of these issues?
I will not say it is a fresh issue. Some of these things take processes, the process has started, some things have been done, these positions were made last year and government in its wisdom has taken up these positions or has started doing some things. We know that the way we do things is not the same way government or organisations will do things, they have to do one check and balance here and there.

Let us not forget that we have a new government that is still looking at some of all these things and that can begin to say going forward we have to follow some steps. So, I will say that the government is still going to do something about it.

For example, in 2015, there was no Land Use Charge Appeal Committee, that was raised by our institution, now it has been incorporated into the new Land Use Charge of Lagos State. What matters in law is compliance and the government is getting the revenue they want from it. So, we have to weigh all these things and say, the government is doing something. There is a new government in place, they need to be encouraged to take us to the next step.

Issues of real estate data have continued to be a major challenge for the industry. What is the State branch doing in that regard?
Like I said earlier, we have set up research and development subcommittee now to help us harness some of these things. Market data or real estate data as you called it are parts of the things that will come. However, I know that there are still individual efforts on this. I know that some people within our institution and others outside who are trying to do something but in all of that the branch is also looking at how to make this information available for the public. That is why in our quarterly report, there will be few sections that will look at all these things, it may be on a location-by-location basis not entirely the state. But what is really good for market data is online real-time and I think some of us are really going into that.

Former Minister of Power, Works and Housing recently urged your institution to get accurate data on the housing deficit in Nigeria. Are you doing something on that regard?
Well, that will be on a large scale but getting into this, there are basic things we need to look at. What qualifies a building for basic housing? That is where we should start from, like the Minister asked, who have counted these houses to arrive at the deficit figures? But there are basic elements that have come to determine these statistics that are out there in terms of livability, in terms of the idea of what constitutes a basic housing unit, the family size and all that.

The challenge we have in this part of the world, not just in real estate is that we don’t set our own standards.

Standards are set from out there, they are global. So, if the United States standard believes that a housing unit should accommodate a father, mother and two children and that the family unit should have two rooms and a sitting room as well as basic conveniences, probably one car garage attached to it. In Nigeria, you could have that size or even double.

Family size, in a room in some places, especially in Lagos, where you have tenement houses, there are many of them that have maybe six people living in the same apartment; it may not be the right basic housing. Some other people may not consider such basic housing standards in any tenement house as houses but Fashola said he has not seen people on the streets but of course there are people on the streets. So the first thing is that, in taking that challenge, we have to define what is basic housing and kind of family size? You know we have a growing population; Lagos increases in population every day. We have to look at population, the type of housing unit, you have to look at how many of these housing units are available, you start from there and that is how we can now know whether we have less or more.

Definitely, it is not something that cannot be done but we have to look at this. Research costs money, if the minister is saying that, the government should be ready to fund it because our organisation is not –for- profit institution. Definitely, they must be someone that should fund it because you can’t put people on the streets to begin to do all those findings and surveys without being funded.

Multiple taxations have become a recurring decimal in the real estate sector. What are the issues? Are you impressed with the forms of taxation on the real estate sector? What can be done?
Taxation in the real estate sector has remained. It has been one of the things borrowed for a long time. Capital based tax, Capital transfer tax, Consent fees under the Land Use Act and all that. It is also about the application.

I remembered that in 2012, there was a committee initiated by our colleagues from the public sector and working with the NIESV Lagos State branch. Issues came with the president of the institution then, Emeka Eleh called in to make a presentation to the governor of Lagos State. Consent fees, Capital Gain Tax, stamp duty, and all these things were around 15 percent.

The proposal, the branch gave then was to ensure that it can support the availability of land if you get a good land title. It is at time support for ease of doing business in Nigeria was pushed and the institution pushed that it should be One percent all-encompassing but so far Lagos state has tried in reducing that 15 per cent to like 3 percent since 2015 under the executive order of the governor then. So they have improved to 3 percent but 3 percent on the fair value of those property unlike 15 percent of fictitious figures.

You have to understand that the government earns income from these taxes to run services, to provide infrastructure and others, that is the responsibilities of government but key components that actually inhibit some of all these in terms of titling and all that refer to the personal income tax, which is not under the land bureau, it is not under the control of people handling lands but it is a referral from the Lagos state internal revenue services, same applicable to FIRs. They have the capacity to use the rule of thumb to decide what you are paying, they can say if your tax is N100,000 and you are paying judiciously, you have to start paying N200, 000, if you own that land you must have made extra money. So these are areas that need to be looked at.

There is also the issue of VAT, there has been argued that people will need to pay VAT on their rents, some tax authorities have pushed for that, a lot of property owners will tell you that these properties you paying taxes, so instead of a tenant deducting it you are paying to tax authorities on behalf of landlords, though, that is permissive by law, the issue is that the owner is telling you, you can’t take my money, that is my money, it said net of all taxes so go and care of that, it is your burden, the burden of tax is you because the owner sees that he is already paying taxes, title registration, he pays his income taxes regularly, then you now have So, I think they have to find a way for these things to be harmonised and it will take the relevant tax authorities to come together, there is a joint tax board but those issues have not been clearly put in the front burner for them to see how they harmonise these things when it comes to property tax.