‘Only three per cent of land in Nigeria can create wealth’
EMEKA ELEH is a past president, Nigerian Institution of Estate Surveyors and Valuers (NIESV) and a principal partner at Ubosi Eleh and Company. In this interview with BERTRAM NWANNEKANMA, he spoke on the imperative of land titling, challenges of inaccurate data and other issues in the real estate sector.
The real estate sector has been identified as one of the worst-hit by COVID -19 pandemic. Why is it so?
The real estate sector is not the worst hit but was badly affected by the pandemic. You cannot compare the sector with the impact on entertainment, hospitality and aviation sectors, which are in bigger trouble. Of course, the sector is part of the micro economy, which is experiencing an economy glut and difficult times. You see that more often than not, the side effect of the micro economy affects the commercial sector more. A man who lives in a house will make all efforts to pay the rent than somebody who occupies an office. Even though the sector is badly affected, we are seeing higher vacancy rate, rent defaults and those rates are higher in the commercial area.
Of course, it is expected. I mean the rental payment has to do with people’s income. A man who has not been paid salary cannot pay rents. At a time like this, we kept counseling landlords to take it easy with tenants as pertains rent payments. I must also say that the effect here is not as it is abroad because a lot of people still pay yearly rents or two years in advance and a lot of them are not yet due.
Unlike abroad where they pay monthly rents, if they did not pay, they will be affected immediately. Here the bulk of the challenges we have are those whose rents are due by January, February and March. Things got worse in April and everybody is now latching on COVID-19 to default in paying rents. It is an expected scenario. It is also less here again because we are not a mortgage driven economy, unlike abroad where people rely on mortgages for everything and those payments have to be made monthly. It is very difficult there because if you don’t pay, it goes into foreclosure. But here, mortgage penetration is still very low. It becomes more sensitive, if it is mortgage driven. Our system can accept the shock better than abroad.
What option is opened to operators like you in navigating out of the problem?
The pandemic brought about a lot of changes and some of us believe that these changes cannot be wished away. We are now holding online webinars all over the place. It is a lot convenient for so many people. We are increasing our online presence. We are devising other means in which tenants can select what they want. Of course, real estate transactions require visitations and inspections but what we are doing is video tours and virtual viewings to reduce that element of physical viewing.
We must do that because nobody will pay you rents without seeing the house or buildings, especially in our nation where environment is not well planned. If it is in the United Kingdom, you can use Google map and check all the whole area. You are sure if all the roads are bad, there is water and all that but it is not the same here, people must still go and physically visit the property but what we are doing is that instead of the tenant visiting 10 houses, through a virtual process, we can reduce what to visit to two, it saves time. We also increased our online presence, and invest in technology for online viewing. It is actually inevitable because nobody knows how long the pandemic will last. In any case, the market is changing gradually.
Lack of accurate data has continued to pose challenge to the operators in the sector. How can this be handled?
It is a big problem and it is sad because you only can’t do much without accurate data. As estate surveyors and valuers, we do a couple of things, letting, sales and valuations. In the area of valuations, the import of data is even more profound. The reason we have issues with banks and clients we work with in the area of valuation is because we rely on different data sources. If you invite surveyors to value a property at Adeola Odeku, three of them can give you three different values. Totally different, the reason is that there is no standardized data. Abroad, every valuer is linked to a network from where he could receive information. If a house is sold in this street, it is listed that it was sold for this particular amount. All you need is to do adjustment based on the value but more often here, you will get three different values. So the issue of data is key to the credibility and integrity of our work. A couple of firms have tried to do that but that is not what we need. What we need is standardized data source that people can rely upon so that it does not belong to anybody. I recalled that when I was president, I tried to create a standardised data for the institution, so that any body could rely on it. We did it for the first two years, we covered Lagos, Port Harcourt and Abuja, unfortunately, it has not been sustained. We need the Nigerian Institution of Estate Surveyors and Valuers as a custodian of real estate in Nigeria to lead the challenge to collect data and analyse it. Part of the problem is that we don’t have multiple listing services because if we do, we will see it as a service to the public.
We need a sustained approach, the multiple listing services alone can provide data over five years because once every body gets into the platform; the information will be there. But the challenge in Nigeria is that the level of secrecy is too high. Abroad if you want to know the price of a house in Adeolu Adeku in Lagos, you will see the value. You will see when last it was sold, you see even who is there. In England, they are making public their land registry. So, it is that level of transparency and openness that will make us make progress and our institution can do it.
Figures show that three per cent of registered title cannot be used to create wealth due to impediments in the consent provisions of the Land Use Act. What are the implications for the real estate sector?
I mentioned earlier that one of the issues we had is that of access to registered title. A survey done by the Royal Institution of Chartered Surveyors (RICS) stated that about 70 per cent of the global wealth resides in real estate. It shows that all valuable assets in Nigeria beyond the human resources are actually in the real estate. Therefore, government should pay attention to real estate. If you go abroad the housing sector or the real estate sector contributes so much to their Gross Domestic Product (GDP). The sum total of the real estate contribution to Nigeria’s GDP is below 5 per cent, which is minimal. The reasons are obvious; we mentioned the issue of lack of title. As you stated, available record showed that only 3 per cent of all the lands in Nigeria has registered titles. The import of that is that only 3 per cent of lands in Nigeria can create wealth. The rest could only be used in menial farming but abroad, there are multiply interest that can reside on a particular property. So you can create multiple effects on the same property. But you cannot do this if you don’t have a title. Government most times lacked understanding what the problems are all about.
We don’ t also look at the government as a continuum. Every government believes it can be they’re for at most eight years, but this process can also be abridged. If you look at Rwanda that came out of wars few years ago, every plot of land in Rwanda has now registered 100 per cent. Indeed, if you have the right app, you can input a plot in Rwanda and it will tell you who the owner is. It is not a rocket science. If government understands the economic imperatives involved in land titling and making consent easier, may be things will be better for us. Land titling is like tax nets, the government can raise income through property taxes. Abroad, cities are funded with taxes paid on property taxes from the local government, which we called tenement rates or land use charge. It is a major budget income for every city but then how do you possibly levy taxes on people that you don’t know they exist. If you have not given title on my land in the village, how do you tax the property? In Lagos for instance, it means that you have registered all the lands in Lagos. It also means that instead of levying few people land use charge of N10, 000, you can reduce it to N2, 000 and everybody is involved. It expands the net because you had them registered. The bottom line is government being able to understand the economic benefits of titling process. It is the same with consent, where government charges punitive consent fees for land transactions, it is ridiculous.
Estate agency practice has remained an all comers affair, which has made quackery to thrive. What measures should be taken to address the problem across the country?
It is a matter of implementing our rules. We have a scenario where everybody can be an agent. They regard agency business as a salesman business. Today, you build a house, you put ‘To let’ sign and your contact, you put your phone number. If you want to sell land somewhere you put a sign. So everybody becomes an agent, but we must look at agency as a service to the people. If every agent understands the fiduciary role maybe there will be a basis to deal with. As professionals of estate surveyors and valuers, we have been on it for a long while. We established Association of Estate Agency of Nigeria, so that if you are not qualified to be in NIESV, you can qualify to be an agent. It is safer. In England, if you don’t want to qualify as a chartered surveyor, you can join the National Association of Estate Agency. The key thing is that because you have joined, you receive the basic training, you have the minimum knowledge, and you have the check tags of being a person of good character, transparency and operates within high ethical standards. You’re investigated very well and you are registered.
What do you consider as the major challenge to the real estate sector in Nigeria? In what areas will you want improvement?
The sector is in two parts. In the advisory part, valuation has thrown up the challenges of data, if you come to estate agency; the level of quackery is too much. If you come to the housing sector, which is part of the real estate sector, the level of supply is not commensurable with demand. You can qualify that supply to quality and proper structure. People put our housing deficits to 15-17 million but nobody is sure because we have not conducted housing census. But it is clear that the urban area does not have much houses, if you take Lagos for instance, the level of slum settlement is too much. It is a major challenge that we cannot house our people and the major reason for that is the micro economy. A country where the minimum wage is N20, 000, it is tough; how many people earn up to N100, 000 per month in Nigeria, you will be surprised that about 10 per cent of Nigerians earns N100, 000. There is no mortgage available. Even, if it is available, how many people can qualify for it if you said it is 3 per cent? How many people will qualify for mortgages of a single digit based on our unstable income. By and large, it has to do with the economy as a whole; some things need to be done about that to improve income level of an average Nigerian. Another area is the issue of land and titling. Lack of land title affects property right. The availability of property rights is a big incentive and a big issue. If people are not able to leverage on what they have, then it is difficult for them to create wealth.
xzx It is only in our environment that you owns 10 acre of land somewhere in our village and you can’t raise N10, 000. When the property you had is not titled and you cannot go the bank and said keep this and give me some money. So, it is a problem for the economy and the real estate sector because it is part of the challenges of funding real estate development. If you want to fund real estate development, you have to provide collateral and if you don’t have title to a land it is difficult.
That is why our economy is driven by the informal sector; the informal sector in the economy is very large. As far as the informal sector remains this large the poverty level will remain very high, if you reduce the informal sector drive, you lift more people out of poverty. If you increase the formal sector by 10 per cent, about that number enters the organised sector enters medium income level and once you lift them out of informal sector, they move to the formal sector and that is what we need to do. Of course, the government started with regards of allowing a lot of people to enter the banking sector. But, beyond that we must empower people to see how they can use what they have to create wealth. It is all a matter of wealth creation. If you look at it, every body has property rights, property is a property anywhere it is but government needs to help us to see how we can collectively use all these to create wealth to fund real estate development because the supply end is very bad. When you look at the supply end in the real estate sector, it is the low-income end that is very poorly supplied; the high-income end never really has so many problems. If you go to Ikoyi, Maitama, there are houses but when you go to the poor areas, there are scanty because there are no mortgages for them to buy.
Secondly, our laws are also such that they do not encourage investment at that level because if you invest in poor areas, the default rate is very high and the process of repossession is very bad. The possession laws are such that it favours the tenant naturally and therefore you can be in courts for longer period. So why don’t we change the laws to encourage investments to areas where houses are needed. Investment has to do with confidence and trust. No body invests where the risk is too much. So, if we are looking for things that will improve the real estate business, we look at the micro economy, government needs to jumpstart the economy to the point that people have more disposable income, we need to create mortgages, improve access to land and titling as well as the issue of trust in the system. On the advisory side, we talked of about data and building trust. It is only in this country that people thought that estate surveyors are merely salesmen, they are selling services and when you are selling services, you have to own your clients a fiduciary responsibility. If every agent knows that for giving false information or defrauding your clients, there are consequences, they will not do it.