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Real estate industry to record modest growth in 2018

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An illustration of the proposed Ilubirin housing estate in Lagos

The growth of the nation’s real estate industry is expected to be sustained this year, with increased signs of economic recovery.

And this positive outlook will be largely driven by the country’s sound macroeconomic fundamentals, the growing knowledge process outsourcing industry, aggressive infrastructure spending by the Buhari administration, and the sustained private sector confidence.

This, however, is also fragile as it dependent on the price of budget provisions of $45 per barrel, sustained peace in the Niger Delta, the implementation of the budget along the long-term growth plans and an improvement in the power sector, according to International Real Estate Partners (IREP).

The concerns, include the fact that the exchange rate to the dollar is pegged at $1:N304 as opposed to the parallel market rate of N370, which would have earned more credibility in termed of forecasts and expectations.

Specifically, experts, who looked into the performance of the sector, however, noted that the indices that will drive the market remain government actions or inactions. The implementation of the budget and the amount of money in circulation as well as the perceived government  willingness to focus on economic growth.

“A lot of investors will be guided by their perception of the dedication of the government  towards its own policies and not just lip service,” Chudi Ubosi, President, African region of International Real Estate Federation, (FIABCI ) said.

According to him, stakeholders could continue to look out for government policies that encourage private enterprise.

“The world is moving towards economies where the private sectors take the lead in driving the economy whilst the governments focus on providing the enabling environment for economic growth.

“Until these are visible in Nigeria we may not be forward bound”, he noted. Ubosi, a renowned estate surveyor and valuer was also optimistic that the real estate sector will enjoy slow recovery this year.
 
He hinged his optimism on the few policies enunciated by the Federal government in its budget.
 
Ubosi however, noted that this could be short lived based on the perception of players in the economy and their confidence level as well as the political risks involved.

“We must all remember that by the second to third quarter of this year, political activities for the 2019 elections will assume full swing.
 Political elections in Nigeria have always had a dampening effect on the economy in Nigeria and expectations for the real estate sector,” he added.
 
On the retail and residential markets, he said they may experience small spikes in growth in certain neighbourhoods, while growth will be very slow and zero in some areas like warehousing.

Collaborating his views, the Chairman, Faculty of Housing, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Chief Chika Okafor noted that the sector will be highly dependent on government’s policy, but expressed doubt that the budget for housing would be able to have any significant impact on the built environment.
 
He said for a robust 2018, government must wake up and play its role, especially in the provision and accessibility to lands and services, infrastructure such as roads, water amongst others as well as allow the private sector to thrive through an enabling environment.

“With the current provision for housing in the 2018 budget, housing demand of Nigerians can never be achieved. Government should encourage the real estate developers by reducing charges so that they could develop houses for the masses. The sector can bounce back to its glorious days, if there is genuine willingness and commitment from the government, above all, the government has the key, our economy is government oriented. Genuine policies that would facilitate the provision and development of affordable houses must be made”.
    
According to him, housing sector is always in high demand, stressing that the challenge is adequately tackling the issue of affordable housing for the masses as against the construction of skyscrapers and luxury apartments, which is fast becoming the norm in most cities.

“There is prosperity in the housing sector because we are talking about what some experts have tagged 17million deficits in housing and you can imagine the implication of that for a country. Government needs to commit between N3 to N5trillion yearly to housing if Nigeria would have to drive any development in the sector, at all”, he stated.
   
In his submission, the former chairman, NIESV’s Faculty of Housing and Principal Partner, Kola Akomolede and Company, Chief Kola Akomolede expressed optimism for a vibrant 2018 in the sector, which is hinged on the reality that the country just exited recession.

“The fact that it takes a longer time for the property market to fully recover points to the fact that once the economy gets better, the property market would also feel the impact of a robust economy. It is going to be fine,” he said.

“Presently there are gluts in the market, especially in the high-end areas of Ikoyi and Victoria Island and Lekki. We expect that in this new year, people would be able to either buy or rent those houses. It is also expected that developers who have abandoned projects for a long time due to paucity of funds would be able to start construction. The sector growth would depend on the general economic outlook for the year. Government should review whatever has been budgeted for housing, if it is too There would be the need to strengthen the mortgage banks financially so that developers and investors could have access to funds”, he said.
  
For him, developers should shift focus from investing on the high-end sub sector and lay more emphasis on the medium and low-income areas of the real estate.

He suggested that investors should concentrate efforts in building of cheap houses that people can afford in locations like Agege and Akowonjo parts of Lagos amongst others.

“The kind of money developers use to construct one big house of worth about N150 million in Banana Island, Victoria Island and Lekki could be used to build about 10 and 20 flats for the low income earners. This would potentially go a long way in reducing the deficit in the supply of houses in the country”, he posited.

For Rotimi Akinlose of Residential Auctions Company (RAC) said the real estate sector is yet to recover from the effect of the recession.

“The residential sector will continue to thrive as developers churn out more housing projects as a result of the demand for housing units but affordability will be key for buyers.

“The rental sector holds a lot of prospect of potential investors, especially for single professionals and young families that are looking for cheap and affordable accommodation to rent because of the high cost of housing in the major cities like Lagos and Abuja,” Akinlose added.

 


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