Amid mounting pressure from inflation and high interest rates, the real estate sector closed the first half of 2025 with a deepening housing deficit that continues to displace homeownership ambitions in favour of rentals, CHINEDUM UWAEGBULAM reports.
Nigeria’s real estate market witnessed a turbulent but active first half in 2025, with inflationary pressures, high construction costs, and limited mortgage access continuing to define the landscape.
The Guardian gathered that the rental segment now dominates transactions in major cities like Lagos, Abuja, and Port Harcourt, as affordability challenges push potential homebuyers to the sidelines. The market’s activity level remained high, particularly in urban fringe areas and luxury developments, but analysts caution that rising inflation, hovering above 22.97 per cent, and skyrocketing building material prices are stretching developers and tenants.
Nigeria’s housing deficit is now estimated at over 28 million units, yet the country produces fewer than 700,000 homes yearly. This imbalance has led to skyrocketing rents, particularly in Lagos, where a standard one-bedroom apartment in the Lekki-Ajah axis now commands N2.2 million yearly, almost twice the average urban income of N1.2 million.
Data from estate platforms shows that over 80 per cent of Lagos residents now live in rented accommodation. With home financing almost inaccessible due to interest rates as many first-time buyers are priced out of ownership.
To arrest the situation, the federal government launched a N1 trillion housing fund (MREIF) in Q1 2025, offering off-take guarantees and 12 per cent mortgages over 20 years, bolstering developer confidence and supporting end-buyers, especially low-income housing.
However, implementation has been slow, with industry players calling for faster disbursement, regulatory clarity, and partnerships with credible developers.
Also, recent reforms and the roll out of digital land records have simplified land acquisition and reduced bureaucratic delays, while tax breaks, rent-to-own schemes, and subsidised mortgage initiatives under the updated National Housing Policy are encouraging the development of mid-income homes.
The Monetary Policy Rate (MPR) has remained elevated (26.75–27.5 per cent), driven by efforts to curb inflation. These hikes have significantly pushed up mortgage and construction loan costs, while higher cash reserve requirements further tightened liquidity, making credit scarcer for developers.
During the period, cities with high growth areas include Lagos (Epe, Ibeju-Lekki, Sangotedo). These areas continue to attract massive investment due to infrastructure projects like the Lekki Deep Sea Port, Dangote Refinery, and the new Lagos International Airport.
Also, Lugbe, Gwarinpa and Lokogoma in Abuja. These suburbs are experiencing strong residential growth, driven by demand for more affordable housing close to the city centre. Others are Obio-Akpor in Port Harcourt. Growth is steady in middle-income estates, supported by oil and gas-related investments and improving road networks.
Among areas with stable or declining areas are high-end parts of Ikoyi and Victoria Island, while some parts in the premium areas have seen slower sales and rental turnovers due to oversupply and high service costs. In Abuja Central Business District (CBD), commercial occupancy rates are under pressure as businesses downsize or relocate due to high operational costs.
The emerging markets are Abeokuta, Ibadan, and Asaba. These cities are gaining investors’ interest due to lower land prices, growing population, and decentralisation of commercial activities. For instance, Lagos and Ogun States are expanding housing schemes in Ibeju-Lekki, Agbara, and Badagry corridors.
Notable developments include the mixed-use Gracefield Island, Ilubirin Housing Scheme, and private-sector-led Isimi Lagos Wellness City. Currently, infrastructure expansion around Epe, Eleko and Sangotedo is attracting investor interest, and people are moving away from congested zones, looking for affordability and space.
Also, demand in the mid-income and affordable housing segments is increasing across many cities due to continued migration to urban centres like Lagos, Abuja, and Ibadan, creating sustained demand for affordable housing close to workplaces and transport hubs. Rising living costs have pushed many potential buyers away from high-end properties, redirecting interest to budget-friendly and functional homes.
The Guardian learnt that more developers are targeting the segment with smaller-unit designs (one and two-bedroom apartments), flexible payment plans, and rent-to-own options. However, despite high demand, supply still lags, largely due to rising construction costs and limited access to affordable financing
Besides, technology is also beginning to reshape the sector. Virtual site inspections, smart building systems, and blockchain-based property registries are seeing gradual uptake. Developers are experimenting with modular homes and eco-friendly designs, though cost remains a barrier.
Industry watchers expect more pressure on the rental market, especially with continued urban migration. Focus will likely shift to mid-income housing, digitised property services, and more institutional funding.
The Chairman, Association of Capital Market Valuers (ACMV), Chudi Ubosi, told The Guardian that the market in the first half of the year has witnessed a continued increase in rental and capital values nationwide. “This confirms the maxim that real estate is always the last to reflect inflationary trends. Values have been moving up tremendously in line with the devaluation of the currency and other measures introduced by the government, which has driven inflation to over 30 per cent per year.”
According to him, the major trend is quantum leaps in the values of real estate. “Rental and capital values have gone through the roof for properties. Inflation has given or caused a quantum increase in capital and rental values of real estate to the point that clients are reconsidering investments in real estate, whilst others have put a hold on their development.
“In terms of our business, we have had to spend more time convincing prospects why they must pay more. For rented houses, we are seeing more defaults as tenants cannot keep up with the new rents being asked. In the same vein, we are seeing higher values for real estate and other assets when we update their portfolio values.”
Ubosi, a past president of the Africa Chapter of the International Real Estate Federation (FIABCI), revealed that developers are increasing asking prices for their project and selling more of their projects off-plan to raise money for construction rather than take a facility from the financial institutions, while agents are also taking cuts on their professional fees as clients are pressed to the wall in terms of real estate transactions.
He said buyers and renters are concerned about the galloping prices for rent and acquisition. Ubosi is in doubt if the N1 trillion MREIF funds would have far-reaching effects, as implementation of policies has always been the bane of the public service.
However, the fellow of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) is optimistic about the market and foresees a market where values will continue their upward trend in the second half of the year.
Also, the immediate past Chairman, NIESV Lagos branch, Mr Gbenga Ismail, said demand in the mid-income and affordable housing segments remains robust, particularly in Lagos’ peripheries and Abuja’s fringes.
“However, purchasing power is eroding. Renters are facing higher monthly costs, and buyers are increasingly unable to convert intent into transactions due to inflation, interest rates, and limited mortgage access.”
In the second half of the year, Ismail stated that residential demand will remain firm, driven by population growth and urban expansion, while commercial property may continue to lag, except in hospitality and flexible office segments, as well as sustainable, and tech-enabled developments.
The principal partner, Samson Agbato Consulting, Dr Samson Agbato, said despite economic pressures like inflation and fluctuating exchange rates, there was steady demand for residential and short-let properties, especially in urban centres such as Lagos and Abuja.
“Developers increasingly leaned into flexible payment plans and mixed-use developments to attract buyers. Also, the growth of proptech and digital marketing helped improve visibility and accessibility across the sector.”
The immediate past Director, School of Environmental Studies at Moshood Abiola Polytechnic said the first half of the year recorded a surge in off-plan sales, a rental market boom, smart and eco-friendly developments, flexible workspaces and co-living, as well as diaspora investment growth. “Buyers are also attracted by relatively lower prices compared to completed properties.”
Agbato, an estate surveyor and valuer, noted that high construction costs and inflation have pushed more people toward renting. “Short-let apartments remain profitable, especially in Lagos and Abuja, while long-term rentals are in high demand due to urban migration. Developers are increasingly integrating solar power, water treatment systems, and smart home features, driven by rising utility costs and demand for sustainability.
“The shift to hybrid work models has increased interest in co-working and co-living spaces, especially among young professionals and digital entrepreneurs. A steady inflow of capital from Nigerians abroad continues to drive demand for secure, well-documented properties, especially in gated estates and serviced apartments.”
He said inflation has significantly shaped both operations and clients’ behaviour, as prices of building materials such as cement, iron, and finishing products have soared, causing developers to revise project budgets and, in some cases, delay completions. Sales prices have also increased to reflect the cost of development, making affordability a growing concern, especially for first-time buyers.
“Many potential buyers are choosing to rent or renew leases instead of purchasing, due to unstable income and increased mortgage rates. Both individual and corporate clients are now more cautious with real estate investments, requesting detailed cost breakdowns and favouring properties with proven return on investment potential.
“Tenants are more sensitive to increases in service charges, pushing property managers to justify every cost and optimise estate management more transparently. Inflation has made clients more value-driven, preferring locations with infrastructure, security, and long-term investment appeal.”
In the coming months, Agbato is cautiously optimistic and expects sustained demand in mid-income and affordable housing, and rising urban migration. “High inflation will continue to fuel demand in the mid-income and affordable housing segments. Rent-to-own schemes and off-plan sales are likely to gain more traction. With the MREIF gaining momentum, more Nigerians may begin accessing long-term, lower-interest mortgages. Uptake will still depend on improving awareness and simplifying disbursement processes.
He said that high construction costs, FX volatility, and tight access to financing will cause some developers to slow down or phase their projects. However, those with access to off-take guarantees or joint ventures may continue to build. “Demand for large commercial offices may soften, while co-working spaces and flexible layouts will gain popularity as companies cut costs and adopt hybrid work models.
“Regulatory bodies are expected to roll out frameworks that enhance professionalism, licensing, and land registry systems. Investors will likely continue to prioritise high-growth corridors like Ibeju-Lekki, Epe, Lugbe, and Obio-Akpor. Diaspora buyers will remain active, seeking secure, well-documented opportunities.”
