‘There is now no justification for importing foreign valuers’
Victor Adekunle Alonge is the Vice-Chairman, Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON), Principal partner, Nelson Thorpe Alonge. In this interview with CHINEDUM UWAEGBULAM, he explains how estate surveyors could regain their lost grounds, the role of real estate sector in curbing climate change, and board’s panacea in checking under pricing of valuation jobs.
Pressed by increasing population, cities especially the coastal ones have become hotbeds for land reclamation with water front reclaimed areas used to accommodate the growing demand for new housing projects. Do you think that the estate of surveyors and valuers have fulfilled their roles in wetland management?
Wetland management is a specialist professional service. In Lagos State, for instance, reclamation exercise has been going on for quite some time and the integrity of the process is yet to be confirmed in real terms. The people in charge of the exercise cannot say with all certainty that they have followed the right process by using the appropriate professionals in implementing this physical development. The truth is that the estate surveyors and valuers expertise have not been sufficiently utilized in this exercise.
In the ministries of land, waterfronts and others that deal with coastal facilities, there may be estate surveyors who are part of the government team, but if you look at developed countries, especially the Netherlands, private practices are heavily utilized because they provide independent professional inputs and opinions in this process. These inputs help those in public service to make informed judgment and sound decisions. That is lacking in our own jurisdiction as presently constituted. Post-development management of these coastal areas should be the responsibility of estate surveyors and valuers of course, with the compliments of other professionals.
How would you describe the real estate sector as it is today? Do you see it growing or being stagnant?
The real estate sector as of today is generally growing. But the growth rate is the issue of concern because when you have one per cent growth for instance that is not acceptable considering, the potential of the sector. There are key issues that have continued to constrain the growth of the sector. These include land reform, which is, well, an on-going thing. But we need to start seeing on a national scale, the impact of the land reform measures. The agitation has been on for a long time, but we are still bugged down by the bureaucracy of government and removal of the impediments like access to land, and titling.
For properties to be included in the gross domestic product, such properties need to have titles. If a property has no title, it is known as a “dead capital”. There are a lot of them around producing income to their owners, but such income is effectively not captured in the GDP. We need adequate reform to be able to bring all of these properties into our national accounting record. The growth of the sector is related to national growth. What is happening now in the economy should have been to the advantage of the property sector. But the challenges in the sector are enormous. For instance, in the money markets, the Treasury bill and bond market, interest rates have crashed. In real terms, if I keep my money in the bank, I am losing if you consider the interplay of interest rate and inflation. But property offers much better return options, among others, but we are not taking advantage of it because of the issues in land reform.
We have land reform as an on-gong effort. What does it take? We should have a target that in the next five to 10 years, may be 50 per cent of land that do not have titles will be provided with titles. At some point, we will have all the properties titled. Then access to land, let’s make it more flexible and accessible to people. Everybody wants to own property. Property is the single largest investment of most individuals; we should have a policy that makes access to land and properties easy. That’s why a property is not currently recorded as contributing enough to the national gross domestic product (GDP).
The World Economic Forum considers climate change ‘the greatest global risk among business leaders’; nowhere is this truer than in the real estate sector. How prepared is the real estate sector in Nigeria towards curbing climate change?
Climate change is real and not only for us in the real estate sector, but every sector must plan for it. The point actually is how do we mitigate and manage the impacts in the real estate sector, which is very huge. Given that buildings account for 30 to 40 per cent of carbon emissions, the role of real estate owners, investors, and operators in reducing greenhouse gases and atmospheric temperatures cannot be overemphasized. Apart from automobile and industrial effluents, buildings consume more energy and are known for carbon emission. Nigeria and Africa generally have not been able to manage its vast natural resources, including energy resources.
In our sector, we have to start looking at design efficiency, energy utilization and conservation. The proper privatization of the energy sector will bring out the reality of the situation to us. If there is energy efficiency and utilization, it will curb the emission and cost of running buildings in the industry. If we fail to do that, we will start having buildings that are developed and becoming obsolete as soon as they are developed, especially in choice locations.
A new Royal Institution of Chartered Surveyors (RICS) Valuation – Global Standards, commonly referred to as the RICS Red Book Global came into force early this year. How can you compare this with ESVARBON Green Book on valuation practice in Nigeria?
ESVARBON green book or the Nigeria valuation standards is primarily a national standard that domesticated the International Valuation Standards (IVS). The same thing with RICS Red Book. What the Red Book did in the United Kingdom, in particular, is also what the Green Book has done in Nigeria. IVS is the global standards and the point is that it has no legal compliance requirements on member states. It is mainly guidance and best practice advice. The global community has however accepted it and therefore, they demand its application to valuation service delivery. Before now, if a valuer carried out valuation without following the IVS in Nigeria, a client cannot effectively sue him\her for not following IVS. But with the coming of the Green Book, which effectively domesticated IVS into national regulation, the story has changed. IVS is now a legal requirement in valuation in Nigeria. Clients can actually sue a valuer now for not following IVS standard. What we did with the Green Book is that the delivery framework adopted the RICS Red Book global standards. So, a valuer in Nigeria giving valuation service to clients will provide the same level of valuation advice with RICS valuers in England or elsewhere. That’s the level we are now. There is now no justification for any multi-national company to import foreign valuer in Nigeria.
Several aspects of estate surveying and valuation practice seem to have been encroached by other professional bodies. What’s the best way for your profession to regain these lost grounds and gain more prominence?
That’s actually an understatement. The fact is that several aspects of our professional practice territory have encroached upon either deliberately or by other professionals that want to challenge us due to our own apparent complacent attitude, and you know nature abhors a vacuum. So, in a number of ways, we as estate surveyors and valuers have temporarily lost a lot of our traditional professional services. But they belong to us, because the knowledge and expertise are there, and it won’t take us time to reclaim them. It is not just for the benefit of our members, but also for the public interest.
Don’t forget that the nation spends a lot to train each and every one of us. As you know, the educational system is heavily subsidized in this country. Therefore, if we’re not delivering those services, we are trained for, then we’re not really helping the nation. Maybe because of our number, we have not done enough as a profession to highlight the importance of our role, in the system. We contribute a lot to national and economic development. For instance, in the financial sector, debt creation relies mainly on properties as collaterals. What that does is that our valuation ultimately ensures financial stability.
The global economic crises that we have experienced, were precipitated by asset mispricing, which was effectively valuation issue. It is very important that the contributions of valuers to economic development, especially in the financial sector and physical development of the nation are recognized and appreciated. However, we need to engage the public and policy makers to let them know the importance of our services and the benefits of making use of our services both in tactical and strategic terms. In terms of regaining our territories, I think the profession now has a strategy that we’re working on. For instance, project and facility management are our traditional professional services. Project management is not construction management; it is the totality of the development that involves not only the technical but financial aspects of the project. When you’re developing a project, the ultimate is that you develop and realize your objectives. After the building has been developed, the estate surveyor and valuer remains to manage the revenue profile of the building to ensure that the predevelopment financial objectives are realized.
The non-recognition of estate surveyors and valuers is a key reason why securitization has not taken off properly in this country. Securitization should by now have a positive impact on housing and infrastructure. Where people pool various types of contractual debt such as residential mortgages, commercial mortgages and sell their related cash flows to third party investors. Most of these cash flows are expected from properly manage properties. It is not what bankers alone can do on their own. It requires a professional strategy to proactively manage and realize the income, then create confidence in the market. Even if you have an investment certificate in a securitized asset, you can trade it. Estate surveyors and valuers are key to asset securitization development in the country.
There has been criticism of ESVARBON not doing enough to regulate and control the profession, especially in the area of banks’ underpricing of valuation jobs. What’s your take on this?
ESVARBON is taking this issue very seriously because we expect estate surveyors and valuers to be treated fairly as professionals. One of our expectations from clients is that they treat the profession with respect. Valuation is not a commodity but a professional service and when you’re pricing, you look at the benefits as well as the importance of that service to your business and its operations. As a Board, we are aware that we need to thread with caution and ensure the profession is organized to deliver quality and world class services. That’s why in the last few years, we have embarked on a lot of internal reformation and support for valuers including the introduction of Green Book The Nigeria Valuation Standards, to ensure service standards. Clients should be comfortable with the services they’re getting from our registered persons and firms. We also have adhesive stamps to check quackery and complaint handling procedure so that dissatisfied clients can actually make use of the approved dispute resolution mechanism in ensuring that issues are objectively resolved. We also have the mandatory professional indemnity insurance that protects the clients against possible professional negligence. All these are adopted as regulatory measures to assure the public of our services.