The real estate sector in the first quarter of the year has been negatively impacted in several ways by ill-timed fiscal and monetary policies. A case is the Central Bank of Nigeria’s (CBN’s) policy on Naira swap. The effect of the policy on Nigerians was tough as they were denied access to money to buy most basic things in life. Investing in real estate was the last on their minds. OKWY IROEGBU-CHIKEZIE reports.
It’s almost five months since the Central Bnak of Nigeria (CBN) introduced the policy that redesigned the N200, N500, N1000 notes, which has had a spiral effect on Nigerians.
Though this is characterised by huge cash crunch, the apex bank maintained that it was meant to checkmate vote buying as well as promote cashless banking.
True, the policy brought with it untold hardship as many people find it difficult to purchase the basic things of life such as food, accommodation, school fees and medicals.
Against this background, investment in real estate is the last thing on people’s mind as investible funds remain inaccessible. Still, some real estate operators believe that some good could come out of it in the long run.
They projected that some major factors that might influence the development of the real estate market in 2023 would include inflation, high cost of building materials, the election, soaring housing price and high interest rate environment.
Others are increase in the cost of building materials, poor land acquisition policy and forfeiture orders.
Last year, the sector contributed over N7 trillion to the nation’s Gross Domestic Product (GDP), coupled with the improved investors’ trust in the industry, no thanks to the number of housing schemes initiated in the third and fourth quarters of the same year.
All things being equal, analysts predicted sustained growth in the industry. Financial Derivatives Company (FDC), in its report, said real estate would expand by 5.2 per cent in the year. It added that the contribution of real estate to the GDP would increase to 6.5 per cent as a result of high population and urbanisation growth.
On opportunities in the construction sector, FDC said the sector’s contribution to GDP may hit 9.2 per cent due to increased spending and investment on road infrastructure, noting that the Federal Government had concessioned 12 federal highways, but feared that the projects initiated by the outging administration might be abandoned by their successor.
“Aside the ill-fated CBN cashless policy, there is a possibility that after now, there would be adequate cash in banks that can necessitate banks giving out loans to the sector. If this happens, more people will be interested in housing products as investment forms as the era of keeping cash at home and in the offices will no longer be attractive,” FDC said.
An estate surveyor & valuer Ikenna Okechukwu Oyedele, said though the monetary and fiscal policy of the Federal Government and the CBN was not well-thought out as it looked more like a political gambit, the expectations in the sector for 2023 were an improved performance over those of last year.
While calling on President Muhammadu Buhari to assent to the National Building Code (NBC), he further canvassed the need for a policy that would bar imported building materials to grow the capacity of indigenous manufacturer.
“The time has come for the reduction of the usage of foreign materials in the building construction in order to reduce cost. We need to reduce the use of cement, especially for walls and paving and we need to standardise our sandcrete blocks and encourage the use of bricks. Our houses are not economically distributed as there are numerous abandoned properties,” he added
Stakeholders and experts, however, outlined some critical areas to be addressed to reposition the housing sector, stressing that adequate financial intervention was needed in the housing sector value chain.
They asserted that the ballooning population in urban cities would contribute to the development of the housing sector in 2023, adding that the challenge had been traced to Nigeria’s population growth, which is at 2.6 per cent per annum and outpacing the provisional housing system.
The Bank of Industry (BoI), in a report on Nigeria’s housing sector, affirmed: “With a growing urban population, increasing construction costs, and declining household income and access to affordable housing is becoming more difficult for millions of citizens.”
The BoI, however, outlined some critical areas to be addressed to reposition the housing sector, stressing that adequate financial intervention in the housing value chain was required to boost development in the sector.
“Increased partnership with the organised private sector is crucial to unlocking opportunities in the real estate market,” the BoI report stated.
Another report by the Federal Mortgage Bank of Nigeria entitled: “Institutional turnaround for the next level,” indicated that last year, although the Federal Government budgeted N470billion for housing, the sector would require trillions to close Nigeria’s housing gap.
The FMBN report estimated 206 million persons in Nigeria, indicating that about 95.1 million lived below the poverty line, and as such, it was difficult for them to have access to their own homes.
The rising cost of housing, particularly, house rent, has eroded the purchasing power of Nigerians, pushing more people below the poverty line.
According to the Executive Secretary, Association of Housing Corporations of Nigeria, Mr. Toye Eniola, poor implementation and mismanagement of economic policies were largely responsible for the upsurge in the rising cost of living, which has continued to push more people below the poverty line.
He noted that, virtually everything in this country is determined by the price of foreign exchange market rate. This ineptitude of the manager of the country and their inability to stabilise the exchange rate is causing more damage to the economy and people are becoming poorer and poorer without visible hope for the people, especially the youths, he said.
According to him while all these costs had likely impacted rising home prices, a resultant increase in disposable income had not been recorded, making residential real estate unaffordable for the average Nigerian.
Secondly, I will say it is the lack-lustre attitude of regulatory bodies, especially, in Nigeria, because, we have no regulatory bodies, many companies and individuals are just increasing the price as they wish. Regulatory bodies should regulate the price even though there is inflation everywhere. It could be managed in a way that will not affect the people.
“What I will say, which is like a continuation of the second one, is greed. Many people use a rise in exchange rate as an excuse to increase the price of housing, but in the real sense, it may not be affecting them as they portrayed it. For example, everything we use for construction in Nigeria can be sourced locally with very good quality.”
The Managing Partner, Ubosi Eleh & Co, Chudi Ubosi, noted that the issue of the incessant hike could be looked at from a couple of perspectives. He said: “Property development has continued to be an expensive venture from land acquisition to obtaining consent or good title to government approvals and then the actual construction, which involves buying building materials at the current high prices. The result is that, upon conclusion, the developer wants to charge a premium to enable him/her to begin the process of recouping their investment.
“Another perspective is that real estate is an investment like any other investment. Investors sweat their investments to ensure they are getting maximum dividends from them at any time.”
