The real estate sector had initial hitches as a result of the recession in the early part of the year. However, with the country’s exit from the economic recession, some measure of good prospects followed, especially in the retail mall sub sector, writes MUYIWA LUCAS.
Stakeholders in the real estate sector have taken a look into their crystal ball and submitted that the outgoing year for operators in the sector has been fair and not particularly fulfilling.
Their submissions are not unconnected with the developments in the industry and the market environment the operators found themselves. For instance, at the onset, real estate owners had the challenge of low occupancy ratio, and tenants’ inability to pay rents.
Kayode Oyedele, an estate manager, recalled that his first shock in the year came from the position of his tenants who told him in clear terms to either reduce the rent or they vacate his house. He had no option than to take a 30 per cent cut in rent to avoid a situation where he would have a lot of vacancy in his property.
Experts like the Head, Property Management, SFS Capital Limited, Victoria Island, Lagos, Mr. Bolarinwa Odeyingbo, explained that the expectations for the property market this year has been dwarfed by the same problem of investor confidence experienced in the sector last year. “The biggest challenges in 2016 were investors’ confidence – local and international. There was not an increased confidence this year, which led to the not too impressive performance of the sector this year,” Odeyingbo said.
Analysts, like Odeyingbo, maintained that as a result of dwindling income of would-be home owners on one hand, and weak currency that further shrunk companies and personal income earnings, remained a strong factor that affected the sector.
With the sector accounting for eight per cent of the Nigerian economy, while the country was in recession, following two consecutive quarters of GDP contraction, the sector declined and contracted so many times. This became a disincentive for investors.
This position was further accentuated by a lecturer and member of faculty at Lagos Business School, Doyin Salami, during his presentation as a guest speaker at this year’s Annual Business and Award Dinner organised by the Nigerian chapter of the International Real Estate Federation (FIABCI), in February.
He had submitted that given the state of the economy and the sector in particular, it was much better to buy a government treasury bill at the moment than to build a house. This, he premised on the return on investment. “Treasury bills will give 20 per cent returns and no risk, while houses are associated with a whole lot of risk such as government approvals and consent, non-payment of rent by tenant and managing the house as a whole. Capital appreciation in housing is one of the slowest; it’s long term and not something that is rapid. It may take another two years for the housing market to become productive, looking at the present economy and the rate at which already built houses up for sale or rent are not occupied,” he told the audience.
Odeyingbo explained that the glut in the market did not really clear out in the year, making several properties across the country to remain unsold, abandoned and uncompleted. The problems, he said, could be traced to the era of cumulative bad governance, endemic corruption, disruption in the oil industry, and the absence of any revolutionary economic blueprint. This is why mass homelessness is now a common feature in all metropolitan areas, and infrastructure problems continue to escalate.
Fed Govt’s initiatives
Nigeria’s mortgage system is currently unable to support a housing policy that will deliver affordable houses to Nigerians. At the recently concluded 2017 National Built Environment Conference (NABECON), which held at the Ahmadu Bello University, Zaria, Kaduna State, the guest speaker, who is the the Managing Partner, Costec Consultants, Mr. John Agele Alufohai, making reference to researches conducted by the Federal Mortgage Bank of Nigeria (FMBN), noted that high mortgage rate, which is usually given at short tenures; a difficult business environment, high inflation, and unstable policies, all combine to hamper the growth of the housing sector in the country. This, he further explained, is why there is an estimated deficit of 18 million housing units in the country. The research also revealed that the country needs to build 720, 000 housing units per annum at an annual cost of N56 trillion to bridge this gap.
“The most efficient focus of housing policy is for the government to assist millions of Nigerians obtain lower-interest mortgages; this is how most citizens are helped to acquire houses in many countries with successful housing policy such as Singapore, South Africa and Malaysia,” Alufohai argued.
This year, the Federal Government also tried to inject funds into the sector through its various agencies. For instance, in April, it announced that it had provided N500 billion to resuscitate the Federal Mortgage Bank of Nigeria (FMBN) to make mortgage facilities easily available to Nigerians. Alhaji Mustapha Baba-Shehuri, Minister of State for Power, Works and Housing, announced this in Lafia on Monday when he called on the Nasarawa State Deputy Governor, Mr Silas Agara.
The News Agency of Nigeria (NAN) reports that the minister visited the site of a National Housing Project (NHP) in Lafia. “The resuscitation of the bank with N500 billion will provide the institution with adequate funds to provide mortgage facilities to interested Nigerians. The government in its quest to provide shelter to Nigerians, has recently directed the FMBN to waive the payment of 10 percent equity on mortgages below N5 million. This will greatly enhance the transition of low income earners from tenants to home owners,’’ the Minister of State for Power, Works and Housing, Alhaji Mustapha Baba-Shehur, had revealed in Lafia, Nasarawa State.
Hot properties
Odeyingbo mentioned this to include the retail sector that is, malls, including the mass medium income category on the Mainland part of Lagos State which drove the market. He observed that areas such as Yaba and its environs, Surulere, Maryland, Magodo Phase 2 (Shangisha/ Ketu Ikosi axis), Gbagada, and some other central areas on the Lagos mainland, will experience a boost. In Abuja, Phase 3, comprising Galadimawa, Kabusa, Lokogoma down to Apo resettlement will experience a boost.
Another segment that moved the sector this year was the development of the malls. For instance, Novare Real Estate Africa, inaugurated its third mall in Abuja- the Novare Gateway Mall, built at a cost of $68 million. The firm is also developing a 12,508-square metre Novare Central Office park- a mix-use centre consisting retail space and A-grade offices. In Lagos, the group developed the 22, 000 square metre Novare Lekki Mall.
Novare Real Estate Africa Chairman Prof Fabian Ajogwu (SAN), explained that the investment has shown the firm’s belief in the economy. For him, it is a wise investor that prepares ahead of the market, which he said is exactly what his group is doing in the Nigerian economy.
Investment opportunities
The rise in Nigeria’s middle class has been over-hyped in recent years but it is still believed to have contributed to the sector this year. A researcher on housing provision and the economy, Mr. Mayowa Sodipo, said there has been dramatic growth in the bracket from about 4.6 million households in 2000 to almost 15 million households today if the middle class and lower-middle-class categories are both included. He, therefore, said, it was assumed that over the next 15 years, the growth will continue to gain momentum, and a further 25 million households will become middle class and lower-middle-class households.
Also Nigeria is by far the biggest source of the new middle class in Africa, with a forecast that by 2030, there will be 12 million middle-class households in Nigeria alone. Sodipo said it was given that the medium income Real Estate investment would fare better.
The Lagos Initiative
The efforts of the Lagos State government and other stakeholders in the built environment to tackle housing deficit, frontally, received a boost this year. In November, the state government signing of a Memorandum of Understanding with the Nigeria Mortgage Refinance Company (NMRC) and a consortium of developers to build and deliver 20,000 housing units in Lagos. The MoU, signed by the parties, is in line with the Lagos Affordable Public Housing (L.A.P.H.) initiative of the Governor Akinwunmi Ambode-led administration, geared towards building 20,000 housing units through a joint venture initiative (JVI).
The Lagos Commissioner for Housing, Mr. Gbolahan Lawal, said that the ministry and the developers had initiated an arrangement with Primary Mortgage Institutions (PMI) and NMRC to facilitate the creation of mortgages for subscribers to the housing units under the LAPH initiative. This is because of the prevailing economic downturn in the country which, he said, has affected the finances of most citizens and their ability to fund the purchase of a home,
“The state government is a subscriber to NMRC by virtue of the registration of our Lagos Building Investment Corporation (LBIC) with the company and is therefore qualified to benefit from the mortgage loan refinancing roles of NMRC. The refinancing agreement will assist the supply side as well as the demand side of the value chain as it will set in motion a revolving pool of funds for mortgage origination which will assist developers and provide them access to construction finance and help scale up housing delivery,” he said. Gbolahan added that the LAPH home ownership initiative and the collaboration were an opportunity for the state and its residents to leverage the benefits under NMRC. He said the MoU would trigger a scheme that could be tagged: “Home Ownership Made Easy.”
By and large, it is the belief that this year has seen the industry perform averagely.
