Stakeholders are happy about the prospects of a good return on investment in real estate this year, but the difficulty in regularising title documents may be a problem, reports MUYIWA LUCAS.
Stakeholders are upbeat about the prediction of a huge Return On Investment (ROI) in real estate in the coming years. However, a recent report by the World Bank may just be enough caution for prospective investors.
It said: “Nigeria is one of the most expensive and difficult places to register and acquire property for businesses in the world.”
This revelation was contained in a Word Bank Group, document, entitled, ‘Doing Business in Nigeria 2014’ under the section ‘Understanding Regulations for Small and Medium-Sized Enterprises.’
According to the report, an investor in the country’s real estate sector has to go through 11 processes over 78 days, and also pay 15.8 per cent of the value of the property before a transfer of property can be achieved. This situation has made the country to be rated as one of the most difficult and expensive places to register property in the world.
The report which based its submission on findings obtained from the 36 states and Federal Capital Territory, Abuja, held that the easiest place to register a property is Zamfara State, where the process takes just about nine processes, 31 days, and eight per cent of the property value. In Abia State, it takes 13 stages, 108 days, and 15.9 per cent of the property value.
The World Bank report blamed the delays recorded in trying to register property on government bureaucracy, saying “the time is largely dependent on a single requirement: the state Governor’s consent, which accounts for 65 per cent of the total time required, on average. The delay varies from four days in Gombe to six months in Anambra, or Keffi.”
But this is not all. Further findings revealed that apart from the search, consent, registration and stamp duty fees charged, legal fees account for almost half of the total cost to register property. It further stated that the registration fee varies from N2, 500 in Akwa Ibom State to five per cent of a property value in Bauchi, Kano, Sokoto and Taraba States.
Several reasons can be adduced for this trend. According to lamudi.com.ng, an online real estate publication, several people are oblivious of some statutory laws that have been enacted and established by both the state and federal government aimed at regulating, guiding and governing all forms of land and landed properties’ transactions in the country.
These regulations, it further explained, became necessary because land and landed properties’ transactions,- ownership, sales, acquisition, lease, mortgage, alienation, assignment/conveyance, sublease, are a contractual relationship between two or more persons for exchange and release of interest they have on land and landed property in consideration for a compensation, which is usually of monetary value in nature.
It is therefore, for the protection of all parties involved in any, or all of the above mentioned transactions and making such transactions legal and tenable in any court of law, that made the government to enact some statutory laws to guide, govern and protect all persons who find themselves embarking on any of these lands and landed properties’ transactions. They include the ones for revenue generation purposes.
Some of these statutory laws governing land/property transactions, include the Land Use Act; Land Instruments Registration Laws; Registration of Titles Acts; Rent Control and Recovery of Premises Acts; Tenancy Law of Lagos State; Tenement Rate Laws and Land Use Charge Law of Lagos State.
The land instrument registration law, enacted to regulate registration of instruments that are executed prior to, and after the establishment of the Act in Nigeria, incorporates items such as an estate contract, a deed of appointment or discharge of trustee, containing expressly or impliedly a vesting declaration affecting any land. It seeks to guarantee genuine land title documents that have been investigated and registered by the Registrar of Titles in each state of the federation.
This is compulsory for any holder of an interest in land, who wishes to transfer same to another person, to have registered such document at the appropriate Land Registry Office as it will assist purchasers of such land in determining if the owner/seller has the genuine land title document to sell the property and all encumbrances that are attached to the land.
To authenticate the transfer of title, the owner is expected to apply for the Governor’s consent to the Deed of Assignment, which is being executed by both the seller and buyer in such a scenario.
In the case of the Land Use Act, it basically vests the ownership of all the land in the country in the government, who in turn leases it to individuals or corporate bodies as appropriate for a period of 99 years.
But experts and stakeholders have faulted these laws, blaming them for being responsible for the difficulty in securing mortgage for housing finance in the country. Experts have at various times expressed concern over the poor state of housing finance, especially by public institutions, which are put at about 10 per cent. Sadly, mortgage banks are said to contribute about two per cent to this, while contribution from banks and other institutions is insignificant. This is a worrisome trend given that in developed climes, housing finance is synonymous with mortgage system.
The Principal Partner, Imole-Ayo Real Estate, kayode Oyedele, said with a faltering mortgage system, home ownership in the country is realised by almost 100 per cent savings from the owners’ purse. He said this is in contrast with what obtains in other countries, such as South Africa, where an estimated 40 per cent of housing finance is sourced from mortgage institutions. Financial experts and real estate developers, agree that the low mortgage contribution to housing finance can be linked to the cumbersome and unfriendly land administration in the country.
Lending his voice to the impact of mortgage financing on real estate, UACN Property Development Company (UPDC) Plc Managing Director, Hakeem Ogunniran, identified five drawbacks to housing finance. He said these include cost, character, capacity, collateral and conditions. He is of the view that the problem with land registration and titling, is more of a systemic issue than anything else, explaining that the system is people-driven and not process-driven.
He suggested that there should be a “one-stop-shop” for perfecting titles which should be business-like.
As a way forward, the Managing Director, Resort Savings and Loans Plc, Abimbola Olayinka, said the Land Use Act should be used to empower the people and not as an economic and political tool by states’ chief executives, adding that the Act should be expunged from the Constitution so that it could be easily tinkered with.
Olayinka is of the opinion that land administrators should adopt what he called, “three-one-three strategy” for land registration. This means that land titles should be perfected in three days at one central place, and at the cost of three per cent of the value of the land.
Real estate operators and players in the financial sector are of the view that eliminating the bottlenecks created by the land and property laws and regulations will go a long way in encouraging mortgages.
They are quick to cite the Ghanaian example, which was said to be a “dysfunctional land administration, long and expensive procedures,” that lasted up to five years and involving six different agencies supervising the process, leading to inefficiency of the system.
But following its reforms, property registration in the country was cut to 34 days and queues at the Lands Commission disappeared, making it possible for the mortgage sector to thrive. And following further improvement to the system, today, it takes 10 days to register a property in Ghana.
A similar experience happened in Egypt, where high fees and inefficient government agencies that hindered the process of real estate was eliminated by reducing property registration fees; simplifying the registration process, thus encouraging citizens and companies to obtain titles.
Stakeholders are of the view that following the steps of such countries, would go a long way in ameliorating the mortgage finance problems in Nigeria.
