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Experts Cite Poor Financing and Dollarization of Nigerian Economy as Barriers to Real Estate Growth
President Bola Tinubu’s first year in office has been marked by economic turbulence, impacting various sectors, including real estate.
Removal of petrol subsidies, naira floatation, high inflation and dollarization of the economy are factors that have led to a significant increase in building material prices, making it challenging for citizens to meet their housing needs.
Stakeholders in the real estate industry have urged the government to prioritize the sector’s development by establishing mortgage financing institutions, regulating foreign exchange rates, revising land use acts and other laws that hinder growth
They believe that an enabling environment for operators and buyers, including access to financing and affordable housing options, is crucial for addressing the housing deficit in Nigeria.
While some operators acknowledge that one year is insufficient for a new administration to significantly impact the real estate sector, others express concerns that real estate may not be a priority for the government, given the lack of visible focus on its development.
In the opinion of Mr. Merckson Innocent Okoro, Principal Partner, MI Okoro and Associates, the president is navigating a very challenging time and real estate does not seem to be a top priority. According to him, while the President mentioned plans for mortgage reforms, social housing, and other initiatives, they have not materialised yet.
“Similar to foreign policy, focusing on creative mortgage solutions in real estate for 25-year term could be very beneficial. Unfortunately, it appears these plans haven not progressed.
“Social housing would also be valuable. However, as mentioned, the current focus is on broader governance issues. It is too early to definitively judge the president’s performance in real estate. We will need to see his second year to assess the implementation of any planned policies. While some policies have not been enacted yet, it may take time for their benefits to become evident. At least, there is an effort to communicate this time, unlike the previous administration. The new approach emphasises collaboration and good intentions, which is a positive step.
“However, there’s more work to be done. While real estate is not a quick fix for broader economic challenges, it should not be completely ignored either. The reason is, unlike other commodities, real estate is highly sensitive to macroeconomic disruptions. There was a recent effort at communication from the government, a shift from the past.
“While improved communication is a positive step, more action is needed to address the housing crisis. Real estate is particularly vulnerable to economic fluctuations. When the dollar rises, the cost of developing properties increases and this discourages development and reduces supply, leading to a surge in housing prices. For example, properties that sold for N400,000-N500,000 just a few months ago are now priced at over a million,” he noted.
On the need for sustainable solution, Okoro stated that, “the high cost of electricity further burdens the real estate sector. Due to reliance on imported diesel, multi-tenant buildings face exorbitant service charges. Solar energy offers a viable alternative. While the initial investment is higher, solar panels have a lifespan of 15 years, significantly reducing long-term costs. The government’s recent decision to encourage solar usage is a positive step.
“Heavy dependence on imported building materials with inflated costs without government encouraging domestic production of essential materials like cement and roofing sheets is worrisome. We have the resources and a deliberate effort to utilise them would create jobs, reduce reliance on imports, and even foster exports. An example is the steel industry. Revitalising domestic steel production would eliminate dependence on imports. Nigeria is blessed with abundant natural resources. However, ineffective leadership hinders us from exploiting these resources to our advantage. Our leaders often view the country as a personal piggy bank, enriching themselves at the expense of the nation. A patriotic leadership that prioritises the nation’s well-being is crucial. Nigeria has the potential to solve its housing crisis. By embracing renewable energy, promoting domestic production and electing responsible leaders, we can create a thriving housing market that benefits all Nigerians.”
In his assessment of President Tinubu’s first year in office, Mr. Chudi Ubosi, Principal Partner, Ubosi-Ele & Co., stated that the country has suffered continuous failures of leadership culminating in the eight years of the last administration.
According to him, “the country is going through tough times but one key thing is that we at least have a leadership that is listening, engages and responds, unlike the last administration where it was dead silence even in the face of severe crisis.
“From my perspective, land use act, dollarisation of the economy, lack of enabling environment, and all the issues raised above will continue to serve as threats to the sector if not handled. Again, the major threat is the government and its unwillingness to help the sector. A lot will flow from their actions or inactions. Access to affordable land, fairly priced and durable building materials, cost of funds for developers, access or lack of access to cheap long-term mortgages, etc., all serve as major threats to the growth of the real estate sector.
“The damages of a decade and half cannot be fixed in 12 months. It will get worse before it gets better. I believe we are now in that phase before we sight the light at the end of the tunnel. It has not been easy and continues to be difficult at all levels but I am optimistic that the economy will come out stronger.”
In terms of real estate, Ubosi further said, “the president has done a few things but I think the key one will be the Coastal Road to Calabar from Lagos. This, I believe, will be a game changer with all the services and infrastructure proposed therein. Real estate on this corridor will boom and trade and commerce will boom too. I am not one who believes that the government at any level should be involved in housing development etc. I believe the government should just provide the enabling environment and let the private sector get on with it. In my opinion, this is going on well to the extent that the government is pushing for a review of the Land Use Act to bring it in line with the realities of modern day Nigeria especially as per its many clauses that do not reflect the interests and thinking of stakeholders.”
For Victor Okafor, the Admin Manager, Dofas Nigeria Limited, a Company that deals on sanitary wares, “We have been in business in Nigeria for more than 30 years but doing business in Nigeria has not been very conducive. The dollarization of the nation’s economy, electricity supply that has not been very appealing to businesses and security challenges are the factors stopping our company from establishing a factory in Nigeria.
“All our products are manufactured in Germany and they are of the same high quality. Our products, sanitary wares are produced from one spot so the quality is always assured. The administration of President Bola Ahmed Tinubu in terms of advantages to our business can only come after the man has stayed at least two years and some months. It is too early to judge the President because the country before him has already been rotten. Everybody can see how the problems he met accumulated from the past administration, however, I can say he is doing well now but he needs everybody’s support to be able to wriggle out of the problems.
It will take some times to correct the bad in the system. I also believe that real estate is not among his first five,” he said.
News
Lagos schedules meeting with owners of distressed buildings.
The Lagos State Government has said it would soon arrange a meeting with developers/owners of distressed buildings on how best to address the redesign and remodelling of such structures by November.
This was disclosed recently by the Commissioner for Physical Planning and Urban Development, Oluyinka Olumide, at a function in Alahusa, Lagos.
Olumide said the prevalence of distressed buildings in different parts of the state was worrisome and needed the urgent attention of all stakeholders.
He said, “The Ministry of Physical Planning and Urban Development as mandated by the Lagos State Urban and Regional Planning and Development Law, 2019, as amended, was willing to extend its responsibility for approving the remodelling of existing buildings to provide technical assistance to developers and owners of distressed buildings, especially on the design and remodelling of such buildings.
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FG threatens contractors over Enugu-Onitsha road delay
The Federal Government has instructed the contractors responsible for the 107km Enugu-Onitsha road dualization to expedite the project.
This directive was given by the Minister of Works, Senator David Umahi, during a meeting with MTN, the Enugu State Government, and the contractors, RCC Ltd and Nigercat Ltd, on Friday.
According to a statement released on Friday, the minister said he is disappointed over the slow pace of work on the project, he said, “Let me express my disappointment over the slow pace of work on that project. It is one of the worst roads in this country.
“Everywhere we have diversion; diverting from the one that RCC and Nigercat had completed, the contractors are not kind enough to even put stone based on the diversion points.”
He added, “So, by the reason of the launching of our Operation Free our Roads, it is now a violation of the policy on the side of the controllers and directors of the Federal Ministry of Works where we have vehicles falling on any project that is ongoing or where there are potholes on our roads.”
He also blamed the sufferings of road users on the lack of commitment and insensitivity of the contractors.
“The public must know that the President’s intention is not for them to suffer while trying to fix the roads, and it is their right to insist that contractors should fix the roads that they are engaged on,” he said.
The Minister commended the Enugu state government for their resolve to fund the construction of a 20 KM section of the road and expressed hope that MTN would execute the second phase of the project.
He noted, “Why the Enugu State government is intervening is because of the slow pace of work by the contractors and because of funding issues. The essence of tax credit is for funds to be made available. And so, I don’t see RCC going to keep their promise to finish this project in 6 months.
“My advice to MTN is to look for another contractor within that axis if they want to get the job done. Division of labour is even the best. While they are doing the road, and if Nigercat is doing a good job, you can give them greater scope to do if you want to finish that job.”
He warned contractors that the Federal Government would not accept phased handovers of projects and has phased out Variation of Price in contract administration.
News
Ekiti state government mediates land dispute between traditional ruler and family in Epe-Ekiti
The Ekiti State government has intervened to resolve a longstanding land dispute between the Elepe of Epe-Ekiti, Oba Ayodele Adesoye, and the Atolagbe family. The government cautioned against the misuse of modernization as an excuse to disregard traditional customs.
In line with the community’s traditions, the government has ordered the release of resources, including palm trees at Oko Oba Farmland, to Oba Adesoye for his administration. This decision ensures the continued adherence to age-old practices.
Ekiti State Deputy Governor, Chief (Mrs) Monisade Afuye, announced the resolution in Ado-Ekiti. The decision was made after considering the Elepe’s claim to Oko Oba Farmland based on historical evidence.
Mrs. Afuye acknowledged the Elepe’s right to be the custodian of Oko Oba Farmland, citing longstanding traditions that support his claim. The decision reflects the importance of respecting historical practices and ensuring their preservation.
The deputy governor, however, told the monarch in clear terms that other princes and princesses from all the three ruling houses should be allowed to farm on the land without payment of royalty.
Mrs Afuye appealed to the community to comply with the government’s position to restore unity, peace and orderliness to the beleaguered community.
Oba Adesoye expressed gratitude for the government’s decision and pledged to foster peace and unity between the throne and the community, aiming to accelerate Epe’s development.
Representing the Atolagbe family, Dr. Yemi Agbeleoba acknowledged their willingness to cede Oko Oba Farmland to the monarch. However, he emphasized the need for all three ruling houses to participate for a lasting and traditional solution.
Agbeleoba expressed appreciation for the government’s directive, believing it will contribute to resolving the long-standing conflict.
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