News
Impact of Inflation on Nigeria’s Real Estate Sector
The National Bureau of Statistics (NBS) has officially announced that Nigeria’s inflation rate stands at a concerning level of 30-32%. Such a high rate of inflation is detrimental to the country’s fragile economy.
The real estate industry in Nigeria is heavily impacted by inflation. According to economic principles, inflation affects both the demand and supply sides of an industry. In the case of real estate, the cost of building materials inevitably increases during inflationary periods. Currently, the prices of essential materials like cement, doors, and windows have doubled, contributing to the rising cost of developing real estate assets.
On the demand side, inflation reduces the purchasing power of individuals, leaving them with less disposable income for housing. This diminished spending capacity negatively affects the demand for real estate.
Again, with regards to real estate, the fluctuations in the naira value viz-a-viz the dollar is more related to the building material components that need to be imported. However, even cement and wooden doors produced locally, is responding to the dollar, this is a misnomer.
This fluctuation causes uncertainty in the real estate market, hence building material stakeholders tend to keep their prices at safe level, meaning no matter the behaviour of the market they would be selling at a profit.
Real estate economy is affected by the general economy, however, there is a character of the market in that it does not respond quickly due to an economic concept called lagging. So, ordinarily by now rents should have doubled but it hasn’t because of the factors governing response to market indices.
But those bringing new products i.e. houses are demanding high prices when compared to those already occupied. Thus, there is a gap between rent paid by sitting tenants as compared to new tenants, and practically, for example a 2-bedroom flat in Garki FCT will go for nothing less than N2 million per annum. For old tenants same will be paying N1.5 million or even less.
And payment of monthly rent is one solution government is mulling to address the high cost of rent, but rents are collected yearly or more in advance because of the inherent risk involved.
And when the economy is less risky, they can consider monthly, especially to assuage the civil servants who earn monthly salary but the value of that has eroded.
Fortunately, the government has recently implemented the Consumer Credit Scheme, which aims to provide subsidies and stimulate the economy. This scheme has the potential to benefit the property market if access to loans is made less restrictive.
Real estate professionals are facing challenges due to the limited impact of rent increases on their earnings. The regulatory body for estate surveyors and valuers has set a 10% commission rate, and exceeding this is considered a criminal offense.
The decision to rent or purchase a property is ultimately a matter of personal preference. However, in Nigeria’s current economic climate, the rental market has become more expensive than the sales market. This is largely attributed to inflationary pressures, which have led to a slowdown in property development. Exhausted off-taker funds and financial stress among developers have resulted in poor-quality construction and delays in project completion. Consequently, developers are struggling to fulfill their contractual obligations.
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.
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.
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.
-
News2 years agoHOW PASTOR ASHIMOLOWO BECAME BIG IN REAL ESTATE
-
News2 years agoA TENANT IS NOT ENTITLED TO REFUND OF RENT WHERE HE UNILATERALLY SURRENDERS TENANCY
-
General2 years agoSeven Most Popular and Influential Young Real Estate CEOs in Nigeria
-
News1 year agoUnderstanding the importance of a certificate of occupancy in land ownership
-
News1 year agoBig C Properties Boss, Aforjama to be Honored as Anambra Real Estate Person of the Year
-
News1 year agoLAND TITLE VERIFICATION EXERCISE IN OGOMBO
-
News2 years agoRevolutionPlus Property Unveils New Executive Management Team
-
News2 years agoLagos socialite accused of unlawful demolition of N800 million property