Worried by the decline recorded in their sectors in the last one and half years, stakeholders in the construction and real estate industry have suggested ways out of the woods. DAYO AYEYEMI reports
While the dust raised by the 2017 third quarter data on Nigerian’s Gross Domestic Product (GDP) published by the National Bureau of Statistics (NBS) is yet to settle, continuous decline in the real estate and construction sectors of the economy has become a source of worry for practitioners in the built environment.
Some of them, especially developers, builders, engineers, city planners and investors alike, who have expressed their concerns, have proffered solutions.
Speaking with New Telegraph, they canvassed for injection of capital; payment of huge debt owned contractors by government; institutions and structures that would ginger emergence of private businesses, attraction of institutional and foreign businesses into the country as guidelines.
The latest NBS report had shown that growth in the construction and real estate service sector had sustained decline in the last one and half years.
According to the report, the real growth rate of the construction sector in the third quarter of 2017 was recorded at -0.46 per cent (year-on-year), higher by 5.67 per cent points from the rate recorded a year previously, but -0.59 per cent points lower than the preceding quarter.
The report also showed that in the real estate service sector, which tracks the sum of fees for services rendered through data retrieved from tax authorities, real GDP growth recorded during third quarter of 2017 was -4.12 per cent, also lower by -0.59 per cent points relative to second quarter of 2017.
Reasons for decline
Analysts have attributed the decline to worsening economic environment due to falling oil output and restricted access to forex.
They noted that real estate and construction sectors did not buck the trend either, having been in free fall since last year, when the Central Bank on Nigeria published a list of 41 items that were invalid for FX.
According to analysts, most of these banned items were real estate/construction sector related, making the ban to exacerbate an already slowing sector, as most of the materials required for construction in Nigeria are typically imported.
“Making things worse, restricted access to forex and increased all around costs have pushed inflation to 11 year highs at 18.33 per cent. Coupled with negative GDP growth and increasing unemployment, a recipe for stagflation has been created,” they said.
However, In the institutional/commercial real estate space, the experts noted that multiple developments were preparing to or have broken ground over the past three quarters, especially in Victoria Island and Ikoyi.
“A few of these include the Nigerian Deposit Insurance Corporation (NDIC) headquarters, Centex Residential Development, Greystone Tower, VMP III, DSPDC development and the new Diamond Bank headquarters among others,” they said.
They attributed ongoing construction activities of the buildings to developers and investors’ insistence on ensuring that the rising cost of construction does not stop them from building already conceptualized projects that have secured funding.
They added: “This is because if they do not begin building now, the rising costs could mean that the (not drawn down) funding secured to build, may be unable to complete it.”
Speaking on the development, First Vice President, Nigerian Institute of Town Planners, Mr. Toyin Ayinde, said that one of the solutions to stimulate growth in the sector was to find out what makes construction and real estate thrive globally.
He said: “It has been discovered that growth in middle class population and retail activity are often responsible for demand for quality housing units, as well as infrastructure-enabled industrial parks and development zones like free trade zones (free zones).”
He pointed out that the real estate and construction sectors were being driven by emergence of private businesses and attraction of institutional and foreign businesses into the country, while local established businesses continue to flourish.
“The answer would range between a shaky “yes” and an affirmative “no.” So, you would imagine that a decline is inevitable,” he said.
To engender growth of the sector, Ayinde warned that unless the nation makes the enabling environment possible through a review of policies in these areas, investors would keep shying away “even when the real estate sector is acknowledged to be a good hedge against inflation and that it is a major employment generator.”
Principal Partner, Akin Olawore and Company, Mr. Akin Olawore, stated that injection of capital remained the main issue in construction and real estate sectors to deliver economic activities and growth.
According to him, the market needs financial support in terms of long-term low interest mortgage to stimulate supply and open up the entire construction and real estate sectors value chain.
“Obviously, the real estate market segment that can help drive growth requires heavy capital,” he said.
Olawore stated that enduring structures and institutions were required to drive private sector capital to the market, adding that the multiplier effect of these would grow the economy exponentially.
Commenting on the NBS’s report for third quarter of 2017, Past President, Nigerian Institute of Building (NIOB), Mr. Chucks Omeife, said that though it was very disheartening but it is also very factual in all respect, being the reflection of the sectors’ status since 2016.
He noted that the prevailing economic situation had made investment and new development in the built environment very difficult.
He said: “There is a lot of fear and trepidation as to unpredictable direction of the economy, which has remained comatose and has negatively impacted on Nigerians’ purchasing power.
“It’s only when an economy is buoyant and immediate survival needs have been met that the issue of shelter becomes important to a lot of people.”
However, he pointed out that the situation as presently seen had been very unpredictable as investors wanted a level of certainty in the nation’ s economic direction before investing.
To act as a catalyst for growth in the sector, Omeife stated that the government would need to pay off substantial debt owed to local contractors and also embark on the development of infrastructure projects that are yet to commence.
According to him, payments to local contractors and new projects could pump funds into the sector and assist in high reduction in the level of employment, which is very high at the moment.
“If this is done, some level of activities can be activated and the sector will gradually grow and start to contribute positively to the nation’s economic growth,” he said.
Construction and real estate sectors are engines of growth in any economy. The Federal Government must deliberately create policies to attract private businesses and institutional investors to the sectors to create jobs and generate economic activities.
2018: Experts predict vibrant real estate
As oil prices stabilise at 17 per cent higher than 2017 average and direct foreign investment increases, experts see surge in real estate activities in 2018. DAYO AYEYEMI reports
Following improvement in the economy, things are beginning to look up in Nigeria’s real estate sector with market operators getting set to tap into the opportunities, which exist in various segments of the market.
They were, however, particular about the low and middle income residential, millennial and student accommodation sections. Apparently equipped with the dynamism of happenings in the economy, they stated that investors (both local and foreign) were prepared to launch into pockets of opportunities in real estate market. Investors’ hope has been further boosted by the latest Bismack Rewane-led Financial Derivative Company (FDC)’s report on review of third quarter of 2017, which showed that Foreign Capital Inflows (FCI) to Nigeria increased by 148 per cent to $4.15 billion.
This positive trend, analysts said, happened as a result of renewed investor confidence in the economy. Also, the experts noted that oil prices had climbed to 17 per cent higher than 2017 average, expressing confidence that if the situation persists, oil revenues might help mitigate consequences of capital flight.
This newspaper gathered that while some developers are entering into Joint Ventures (JV) with the government to provide affordable housing units for citizens, others are currently repackaging their products to attract financiers and buyers.
In exclusive neighbourhoods such as Ikoyi, Victoria Island and Lekki, where landlords can no longer wait without getting tenants and buyers for their dormant properties, they have been converting their vacant houses to smaller apartments such as one-bedroom, studio and condos to attract people in need of smaller accommodation. This innovation by landlords, according to experts, has caught the attention of working-class singles who want to live very close to their workplaces.
Taking a look at what 2018 holds for the sector, experts, which comprised developers, institutional investors, mortgage providers, media practitioners, property consultants and brokers at Fine and Country West Africa’s investors series, agreed that the outlook was bright and promising for real estate, hinging their prediction on improved economic climate. According to them, the economy has started looking up with pockets of opportunities emerging in the residential segment of the market.
They observed that low to middle income market remained strong all through the recession period while the upper market struggled. “But developers are adopting creative ways of dealing with the persisting challenge with a view to stimulating demand and sustaining their business,” they said.
Setting the pace, Sales Consultant, Fine and Country in Lagos, Mr. David Mba, said that he saw a more vibrant residential market coming as a result of an improved economy in 2018, adding that what were considered challenges in the past have become opportunities. According to him, developers in their bid to share risk and also raise more capital were going into joint ventures, citing Brains and Hammers Limited’s example.
“Only recently, Brains and Hammers Limited, one of Nigeria’s leading real estate and infrastructure development companies, entered into a joint venture agreement with Lagos State Government,” he said. This move, he explained, is believed to be the company’s response to pressing demands from its clients who wanted to acquire property in Lagos.
He said: “The move will see the company developing 750 housing units, comprising 132-tower units and 618 units that will be part of the Jubilee Estate development in Iganmu area of Lagos.
“The Phase 1 of the project comprises 129 units made up of 12 units of 2-bedrooms, 24 units of 4-bedrooms terrace and 93 other units. There are also twin towers made up of 132 units, comprising 60 units of one bedroom, 24 units of two bedroom, and 24 units of 3-bedroom maisonette.”
Other market trends, Mba said, included increase in demand for good value three or four bedroom apartments in Ikoyi precincts, selling within the range of N120 million to N150 million; increase in demand for houses including terraces, semi and fully detached units. Publisher/CEO, BusinessDay, Frank Aigbogun, is of the view that improvement in the economy means increased business activities that will in turn trigger more demand for real estate products such as commercial office, retail and residential buildings.
Fine & Country’s CEO/Vice Chair, Udo Okonjo, stated that the sector’s positive outlook would come with opportunities for only investors who are ready to understand that the market had changed.
From market survey, she stated that there would be opportunities across various segments of the real estate’s market including residential, commercial office and retail. “Lifestyle communities are the new face of residential real estate.
These communities have the advantages of economies of scale and security,” the Fine and Country’s CEO said. She hinted that opportunity currently existed in millennial and student housing, adding that many investors were tapping into these areas.
Dean, Faculty of Environmental Sciences, University of Lagos, Professor Timothy Nubi, confirmed that many investors had already taken position around the university campus and were delivering one-bedroom self-contained apartments for N500,000 per annum.
In a bid to maximise the value of their property, a recent Northcourt Real Estate report 2018 outlook, noted that land owners looked more favourable to joint ventures with developers.
This newspaper also discovered that many developers and investors have been taking advantage of the ongoing construction of Dangote Refinery in Ibeju-Lekki, Lagos to acquire more lands in the axis for housing estate development.
As the business investment climate gets betters, necessary actions must be taken by the government to improve ease of doing business in the country.
How to attract finance into real estate, by experts
Real estate venture is capital-intensive. While this huge capital is often difficult to come by, experts and advisors have propounded guiding principles for developers. DAYO AYEYEMI reports
One major thing the Federal Government needs to tackle urgently is developing the real estate sector, which has not shown any sign of recovery from recession going by the number of abandoned projects dotting the landscape.
As investors are beginning to show confidence in the Nigerian economy due to the government’s intervention in forex, rebound in the capital market and rising oil price, real estate developers are overwhelmed with dearth of funds to complete their projects and start new ones as banks are still skeptical to grant loans. While some of the developers are currently talking to banks for project finance, others have taken the campaigns to Nigerians in diaspora and working class home seekers.
However, some industry experts have tasked developers to package their products (projects) very well to attract financiers or investors. Understanding critical problems with financiers of real estate projects, Managing Director, MCO Real Estate (MCORE), Mr. Munachi Okoye, said that developers must package themselves by following strict guidelines to attract project finance.
MCORE is a real estate investment and advisory firm that offers services and solutions to investors, developers and other third parties towards the development of and investment in large scale real estate and infrastructure projects. For any developer seeking funding for a project, Okoye stated that certain basic principles must be applied. For starters, he pointed out that funders would not finance the acquisition of land, enjoining developers to bring land with clean title to the table as their equity contribution. For debt, he said that funding would always exchange against title, which, according to him, acts to secure the loan.
“Without title, there is no collateral to secure the loan,” he said. In addition to land, the MCORE boss explained that developers were also expected to contribute cash as their equity investment. Okoye said: “This is called having ‘skin in the game’ and gives the investor the comfort that the developer is fully committed to the project’s success and would not walk away if the project is challenged.”
He also wants developers to know that funder would need to know that the project is attractive to its target market, pointing out that this would be evidenced by pre-sales. “Pre sales backed up by deposits reduce the need for external funding hence improving returns,” he said.
Besides all these, Okoye stated that financiers would need to know that developers and his team have the experience to successfully deliver the project on time and within the budget, saying, “If a funder is not comfortable with a contractor he may ask that the contractor be replaced with a more experienced one that has a track record of delivery.”
The MCORE boss reminded developers of the need for a good and well-written feasibility report about the project, saying that funders would require a feasibility study particularly for large projects. According to him, a well written feasibility study will provide a window through, which an investor would be able to view the opportunity presented by a proposed project better.
“A good feasibility study is far more likely to attract funding from investors than a poor presentation,” he said. Okoye stated that investors would always focus on their return at the end of the project, adding, “if return is not attractive, no investor will invest.”
In relation to joint ventures, the managing director said that developers must ensure that the JV partner are not overcompensated, stating that if this happens, there would not be adequate return for the investor.
He said: “It is imperative that the developer looks at all the revenue generating aspects of his business – lettable areas, units for sale, land for sale, advertising revenues etc and seeks to design in such a way that revenues are maximised while costs are managed. “Costs such as lifts, swimming pools, fittings and fixtures and sub-structure costs among others, should be engineered wherever possible to minimise costs while delivering value.”
According to him, real estate developers must be opened to multiple exit strategies since market would determine how a deal is ultimately executed.
He noted that residential developers undertaking a JV might seek to compensate investor with units, adding that in certain cases, some investors might not want the trouble of selling units but preferred to receive cash. Exits for larger developments such as hotels, shopping malls and commercial office developments, Okoye said, would require additional expertise, adding that such project are usually sold by private equity investors to international companies or funds.
“In recent times developers have sought to sell commercial office developments on a per floor basis making it easier to sell in the local market,” he said.
In the final analysis, he advised that a good developer has to juggle costs, land acquisition, regulatory issues, funding, design, revenue generation, business requirements, construction and deliver a successful project that meets or exceeds the requirements of the user while providing an attractive return to the investor. Nigeria received up to $21 billion inflow in 2017 through Diaspora remittances. It has also been estimated that remittances to developing countries would grow by 4.8 percent to $450 billion.
In a move to attract funding, the Director of Homework Development and Properties Limited, Jide Adekola, has restored the trust of foreign investors in Nigeria’s real estate sector.
This is the major outcome of the recent conference, organised by the Association of Nigerian Physicians in the Americas (ANPA) in Atlanta, Georgia, United States, where the Lagos-based leading real estate company showcased its affordable housing units and promoted the recent positive developments in real estate industry in Nigeria.
Adekola said the forum provided a platform that helped to change the perception that foreign investors would not get value for money or might get scammed in Nigeria.
Besides, he said it has also created the awareness that there are professionals in the sector who are able to provide quality products in due time. “The change in perception, which we have created, would in no small measure boost businesses and increase the volume of foreign direct investments that can engender increase in gross domestic product of the country, “Adekola said.
Principal Partner, Kola Akomolede and Company, Chief Kola Akomolede, stated that when things happened in the economy, it would take time for real estate sector to rebound.
While he urged developers to package their products for would-be investors, Akomolede said: “It will take time for property development projects that have been stopped to resume and be completed.
On how he attracts funds for estate development, Group Managing Director, Adron Homes, Emmanuel King, the developer of Treasure Parks and Gardens, said he had spread his tentacles to Nigerians in diasporas, especially in United Arab Emirates, United Kingdom and United States of America, targeting them for home-ownership in the country. King said that many of them came for site visitation, subscribed and convinced their friends, who are now potential homeowners in his estates.
Apart from good feasibility report and project packaging, a good developer needs a good team to help his business grow.
Housing: Developers adopt strategies to cut deficit
To reduce Nigeria’s 17 million housing deficit, real estate developers are taking up pragmatic marketing strategies to help Nigerians realise their homeownership dream. Dayo Ayeyemi reports
Housing is more than mere shelter as it encompasses all basic infrastructures such as road network, power supply, clean water and other services that make life enjoyable.
Besides, the number of quality houses in any nation is one of the criteria for measuring its level of development and quality of life.
Real estate sector has been seen by experts as a mirror of the economy as it directly reflects the economic status of the nation.
However, despite the huge housing deficit of 17 million in Nigeria and the need to build 740,000 housing units annually to bridge the gap, statistics have shown that over 60 million residents are living in indecent houses across the federation.
According to the United Nation’s statistics, 60 per cent of households in the developing world don’t have access to clean water.
Besides, the UN report says 30 per cent of urban population in the developing world live in slums, while 4.5 million move into slum each week.
Bracing to reduce homelessness among Nigerians and improve living condition, some real estate developers have mapped out pragmatic sale strategies to simplify and help Nigerians in need of accommodation fulfill their dream of home ownership.
From site and services scheme to introductions of easy flexible payment, concession and high discounts among others, home seekers now have options to choose from.
Group Managing Director, Adron Homes And Properties Limited, Oba Adetola Emmanuel King, said that successful strategy required hard work, critical thinking and strong execution skills.
He hinted that from Lagos to Abuja and Ibadan, he had mapped out strategies through the company’s forthcoming ‘Lemon De Val Party’ to help families seeking accommodation realise their dream at low entry point.
He stated that first and second editions of the programme, which were held on Valentine Day, had helped 3,000 families to realhse their home ownership dream in his various housing estates across Nigeria.
As part of the strategies, the Adron boss introduced some Nigerian musicians and Nollywood practitioners such as Ajibola Alabi popularly known as “Pasuma” and “Small doctor,”, Saheed Balogun and Fathia Williams as the company’s ambassadors.
According to king, Nigerians need housing, stressing that he had discovered that the best way the company could make it possible at affordable rate was by ensuring that the entry point is reduced to N500 for easy accessibility.
“We have new estates coming on board. In a few days, we will be doing ground breaking ceremony of Town Park and Gardens in Imota, Ikorodu, Lagos,” he said.
“We are also going to be doing ground breaking in Kuje in Central Park and Gardens in Abuja and also in Ibadan. It is also in our plans to extend to the eastern part of Nigeria and also in northern Nigeria.”
The Adron boss disclosed that the company had acquired about 10,000 hectares of land, totaling 120,000 plots, with about 100,000 subscribers in its portfolio for home ownership scheme.
He said the company’s total assets is worth N100 billion.
He revealed that 2018 Valentine Day event had become necessary as construction of housing units by the company is meant to tackle the acute shortage of shelter in Lagos state and the FCT.
According to professionals in the sector, there are no shortcuts to marketing real estate products. Some tips, they said, included core abilities development, promotion of value, conpromotio, creation goals mindset, relationship management and development, leveraging other platforms and inbound marketing.
Director of Homework Development and Properties Limited, Mr. Jide Adekola, an architect, is restoring the trust in foreign investors in real estate sector. His firm now has affordable housing units in different locations in Lagos.
Adekola, in Atlanta, Georgia, United States, disclosed this to Nigerians in Diaspora, while showcasing the products and promoting recent positive development.
He added that he has helped to change the perception that foreign investors would not get value for money or might get scammed in Nigeria.
He also said that there were professionals in the sector who are able to provide quality products in due time.
He said the forum had increased networking among customers, adding that it has increased trust in foreign investors in real estate market and boosted awareness.
Shedding light on some of the innovations being adopted to encourage Nigerians to own their homes while celebrating the Valentine season, King said that his firm would be offering incentives such as 14 per cent discount in all the estates, easy and flexible traditional payment system and supply of 100 bags of cement in some instances.
He explained: “Pay an initial deposit of N140.000 for a plot, spread the balance over a period of 14 months and you qualify for a free ticket to our Lemon De Val Promo 2018. Pay outright for a plot of land and you are qualified for a raffle draw to win a set of sofa, king sized bed and 100 bags of cement.”
Besides, he said the company had partnership with some mortgage institutions, while encouraging its clients that subscribed to National Housing Fund (NHF) to access it.
Since construction of housing is capital-incentive, Nigerians need easy access to cheap and effective mortgage system to attain their housing dreams.
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