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How construction, real estate can drive growth, by experts

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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.

Ongoing developments

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.”

Experts’ view

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.

Last line

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.

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Architects task govt on affordable housing

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Issues of urban regeneration to architectural designs, smart city, affordable housing and climate change were again brought to the fore by architects and professionals in the property sector last weekend. Dayo Ayeyemi reports

Rising from a three-day brainstorming session, Nigerian architects have been tasked to mount pressure on the government to formulate policies and invest in affordable housing estates for low-income earners.

Besides, they were also urged to achieve sustainability by incorporating the use of local materials in their projects, as well as engage the government to make it a priority to stop deforestation, encroachment into bogs, wetlands, mashes and swamps.

Participants at the forum cut across diverse stakeholder groups from public service, private sector, academia, and allied professions to artisans and building construction material manufacturers and suppliers.

 

Themed: “Lagos 9.0 – An Architectural Regeneration 1 – The Lagos Response,” the experts in a communiqué issued at the end of the forum, called on architects to sensitise the government to ensure that every compound had minimum of one tree, and that the number of trees should be calculated based on size of compound.

“Architects should try to achieve sustainability by incorporating the use of local materials in their projects. They should design with identity in mind, a sense of belonging, which should be into our architecture,” they said.

The experts also urged the government to encourage and promote local materials industry and that it should concentrate resources in building up areas that will yield greater resources.

 

“Such projects would take time and as such, there is need for focus, regardless of change in administration,” they said.

 

Response

Represented by Deputy Director in the Ministry of Housing, Remi Adebo, the Governor of Lagos State, Mr Akinwunmi Ambode, said it was no longer news that the state government was working towards transiting from a mega city to a smart city.

He said his government was geared towards achieving a mega city status, adding that it starts with architects.

He noted that the theme of architectural regeneration was very relevant and in line with the government’s approach towards creating the mega city.

 

“Plans of regeneration has lead us to embarking on various projects in and around the state including some laudable projects such as the Ilubirin residential scheme, Oworonshoki mega transport hub, transformation of Epe and revitalisation of Oshodi,” Ambode said.

 

One of the speakers, Roman Oseghale, an architect, stated that the housing industry remained a major booster for economic growth, noting that the nation’s housing deficit stood at 17million as at 2013, and that the estimated worth of housing deficit was $302billion.

“About 720,000 housing are needed annually but we can only produce about 350,000. An estimated 70 per cent are living in poverty with about 8,000 added to extreme poverty daily. There was an urban population of 48.6 per cent (90.4m) at the end of 2016,” he said.

According to him, while justifying the need for regeneration of Lagos, he said it had an estimated population of 18million to 21million people and a projected population of 36million by 2050, adding that its housing demand grows by 20 per cent annually.

“In 12 years, Lagos population increased from 8million to 18million. It has a population density of 5,381 people/Sq.km, a GDP of $136 billion, and 30 per cent of Nigeria’s GDP. It also holds 70 per cent of Nigeria’s industrial capacity and accounts for 90 per cent of Nigeria’s foreign trade flow, “he said.

 

Stakeholders’ opinion

Chairman, Lagos Chapter of the Nigerian Institute of Architects (NIA), Mr. Fitzgerald Umah, said the 2018 LAF was a forum to walk the talk, get the details and proffer solutions to problems, noting that Lagos has been shrinking, not because the landmass has been reduced but because “the population is growing at a very fast rate.”

According to him, failure to respond and regenerate into a more resilient organism or organisation could only result in systemic stagnation and eventual decay.

Speaking on” regeneration – The East Village Story,” Adjunct professor at the University of Calgary’s Faculty of Environmental Design , Bill Chomik, pointed out that architects had stepped outside the box to play a seminal role by preparing the master plan, using innovation and creativity as design drivers.

This model, he stated, could readily be replicated in other cities where physical renewal and invigoration of a degenerated urban environment is envisioned.

Another expert, Rear Admiral Houtonu, who was passionate about regeneration, said that a lot of Nigerian towns and cities have been overtaken by what is called ‘the Inner City Syndrome.’

Citing what had been done in the East Village in Canada, she said that there was nothing wrong with concentrating resources in building up areas that would yield greater resources.

 

Last line

When participants coalesce next year, they want to see how architects have applied these solutions suggested to solve the issues raised.

 

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Why real estate market is yet to recover, by facility managers

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From residential to commercial, office space and retail mall, there are signs that real estate market is still struggling to recover from the lull, New Telegraph has learnt.

 

This is evident in low demand for properties, existing vacancy rates, rent service charge defaults and low construction activities in the sector – almost six months after Nigeria came out of one and half years recession.

 

Group Managing Director, Alpha Mead, Mr. Femi Akintunde, an engineer, sais despite the fact that the market characteristics have been gradually fading away owing to improving macroeconomic indices, real estate market is still struggling to recover from the lull.

 

He noted that real estate market was one of the worst hit sectors during the 15 months’ period of economic recession, which lasted from first quarter 2016 to second quarter of 2017.

 

“The sector saw its growth dim as the market was defined by low demand, widening vacancy rates, increasing case of rent service charge defaults and slowdown in construction activities,” he said.

 

Speaking during the pre-event press briefing of 2018, Nigerian Facilities Management (FM) Roundtable, Akintunde said that for real estate markets to receive a new lease of life in post- recession Nigeria, it would be determined by the roles FM would play in enabling positive experiences for its stakeholders.

 

Commenting on current situation in the real estate sector, the Alpha Mead boss stated that report from the International Real Estate Partners (IREP), Nigeria, a strategic business units of Alpha Mead, had shown that rents in commercial properties such as Grade ‘A’ office space could lightly fall below the current average of $700 (N252,000) per square metre (psqm) as the market anticipates arrival of 37,000 square metre in Victoria Island and Ikoyi, Lagos. He pointed out that demand for Grade ‘A’ office space has not been growing at the same pace, adding that report had shown that rise in neighbourhood retail stores have been decreasing footfalls at the modern retail centres.

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NHP: Contractors seek release of budgeted N35bn

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Dearth of funds may hinder full implementation of various on-going housing projects in 33 states of the federation under the National Housing

 

Except the necessary machinery is put in place, attempts by the Federal Government to build affordable housing units in all the states of the federation under its National Housing Programme (NHP) may become another white elephant project.

 

Despite the readiness of real estate developers, who are government contractors for the project, the latest threat to the initiative is fund, which is not coming as at and when due to accelerate the completion of the housing construction process.

 

The contractors, who spoke at different times in their various locations, called on the Federal Government to hasten the processes of fund disbursement to enable them complete the works at their various sites as scheduled. New Telegraph’s findings revealed that stages of work in most of the sites were very impressive. In some locations, developers have achieved between 70 and 80 per cent completion of the project, while in almost all the sites, excuses from the contractors have been lack of funds.

 

The contractors, Mathias Orove and Jude Opute, at Calabar and Uyo project sites respectively during a media tour of the project, told this newspaper that untimely disbursement of funds was hindering the progress of the project.

They appealed to government to release more funds in order to accelerate construction work of the housing units. The team leader of the project in Enugu State, Veronica Enesi, also stated that the project in the state had lifted many of the people of the state from poverty level.

 

She explained that the site had some set back from the beginning, but having overcome the challenges, the project was gaining considerable speed and would be completed soon. Both the team leaders and the contractors called on the Federal government to hasten the process of funds disbursements, so that the projects could be completed as scheduled.

 

NHP

 

Initiated in 2016, and projected to cost about N35.4 billion, NHP was conceived to address the housing needs of workers, and provide economic empowerment for local communities where the projects are located.

 

One commendable step taken by the government in prosecuting the national housing programme is not just the fact that it has mustered the political will to partly address the housing deficit in the country, but the emphasis placed on the promotion or local contents to empower the people who live around the host communities.

 

As a matter of policy, government made it mandatory that all the building materials and every other needs of the projects must be 100 per cent indigenous.

 

That is to say that the local community hosting the project must be given priority attention. This newspaper observed that in six locations of the project visited: Enugu, Ebonyi, Calabar, Uyo, Benin, and Asaba, local content policies of the government were been complied with.

 

The contractors, building materials, the suppliers, both skilled and unskilled labourers are indigenous people who have attested to the economic empowerment capability of the project. The building designs are the same in all these locations. The project, which consists of two-bedroom semi-detached bungalows, three-bedroom semi detached bungalows, three-storey condominium blocks of 24 mixed units are at various stages of completion.

 

Govt’s reactions

 

The Minister of Power, Works and Housing, Babatunde Fashola, said that the Federal Government was considering an upward review of contractors’ mobilisation fees to 50 per cent from its current status of 15 per cent. Fashola told some members of the Association of Indigenous Construction Contractors of Nigeria (AICCON), who paid him a courtesy visit recently, that there was already an executive bill at the National Assembly to address the mobilisation issue.

 

“There is a bill from the executive before the National Assembly to review the 15 per cent mobilisation fee payable to contractors requesting the NASS for an upward review to 50 per cent,” he said.

 

The Federal Controller of Housing in Uyo, Akwa Ibom State, Mrs Ikuo Uzodinma, noted that the project was gaining more speed. She said the project, which started effectively in the state, had empowered a lot of artisans and other people in the community. The Federal Controller of Housing in the ministry, Olusola Idowu, who represented the ministry at one of the project sites in Ezzamgbo, Ebonyi State, said that NHP was one of the initiatives of government designed to accommodate and empower Nigerians.

 

According to him, NHP was initiated by government, not just to provide the populace with accommodation, but to boost economic activities of people, who live around the community. He explained that the project in Ebonyi State, which comprised 72 units of affordable houses, would soon be completed as soon as funds were made available by government. He said: “Over 95 per cent of our workforce at this site are indigenes of this community.

 

Supplying of building materials is also predominantly carried out by indigenous traders, and other beneficiaries of the site include artisans and food vendors.

 

“The project is ongoing and as you can see, most of the contractors are already completing their work while others are waiting for the release of fund to speed up the work.”

 

One of the attempts made by successive governments in Nigeria to meet the housing needs of the populace is the ongoing housing programme. It is the prototype of what Shehu Shagari’s regime introduced in the Second Republic of Nigeria’s democratic journey.

 

After Shagari’s attempt, there were many other efforts at providing the missing links in the housing industry, through more of private sector interventions. Ironically, virtually in all parts of the country, there are massive housing development by private sector investors, yet accommodation gap continues to widen, putting pressure on the health of the nation’s economy. The reason for this is simply that the affordability margin is too far for the reach of the masses.

 

Some experts in the sector noted that the desire to bridge the gap and remedy the deficit had never been lacking, saying that what has ever remained the scarce commodity was the political will to take the bull by the horn.

 

Last line

 

The relevant authorities should hasten the processes of funds disbursement to the contractors in ensuring that the housing programme is sustained.

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