At the centre of 17 million housing deficit, a huge number of vacant houses, coupled with high rental values persists in Lagos and Abuja. DAYO AYEYEMI reports
Nigeria’s real estate sector is still going through tough time as vacant houses persist in major cities despite the recorded growth in the economy and nation’s foreign reserves
Two major cities that have taken direct hit of this followed by high rents are Lagos, a commercial nerve centre and Abuja, the nation’s capital.
The number of vacant houses, especially at the higher end of the market in these two cities, has risen sharply in the last one and half years, in which Nigeria experienced economic crisis.
According to latest New Telegraph investigation, most streets in Lagos and Abuja’s high brows are still filled with huge number of vacant houses despite the seeming improvement in the economy, just a few days to end the year.
Some of the high brow locations include Ikoyi, Victoria Island, Lekki, Ikeja GRA in Lagos and Asokoro, Maitama, Wuse II and Jabi districts in Abuja. These locations have a high number of unoccupied houses despite the nation’s housing deficit of over 17 million units.
Market survey further revealed that despite huge number of vacant houses in the metropolis, high rental values persist as tenants and accommodation seekers find it difficult to cope due to their low-purchasing power occasioned by uncertainties in the general economy.
Survey by New Telegraph showed that rental values for three bedroom terrace building in Ikoyi ranged between N7million and N10million per annum depending on location.
Rents for three bedroom apartment in Ogba, Okota, Isheri, Ketu and Surulere cost N700,000; N600,000; N450,000; N450,000 and N1.5million per annum respectively. The same accommodation costs between N3.5 million and N8million in Victoria Island and Lekki, Lagos. Two bedroom flat in Ogba, Isheri, Ketu and Lekki costs N450,000; N300,000; N300,000 and N2.2 million.
In Abuja, house rent in Maitama costs between N7million and 25million. Rental values for three bedroom in Wuse II, Jabi and Mabuchi cost N7million, N4.8million and N2. 5 million per annum, while rents for two bedroom flats in the same locations cost N6million, N6million and N2million respectively. Rent for two bedroom flat in Apo costs N1.5million.
It was gathered that the rental values in Abuja depreciate as one moves into the outskirts such as Nyanyan, Mararaba and Suleja, justifying reason for overcrowding in these settlements.
For real estate practitioners and estate agents, the business environment has remained unfriendly as tenants have refused to pay new rent while accommodation seekers are waiting for buoyant economy.
Some of the practitioners that spoke with New Telegraph stated that the number of empty property in Lagos and Abuja high brow areas was on the increase as a result of the state of the economy.
Principal Partner, Kola Akomolede and Company, Chief Kola Akomolede, said the vacant houses refused to find buyers due to slump in the economy.
“Business is still dull. The empty houses have refused to go because recession is not yet over. There is no enough money in circulation and there is low purchasing power,” he said.
Managing Director, Jetobless Properties Limited, Mr Toluwa Jekede, a property agent in Lagos, blamed huge empty houses on absence of institutional and corporate investors/ buyers, who he said left the country due to uncertainties in the nation economy
He said the vacant houses most especially in Ikoyi, Ikeja GRA, Lekki have refused to go despite reduction in rent to attract tenants.
According to him, most of the properties in his care for more than two years have been vacant without anyone asking for them for occupation.
“I have some vacant houses in Ogba, Adeniyi Jones, Opebi and Ikeja GRA. They are just emptied for two years now. Accommodation seekers do not even have the money to rent some of these houses unlike before when it was based on who came first,” he said.
However, he expressed hope that as the country’s economy improve and attracts foreign direct investment, some of the institutional investor would return, while blue chip companies would want to buy property for their staff.
An estate agent in Ojodu-Lagos, Mr. Ikenna Mojerie, said that many young accommodation seekers were not ready for big apartment due to their low-income level, noting that demand for mini flats with affordable rents are on the increase.
Slump in real estate
It would be recalled that despite the positive trajectory in the economy, real estate and construction sectors are yet to buck the trend as they still grow at negatives. Construction sector has been in free fall since one and half years ago, around the period the Central Bank of Nigeria published a list of 41 items that were invalid for forex.
Most of these items were real estate/construction sector related and this exacerbated an already slowing sector as most of the materials required for construction in Nigeria are typically imported.
Chief Executive, 3Ivest, Mrs Ruth Obih-Obuah, noted that the recent economic downturn had caused real estate sector in Africa to fall below the projected 2.6 per cent regional growth.
In her calculation, Ruth-Obuah is of the opinion that balancing short-term indicators with long-term structural change would reinstate investor confidence. This, she said, was paramount to success and continued growth recovery process of the sector, as driven by government reforms and policies.
Lecturer at Lagos Business School, Mr. Doyin Salami, urged government to find a pathway to lowering interest rates, adding that it must open space for private sector to drive the process.
Continuous efforts must be made by the Federal Government, through reforms and sound policies, to create opportunities and restore investors’ confidence in the nation’s economy.
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.
Cost of land in Ibeju-Lekki rises by 500%
From N1 milion five years ago, price of a plot of land in Ibeju –Lekki, Lagos has soared to N6 million, representing 500 per cent increase, New Telegraph has learnt.
It was also gathered that the land’s price per plot might soar to N8 million before the end of the year due to increased demand by investors and home seekers, who are positioning for opportunities inherent in various industries coming up in Lekki Free Trade Zone (LFZ).
According to the President, Perfection Real Estate Investors Cooperative Society, Mr. Niyi Adeleye, the price of a plot of land for earlier subscribers who bought into the vision was N1 million about five years ago, now that the land is currently selling for N6 million.
He disclosed this in Lagos while allotting plots of land to subscribers of Perfection Cooperative Estate Phase 1 in Ibeju-Lekki, last weekend.
He urged home seekers to take advantage of the opportunity to achieve their dream of home ownership.
Over 500 members of the cooperative, who subscribed to the estate were allocated land at the event witnessed by the paramount ruler, Onileki of Lekki, Oba Olumuyiwa Ogunbeku.
Earlier, the Oba congratulated members of the cooperative for the milestone, urging all allottees to be grateful to God and be part of Perfection Real Estate.
Adeleye said the cooperative society was on a rescue mission to provide solution to the problem of the society, which borders on housing.
He pointed out that it has been discovered that housing provision was capital intensive, hence the need to come together through cooperative society by pooling resourcess together to provide wealth and also help the government reduce the nation’s housing deficit.
He described Ibeju-Lekki as a strategic location, adding that LFZ was the hottest investment destination in Africa.
He said the cooperative assets base was now worth N1 billion, promising to grow it to N50 billion and float a real estate investment trust on the Nigerian Stock Exchange (NSE) in another five years.
According to Adeleye, plans are in top gear to commence construction of 75 units on two bedroom, 30 units of three bedroom and 30 units of one bedroom bungalows on first 40 plots before the end of the month.
He added that 60 units of one bedroom, 90 units of 2-bedrrom and 90 units of 3-bedroom were being planned for another 40 plots in the second batch.
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