Musa Dangoggo Aliyu was the former Managing Director of Urban Shelter Ltd and current Chairman of Abuja-based real estate development company,Rural Homes Group Ltd. In this interview, Aliyu expounds on some housing development challenges in Nigeria.
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The Homes Group is developing the Karmo District Market, what is the state of the project?
Karmo Market is presently about 58% completed, the structural works is at completion stage, infrastructures work is ongoing while commissioning of the project is slated for December this year 2018, insha Allah. We are also presently reconstructing the access road and major drainages to the estate as part of our corporate social responsibility.
However, the only impediment is finance; we have gotten two banks, a commercial and a mortgage bank. We have been talking for over a year, we are at the final stage but the issue of legal title is still delaying. The loan we are seeking is lower than what we are targeting. We asked for N2bn but the bank said they are giving us N500m and in tranches, that’s fine but they should give us in time.
What are the components of the market?
The market is sitting on a 10 hectare land with different kind of shops ranging from 4 or 9, 18, or 36square meter open shops which we call farmers market. It has over 2,800 shops, warehouses, cold rooms, meat shops and the segmented market, including the textile (okrika). There are enough parking spaces for 1,200 vehicles with adequate road networks.
This market will be one of the best in Abuja. There is provision for police station, fire service also and utility office for managers of the market including two banks. We are almost roofing some parts and we’re using bricks for the building structure.
What is the level of patronage?
We have sold up to 50% of the market, the favored ones like 4, 9 sqm. We have sold out completely, the bigger ones people don’t take them immediately until the last minute because it’s the rich who can afford them. The smaller ones are available through instalment payment.
What are the hurdles facing developers in accessing housing finance?
It includes high bank interest rates, ineffective mortgage facilities, volatility of the market in terms of purchasing power of subscribers. This affects reasonable estimates on loan repayment period. Also, high level of bureaucracy i.e. passing policies can help the industry, in implementation of said policies assuming it is passed in getting relevant approvals from government agencies.
You have mentioned finance as a challenge, what about securing land?
Yes, especially in Abuja, you either secure allocation or you buy, like this 10 hectares you have to have N2 billion cash if you are to buy, so another option is to enter into agreement with the owners, because I’m not giving them money now, I will double their price or give them houses later, like a barter. It is better because it is a win-win situation for both of us.
How true is the claim that Nigerian banks are supporting the real estate sector?
Even the big banks that I have worked with before are not forthcoming with loans because of what they describe as long gestation period. When we take loan we don’t start to pay immediately, it’s a loan for three years, and to complete a project, you need a moratorium of one year before we start to pay back. Real estate is the engine room of a nation’s economy.
Once the construction industry is working, the benefit for the value chain is enormous, the one constructing the nails, roofing sheets, blocks, cement, granite etc. not to talk of labourers and technicians. So, if government refuse to do something about this, our banks nowadays are not banks, so when they tell you they are giving loans, yes, they are wary, they are giving loans to oil companies that can pay them within three to six months, we call that trading and at the end of the day the money is taken out of the country.
What other sources are then open for developers?
The only way is through increasing your equity or otherwise you resort to using depositors’ funds and with this you have to be very prudent, and plough back the money into the project.
What of offshore funds?
Yes, the only impediment is the bank guarantee, because they don’t know you they would want your bank to give guarantee, and here our banks are also shying away, even with your collateral they will say its dollars so they’re not interested or they will agree and then drag their feet.