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Real Estate

Pension fund can be used to finance housing needs- Bode Adediji

Is the housing challenge defying all logic?

No, says a former President of the Nigeria Institution of Estate Surveyors & Valuers (NIESV) and Principal Partner, Bode Adediji & Partnership, Mr. Bode Adediji. Rather, he suggests that the country should use the Pension Fund as a first tier finance for real estate development. He believes that overhauling of the Land Use Act as well as ensuring a sound mortgage system, including effective policies on housing, will go a long way in tackling the over 17 million housing deficit afflicting the country.

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What is your opinion on asset declaration provision and the Code of Conduct Bureau? Of recent, top civil servants and influential politicians have fallen foul of this particular requirement. What is your opinion on this? 

The challenge we have is what is generally with us. As a people, we are not lacking in laws, guidelines and policies, but the implementation of stipulated laws and policies is where there is a challenge. When agencies are set up to achieve a particular noble cause that will benefit the people, the compliance level is usually very low. The functions and provisions of the Code of Conduct Bureau should be sacrosanct to political office holders, civil servants and, indeed, any category of persons, who by law, are required to abide by its status in preventing or sanctioning corruption in the country. It is an area of our constitution that must not be taken for granted because it defines a lot of things about us as a people.

The continued existence of the Land Use Act is said to have cost the nation about $300 billion. Do you agree that this Act should be repealed or improved upon?

It has been a matter of controversy since it was enacted. If there is any document or law that would have propelled us from a third- world country to a developed country, it would have been this piece of law in terms of assets own culture. The Land Use Decree struggled that to bring normalcy to land ownership, it ensured that rights, entitlements and titles to land was not trampled upon. But, unfortunately, governments in different states rather than deploy it as income generating, have influenced peddling and generating undocumented income either to themselves or cronies, stripping it of its original idea and thereby making the whole essence of the Act defeated. This hampered the efficiency and delivery on its mandate. The clamour to repeal or discard it in my mind is an attempt to throw the baby away with the bath water. For us in the Nigeria Institution of Estate Surveyors & Valuers (NIESV) and at individual levels, we are canvassing for the overhauling of the Act and fundamental amendment to those areas we find not workable. The position paper on this is in the closet of the National Assembly and until we have a government that is concerned with the development of the real estate sector, justice will not be pursued and done to stimulate the private sector.

There has been a preponderance of rental defaults. What is responsible for this?

Once there is prolonged recession like we have had, it affects political, moral and institutional aspects of our national life. The economy is in recession and when there is recession people grapple with a lot of things, such as financial, social and other challenges. Fundamental areas of people’s lives are affected during recession, including the ability to house themselves, pay their children’s schools fees, feed and generally meet their immediate needs. However, many countries have fashioned out how to deal with this kind of things because some people can hide under this to shun their obligation because paying your rent is an obligation. No doubt, there are insensitive landlords who increase their rent yearly not considering the difficulties they may be putting their tenants, but on the other hand, some recalcitrant tenants refuse to pay their rentals even while buying new cars, these are realities in third world countries. But we can learn from how other countries came out of that particular situation. Some countries have come out boldly to fashion out rules and regulations to identify those who might want to hide under recession or economic hardship to avoid paying their rentals. However, in a situation where there is a national malaise of indiscipline such as ours, some tenants will want to stand up to their landlords without paying, the landlord suffers more, though some landlords also increase their rent unnecessarily without a care.

Some years back in Dubai and Abu Dhabi,  when there was tendency for tenants, where tenants move into a place and refuse to pay nor moving out of the property, the government set up a process and guidelines to resolve such impasse. The government also put in place the machinery to resolve such and to discourage tenancy disputes in conventional court, I think that is what Nigeria needs. In extreme case like that of Florida, USA, if a tenant owes his rental and the landlord fails to collect his rent as a result of the reluctance of the tenant to pay, the local government will intervene to ensure that justice is done  by investigating if the man has lost his job or debilitated by illness. Upon satisfactory investigation, the government will compel him to pay or vacate the premises.

There seems to be property glut in the market, such that is a huge number of vacant properties adorning the country’s landscape. What is responsible for this?

The proportion of the glut in the market is not directly as a result of the recession per se. Largely speaking, it has to with our collective lack of foresight. Real estate investments and projects are always seen in all countries as a medium to long term projects. But where we see that the rate of economic growth and the migration of people from certain income class to another is either not improving but retrogressing. In this scenario, building for a particular class of people, which may be referred to as endangered species and also for people you cannot foretell their abilities to take such products in the near future, for me, is the main problem  that we have had in Nigeria. So far, those who are building are building for a class of people who  are either expatriate staff coming or  people migrating  from low to medium and high-income areas to premium areas. For these set of people as soon as there is recession there will be no effective demand for such products.

To avoid this, developers and real estate investors like other businesses, should be proactive and futuristic in concept, planning, financing, development and construction. If a developer goes to a bank to borrow money to build luxury estate for a class of people that are no longer available or dwindling, then such developer is courting crises from day one. On a specific note, the way I see the country and, particularly Lagos State, is that they have failed to embark on complementary services that would encourage private sector participation in real estate development. There are things the government ought to have done to provide an enabling environment for the private sector to ensure that whatever product is rolled out by the private sector, the burden of infrastructure development should be taken away from them. Such infrastructural provision of power supply, road network, and water adds cost on the final product and by extension it becomes unaffordable to some categories of tenant that would have expressed interest on such product.

Lagos, unfortunately, has been encouraged to develop on the platform of mono axis. There was a time and largely speaking, that is, still the case where the residential outlook focused on the Lekki/Epe axis to the neglect of other areas such as Badagry and other areas that are not fully developed in the state or even encourage developments outside the state, such as in Ota, Ogun State and the Lagos-Ibadan Expressway. But because this was not done it caused a lot of environmental and physical anomalies that is so evident in the real estate development in the state. People trooped to build in the axis, but the income and unemployment level continued to dwindle in building for the class of people that are not available to take up such properties.

Where is the vacancy challenge more pronounced – in commercial office space or residential accommodation?

Location by location, I would say. If you look at Ikoyi, for instance, predominantly, most of the first class office spaces are empty. But where you have small scale office spaces, the percentage of void is less. Victoria Island and part of Lekki is passing through a transition where largely speaking even residential areas are transformed and converted to office use. Whenever you have recession the first target that is hit is commercial office space because recession always brings about sporadic business closures and when you close down you close down. The highest rate of failure for upstart companies normally happens during recession and so if you have built for people who have just taken off, the response from the market feedback is that there is no effective demand for such a space.

What would you recommend to a real estate developer in Lagos?

My position is that a-would- be developer should select his location carefully and professionally. The mere fact that you want to join the bandwagon of Lekki/Epe axis developer does not mean that you should neglect other areas where you have ready or emerging markets. Generally speaking, people cut their coat according to their cloth. The tendency to build all these five and six bedroom flats, terrace houses should be curtailed. Families now prefer two or in maximum cases three bedroom flats and in some cases, mini-flats, where common services can be shared. The other one that is important is that the idea of encouraging individualistic self-development approach in real estate is a problem on its own. Nigerians have forgotten to implement what we learnt in school known as the economy of scale.

In many countries, the role of building where a man is going to live has been shifted from his neck to that of developer but in Lagos today and many parts of the country, the individualistic housing development is still the main focus of every one. In a situation where you have developers in different categories of small, medium and large scale then the burdens and cost associated with individuals building their own houses should be transferred on their necks and the prices will go down, the ability to pay the rent becomes enhanced. But as long as we allow individuals to acquire their land and struggle to build it on his own even when he is able to build one or two units and let one out, the proportionate cost becomes so high that prospective tenants cannot afford it. Where you have large scale housing, construction cost per housing goes down and expected rental income from such rental property becomes modified.

People, for some reasons and belief, want to have this satisfaction that they built their house themselves. What is your take on this?

I agree with that because it is a cultural problem, but for how long should we run our lives based on cultural inclinations when you know it is a problem? Shouldn’t we borrow the good things from overseas just as we borrowed their education? Why can’t we borrow their culture that subscribes to communal project development and living? I think that is the way Nigeria should go. In fairness there are so many companies currently that are specialised in small, medium and large scale housing estate development and they have been successful. What the government should have done is to focus her attention and place more emphasis in terms of how they allocate land, roll out infrastructure etc. But what we have is that some private and government lay-outs and individuals are encouraged to do their designs, seek their contractors or construct themselves, costs begin to rise and rental expectation will not be met just like we are witnessing.

Wouldn’t it be as a result of not having a functional mortgage sector?

There are so many problems associated with it and mortgage system is part of it, including the Land Use Allocation Policy. It should  be done in such a way that a particular registered developer would be assigned terms and conditions to roll out specific projects within a specified time and to be able to sell to those who have access to mortgage. This will ensure that the nation’s housing problem is being looked at in a very holistic manner and the result is we will be successful at the end of the day.


Why is there a preponderance of quacks in the real estate sector? Some stakeholders attribute this to the fact that would be clients prefer cheaper agency fees compared to the registered agents who insist on 10 percent commission for their services?

I don’t think that observation is correct. There are several reasons why clients patronise more quacks than registered surveyors. Firstly, the percentage of registered surveyors vis-a-vis potential customers is disproportionately low compared to the prevalence of quacks. If for example a prospective client’s first access is to a quack, then that is where he will go. I cannot think of any registered surveyor’s firm that is still very rigid on the percentage of professional fees that should be paid. You can do that during the boom but not now, nobody that is realistic can insist on that during recession as we have it now. Really, quackery will continue to grow in this country for so many reasons including lack of good job opportunities. The increase in the retirement patterns of able-bodied men and women in many respects particularly in urban centers has fuelled the practice. You cannot find an able bodied young man sitting down and idling away when he knows that he can print complimentary cards to persuade, encourage or deceive somebody to give him an assignment to go and look for a house; for these set of people their first port of call is foraying into petty trading or quackery in consultancy. These set of people by their modus operandi have greater mobility and accessibility. For as long as you have this kind of recession in Nigeria, it will spring up a large quantity of quacks because again, they have more fighting spirit than the registered estate surveyors, they are aware that their sustenance and livelihood depends on  how hard they work.

Are you satisfied with engagement of the private sector with the government in terms of housing provision?

In terms of patronage and engagement, there has not been any government in the last 30 years that is pro-professionals and my challenge is that until professionals find themselves in the corridors of power  and within the government apparatus, we should not expect a change in the way that the government relate with us. I suspect that if there is no change, the neglect that we suffer from government will continue to rise. But, for example, if an estate Surveyor and Valuer becomes a Senator of the Federal Republic of Nigeria tomorrow, his perception of the housing crises will be different. Again, if a registered Town Planner, an Engineer, or an Architect becomes a President or  Chief of Staff in the Presidency, the kind of  reception he will give to professional opinions in critical matters of housing and urban development will be different.  Until we have that setting and avoid walking far away from the corridor of power, it means that we can only talk while other makes the difference.

There are so many abandoned Federal Government buildings especially after the movement of the Federal capital to Abuja? Why have they not been  put into profitable use rather than allowing the buildings to rot?

There are some of them that are still going through legal dispute or crises while some seen physically as belonging to government has actually been sold. An example is the Federal Government houses at Bishop Oluwole in Victoria Island sold over 10 years ago. I will not blame anybody who bought and refused to do anything about it. But the abandonment is a sad development especially for a country that says it wants change and is pro-development. I have not seen any fundamental change in government policies concerning abandoned projects and properties all over the country in concrete terms. I have never seen any government in the last three or four regimes that has actually factored in their calculus this vibrant sector of the economy that can be used to check youth unemployment. If a government is pro building and pro development, people who leave school and trained as architects, engineers, technicians can actually have a place to go and work. Not only that, majority of Nigerians in Diaspora who have capacity to buy houses, if there is a functional mortgage system can expand that. But the truth of the matter is that it has never been part and parcel of any government policy to see housing intervention beyond the clamour to say we are putting roof on peoples head to embrace a more serious and wider goal of empowering people by providing employment for the young people. Once we have that, the Land Use Act perspective will change including the treatment of the Pension Fund that has accumulated to over N8 trillion. Things like entrepreneurship support system will change. The last one that I know that we talk about always instead of addressing the challenge is looking into the architecture of our housing problems and solutions to the extent that we have spoken about our concentrating on what we have to build rather than the dependency on foreign products which has been on for the past 50 years.

Is it possible to have a ‘Made-in-Nigeria house’?

Until we take a look at the local building materials we have and enforce it on people to build houses, housing cost will continue to rise and decent housing may continue to elude a greater percentage of the people.  We can ensure that 80 per cent of the material to be used to build anything in Nigeria is made in Nigeria if we have the political will. New technologies will be encouraged, no doubt, to ensure that our timber in the forest accounts for 70 per cent of our building materials either in terms of our walls, windows or floor . If other countries have done this successfully, we must not attempt to reinvent the wheel.

What best use can the Pension Fund be put into judging from the fact that it runs into trillions of Naira now?

Pension fund can be used to take care of short-term housing needs.  As at a year ago, the Pension Fund managers were prohibited from engaging in long term investment. But I believe that there can be improvement on that law by categorising for instance, some real estate development that can take about 24 months as not too long a time to fit into the laws that set up the fund. Where there can be a certainty I believe and advise that the idle fund in the Pension purse should be deployed into housing provision with short gestation period. It’s not for real estate financing that can take 10 or 15 years it can even be used as first tier finance for a particular project. It is when a nation cannot take a creative look into what their challenges and concerns are that makes the problem to persist. Look at the issue of dearth of hostel accommodation for students in the universities, why can’t the government encourage developers and assist them by making it possible for them to draw from the fund to build hostels; no doubt, the students will pay and a great need would have been met.

Why are people holding on to the concept of family houses, abandoning houses for years and living them as relics instead of earning rental income from them?

They are littered all over the place and that is an area I have never seen a government agency looking into. Those in the villages, historically and culturally, are understandable. For instance when Mr. X was making waves he lived in Abuja and went home to build a house but unfortunately the same Mr. X never encouraged his children to holiday in the village. Unfortunately when he passes on, it becomes automatically an abandoned country home occupied by cockroaches, lizards and snakes because the focus of his children are different. In this country, we lay more emphasis on entitlement policy as far as heritage is concerned than transforming a particular asset into functionality and utility. That is why you find out that most personal houses and buildings abandoned are underpinned by family squabbles. Those without family squabbles don’t have capacity to transform them into money yielding asset. It is a whole gamut of challenges that make the concept of family houses embarrassing and prevalent. It is important for government to find a way of encouraging some NGOs to go into advisory services that people can tap into where for example a family of three or four is having a squabble over a property they can be advised as to the channels they can explore raise fund and the kind of property they can redevelop the building into to yield income and everybody will be happy. In a case that the children are all abroad they and have no confidence on their relative they can be advised to appoint an independent estate management advisory agent to manage the property. The only way we can achieve the objective is for government to see the loss encountered by these families as not only theirs but that of the nation in general.

Why is the Federal Secretariat in Ikoyi still abandoned?

I don’t have information on why the Federal Secretariat in Ikoyi is still the way it is now that we have the same political party in Lagos and Abuja. Whatever may have been the crises before now on the management of the property ought  to have been resolved because at the end of the day, it is not only the developer, the state and Federal Government, but the entire  that is losing through the abandonment of such strategic and massive asset.

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