How construction, real estate can drive growth, by experts

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.

COPEN Group inaugurates fifth housing estate in Enugu

COPEN Group, a consortium of God fearing professionals on Monday in Enugu inaugurated its fifth housing estate aimed at reducing the housing deficit in Enugu State.

The Group Managing Director, Rev. Ugochukwu Chime, said that the company had been involved in providing affordable housing to residents of the state in partnership with the Federal Mortgage Bank of Nigeria (FMBN).

Chime, who is also the National President of Real Estate Developers Association of Nigeria, said that the development of the estates were not without their challenges which could have undermined their realisation.

He said that the company was able to inaugurate the various projects due to God’s favour and the goodwill of their partners.

“COPEN has been involved in various capacities in the conceptualization, planning, design, financial intermediation, supervision, construction and management of estates development for organizations and governments across the country,” he said.

Chime named some of the estates completed so far by the group as Bethel Estate, Goshen Estate, Jubilee Estate and Elim Estate.

“The patronage and interest we got from the development of the development of Bethel Estate confirmed that Enugu is considerable yearning for effective and affordable housing,” he said.

Chime said that as part of the company’s corporate social responsibility, “we shall give free three to six months artisanal training to 23 youths of Amaechi Uwani Community.

“This is to ensure that their skill-set is in tandem with current use of the land. This is a policy I am introducing as National President of Real Estate Developers Association of Nigeria.

“It is called 20 for 1 policy: Train a youth for every 20 housing units you build,” he said.

Chime appealed to the state government to further reduce the transaction cost and time for title perfection which he said was solely borne by property owners.

He appealed to the state government to provide infrastructure to the boundary of estates in Enugu in line with National Housing Policy Document.

Lagos State, Echostone Limited To Develop 20,000 Housing Units

The Lagos State Government on Wednesday, signed a Memorandum of Understanding with a real estate developer, Echostone Limited, to build 20,000 housing units in the state within four years.

Speaking while signing the partnership agreement, Mr Gbolahan Lawal, the state Commissioner for Housing, said Lagos State would provide the land as its equity contribution, while Echostone would finance the project.

“This partnership is in line with the state governments Lagos Affordable Public Housing (LAPH) initiative, and it is aimed at constructing 20,000 housing units over a period of four years, towards reducing the housing deficit.

“To this end, the state has identified land in various locations across the state; the land is the state government’s equity while the private investor will contribute funding and technical expertise,” he said.

He said that Echostone will commence with the provision of 2000 housing units in three locations.

“The company is expected to start with 2000 housing units in three locations within the state, namely, Idale in Badagry, Ayobo in Alimosho and Imota in Ikorodu.

“An initial total of 2000 housing units are expected to be delivered in these three locations ” he said.
Mr Anthony Rachia, representing Echostone, said that the objective of the company was to construct houses on a large scale, and to create jobs.

“Our objective is to help bridge the housing deficit in Nigeria and also help generate employment by building houses in large scale and also creating jobs.

” We have the technology to construct quality houses faster, and by the time we commence construction in February, 2018, we would create 6000 jobs,” he said.

The Lagos State had earlier partnered with two mortgage financing companies in its efforts to boost the housing sector in the state.

The companies are Brains and Hammers Nigeria Limited and Multipurpose Infrastructure Development Company Limited.

‘Investors should pay attention to property maintenance’

The Business Development Manager, Provast Limited, Mr. Segun Olabode, says investors in real estate should place emphasis on efficient management and maintenance of their existing stock of properties so as to enjoy maximum returns on their investments.

Olabode, who is an estate surveyor and valuer as well as a facility manager, spoke at a master class for members of the Nigerian Institution of Estate Surveyors and Valuers, Lagos State Branch, recently.


He said there was also a need for an effective safety management system to be in place.

Olabode stated, “The objective of a safety management system is to provide a structured management approach to control safety risks in operations. Effective safety management must take into account the specific structures and processes related to safety.
“The SMS is a comprehensive and integrated system that ensures that all work at the facility or site is conducted safely and should be fully documented, accessible and comprehensible to those that need to use it.”

According to him, property owners, organisations and investors prefer outsourcing the management of their facilities and structures so as to get better returns on investments.

Gemade accuses FG of withholding N100billion appropriated for housing

The Chairman Senate Committee on Lands, Housing and Urban Development, Senator Barnabas Gemade, has revealed that the sum of N100 billion appropriated in the 2017 Budget as intervention fund, to support mortgage activities in the country has not been released to the Federal Mortgage Bank of Nigeria (FMBN).

This is even as the year will elapse in few weeks’ time, and the National Assembly has commenced deliberations on the 2018 Budget presented by President Muhammadu Buhari.

Gemade, who made the disclosure while the committee was on oversight function at the FMBN, urged the Bank to liaise with the supervisory Ministry of Power, Works, and Housing, and the Ministry of Finance, to ensure that the fund so appropriated is released to it for the purpose.

Furthermore, he urged stakeholders including the Federal Government, Central Bank of Nigeria (CBN), and the Nigeria Social Insurance Trust Fund (NSITF), to pay up their equity contribution and actualise the recapitalisation of the FMBN.

NSIA Plans Massive Investment In Infrastructure

The Nigeria Sovereign Investment Authority on Wednesday said it was planning to invest massively in the Nigerian Infrastructure Debt Fund being managed by Chapel Hill Denham Nigeria.

The NSIA said this in a statement issued in Abuja and signed by its Communications Adviser, Mr. Titilope Olubiyi.

It, however, did not disclose the amount to be invested, but added that the investment was consistent with its mandate of playing a leading role in sustained economic development for the benefits of Nigeria.

The NIDF is a Nigerian domiciled close-ended fund. It is the first and only domestic currency listed infrastructure debt fund across Africa.

It is focused on mobilising domestic savings, particularly pension funds, life insurance companies, large corporates as well as family office groups for investing in economically critical and financially viable infrastructure assets.

The fund supports traditional infrastructure sectors, primarily transport, power, renewable energy, utilities, energy infrastructure, logistics and other public-private partnership type investments, with naira long-dated senior debt.

The statement said the NIDF was able to support these projects with long-term financing and in the process, would generate superior risk adjusted returns for its investors

Commenting on the investment, the Chief Executive Officer/Managing Director, NSIA, Uche Orji, said, “We are pleased to support the NIDF, as it is consistent with the NSIA’s strategy of enabling Nigeria pension fund participation in infrastructure, makes available long-term naira financing, and is led by a high-quality management team.

“We look forward to working with the NIDF team to ensure that the fund grows through further institutional investor participation and access to high-quality investments.”

The statement also quoted the Chief Executive Officer of Chapel Hill Denham, Mr. Bolaji Balogun, to have said that the fund would direct institutional investments into productive infrastructure assets.

He said, “Mobilisation of domestic currency sources for funding infrastructure is critical for Nigeria, in order to meaningfully bridge the existing infrastructure deficit.

“The NIDF directs institutional investments into productive infrastructure assets, which have a positive development impact, through the multiplier effect on investments, economic growth and well-being of the population.

“The NIDF has the potential to mobilise a meaningful proportion of this requirement by channelling the growing pension and insurance assets as well as other long-term pools of capital into infrastructure investment and financing.”

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