Stakeholders Chart New Path for Financing Low-Income Homes

With housing production estimated at 100, 000 housing units per year, experts in housing industry have called for adequate housing finance for the low-income group, which constitutes larger part of the population.

According to them, the lowest recorded interest rate on a mortgage in Nigeria is 19 per cent, as of September 2016, while mortgage access requires at least a 25 per cent down payment and mortgage penetration is at 0.58 per cent of Gross Domestic Product (GDP).

However to change this narrative, the Heinrich Boll Stiftung Nigeria (hbs) and Arctic Infrastructure (AI) last week convened a training programme in Lagos on “Public Private Partnership for Affordable Housing and Housing Finance”.

At the training attended by representatives from the relevant government establishments, private sector housing developers, civil society organizations, community groups, academia and professional associations, stakeholders noted the acute challenge in fundraising for housing projects.

Read More: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

They said, there is need to enthrone sustainable housing finance models in order to meet the housing needs of the low-income groups.

While noting the continuous increase in population and the impact of cities like Lagos, which has been dubbed the “mega-city of slums”, they called for more innovative ways to get funding through public private partnership for housing projects.

Leading discussions on Public Private Partnership (PPP) for Housing Projects, Executive Director at the Center for Ethics and Sustainable Development, Dr. Olajumoke Akiode, said Nigeria is one of the many countries that have adopted PPP in the provision of housing at various levels of government across the country.

According to her, the PPP in housing provision started in Nigeria in the early 90s, after the 1991 National Housing Policy, which supported and promoted private sector participation in housing provision.

However, in practice these, she noted, have not always been achieved due to inadequate risk assessment and management as one of the major reasons for failures of PPP in housing.

“Like any other construction business, PPP arrangement is prone to risk. In fact PPP projects are perceived to have more inherent risks due to the involvement of many stakeholders with varied interests in addition to the economic, political, social and cultural conditions where the projects are to be undertaken.

“This, therefore underscores the importance of risk management in PPP projects which have been adjudged to be riskier than the traditionally procured projects”, she added.

Dr. Akiode however mentioned transparency, respect to the contracts’ specifications, value benefits to stakeholders, thorough risk analysis and stakeholder’s engagement as some of the factors for ensuring success of PPP.

Also, the Country Director of Cromwell Professional Services International, Mr. Sola Enitan, who facilitated the housing finance session, said over time, housing in Nigeria’s urban centres has been a subject of concern to every government as there always seem to be a shortfall.

This, he said, is especially true for Lagos as a state leading to several reforms and policy measures, which have addressed the housing needs to an extent.

He however, listed lack of strong political will, economic limits, ideological limits, lack of provision of construction materials, administration of construction process, nature of labour process, system financing as some of the limitations.

“Of all these limitations, it has been agreed that the one that stalls the effectiveness of most housing schemes is lack of a political will. When this is addressed, then financing a housing scheme will not become as tedious as it is in recent times”, he added.

By Bertram Nwannekanma

Enitan outlined innovative building technology, tax holiday, off-taker mandates and removal of negative equity syndrome among others as, some of the strategies to be considered in enthroning sustainable housing finance models for Lagos and Nigeria in general.

Earlier, the Project Director of Arctic Infrastructure, Mr. Lookman Oshodi said the training becomes necessary in view of the acute challenge being faced by stakeholders in fundraising for housing projects.

He emphasized that the training programme exposed the participants to innovative and creative approaches of financing projects rather than full focus on conventional system.

On her parts, Mrs. Monika Umunna of Heinrich Boll Stiftung, Nigeria said the training was convened to strengthen the understanding of participants on PPP structuring, approaches, potentials and challenges now that many housing projects in Nigeria are being packaged using the PPP model.

Some of the participants at the programme expressed satisfaction with the new knowledge obtained including crowd funding for housing project, need for compensation fee or rejection fee for the bidders that are not successful in the bidding process and layers of housing acquisition loans and support mechanism that could be available in an organized but diverse housing market such as Lagos.

Africa Promises Good Investment Opportunity Says Elumelu at WEF

Mr. Tony Elumelu, group chairman, United Bank for Africa (UBA) and one of Africa’s top businessman, has stressed the need to change the African narrative while concentrating on the myriad of opportunities inherent in the continent, stating that its economic transformation and stimulation should be the focus of all governments and global institutions.

This, he said, is paramount if the continent is to take its rightful position as a strong regional player in the international community, owing to its numerous investment opportunities.

Elumelu, who is the Founder of the Tony Elumelu Foundation, said the time had come for governments on the continent to put things in place to ensure that the continent which has great potential, lives up to it; adding that already, there are signals of the greatness all around.

Speaking during Richard Quest’s programme on CNN  aired on the sideline of the ongoing World Economic Forum in Davos, Switzerland on Thursday, he said; “the time has come for us to prioritise our young ones, who are the future of this great continent. These are the men and women who are energetic in Africa and who can perform wonders if the enabling environment is there.

“We need to get it right with infrastructure in Africa and with the macro-economic policies and environment. And the good thing is that things are gradually falling in place. I think Africa promises good investment opportunities, the problem has always been creating the right environment for it, and this should be our major focus.” Elumelu stressed.

He added that in Zimbabwe, for instance, there have been recent concerted efforts by the government and the people to change the narrative, adding that “I am optimistic about what is happening in Africa right now, because our leaders are getting it right and in fact what has happened in Zimbabwe is also an indicator of great things to come. The fact that they on their own decided to sort things out the way they did, is a new kind of democracy that the world needs to learn from. “There is so much private global capital looking for the right destination, they can go to Zimbabwe as in other African nations, once the right environment is put in place.”

READ: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

While pointing out that the blame game which previously obtained in the continent should be done away with, Elumelu called for increasing support from the private sector as well as key stakeholders to make Africa and African self-sufficient.

Throwing more light on this, he said; “We can’t keep talking about missed opportunities. What I keep saying to people is to put an end to the blame game. Let’s begin to fix what needs fixing and get things right. Our government should get it right, the private sector should come forward and we need to support the young African entrepreneurs; create economic hope and opportunities for them.  “We need to think of how to engage Africa in the 21st century because it is no longer about giving grants and aid to Africa, it is more about engaging them in a way that creates self-sufficiency; independence; and reduces the perpetual syndrome of dependence.

Continuing, he said “There is promise; it is getting better because the way this year has started in Nigeria for instance, we have seen market indicators showing good promise, so we are optimistic that it will be better year. The Key is to prioritise things that are important to us to help the continent to grow.”

– Nigeria Communications Week

Enugu Gov. Commends Ugochukwu Chime at the Commissioning of ECCIMA House

Governor Ifeanyi Ugwuanyi of Enugu State has reassured the Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA) of the continued support, assistance and collaboration of his administration for sustenance of the existing business- friendly environment towards the enhancement of economic and commercial potentials of the state.

Gov. Ugwuanyi who gave the reassurance during the commissioning of the new ECCIMA’s multi-dimensional secretariat complex in Enugu, stated that his administration was also committed to “the provision of necessary infrastructure and facilities that would help boost economic activities in the state.
The governor expressed delight that the construction of the complex was part of the efforts being made by the Chamber to build institutional capacity for the development of the organized Private Sector in Nigeria, particularly in the South East Region.

Congratulating the Chamber for the “spectacular” achievement, which he said, would enhance administrative convenience, promote productivity and also cement the rising profile of the Chamber and Enugu State as the hub of business activities in the South East.

Gov. Ugwuanyi equally commended the outgoing President of the Chamber, Rev. Surv. Ugochukwu Chime, “for the vibrancy, innovation, dynamism and creativity that his leadership has brought to the Chamber”.

According to him “the Chamber has, without a doubt, undergone such transformation since he assumed office, as to be ranked as one of the best in the country and even beyond”.
“We assure the Chamber of the continued support and assistance of the state government especially in the sustenance of the business- friendly environment that currently exists in the state and the provision of necessary infrastructure and facilities that would help further to enhance the economic and commercial potentials of the State”, the governor said.


In his welcome address, Rev. Surv. Chime appreciated Gov. Ugwuanyi for “the phenomenal support” towards the spirit of Public Private Partnership, stressing that it is most exemplary and promotes growth in the state.

He acknowledged the invaluable contributions of the founding fathers and past leaders of the Chamber, especially the solid foundation they laid, which he said has crystallized in the progress recorded by the body.

Rev. Surv. Chime said that the Chamber’s relocation to a befitting edifice was “a historic landmark” in the affairs of the organized Private Sector in the country, adding that “this building is a great signpost for the Institutional Capacity Enhancement of the organized Private Sector, particularly in this part of the world”.
“ECCIMA House is a message of hope. It is an affirmation that our God can do all things… The next frontier of battle is human capital development across all levels of our society. We need to pray for, identify, mentor and fund young leaders with vision and passion”, the ECCIMA president said.

He stated that the Chamber was eager to interact with the state government “to define a comprehensive development agenda for inclusive socio-economic wellbeing of our people”, applauding the Ugwuanyi’s administration for “their huge financial and non-financial contributions”.

Source: Daily Post

Informal sector as critical growth factor

Like the Biblical rejected stone, the informal sector of the Nigerian economy has become the head of the corner for economic growth. This is a sector that, before now, was not reckoned with as a growth index.

But all in a jiffy, both the housing sector and the mortgage system have woken from sleep discovered that this sector could be leveraged for growth. The pension fund is also in this league, though in relation to both mortgage and housing.

There is an on-going debate on the possibility of including the informal sector with its estimated N81.048 trillion annual income in a new housing fund that could be created and added to the existing Pension Commission’s (PenCom) multi-fund structure with the aim of narrowing down housing affordability gap.

This however has to happen alongside lowering of mortgage interest rate to single digit of 8- 9 percent, down from the current 22 – 25 percent commercial rate which operators charge on mortgage loans. The argument flows on the assumption that the inclusion of the informal sector operators who constitute 67.54 million of Nigeria’s 81.15 million workforce in the contributory pension scheme will lead to increased housing affordability.

In the same vein, as economic activities continue to shrink leading to loss of jobs, salary cuts and significant drop in personal income, most of the primary mortgage banks (PMBs), which are struggling with hash operating environment and rising non-performing loans (NPL), are looking to the informal sector to sustain their operations and also stimulate growth in that sector.

Low capital base coupled with the prevailing economic conditions have so impacted the operations of these banks that a good number of them are unable to meet their contractual and statutory obligations to their clients and regulators respectively.

The Nigeria Deposit Insurance Commission (NDIC), one of the regulators of the sector, was quoted as saying that the inability of as many as 15 PMBs to pay their insurance premium as at December 2016 was an unfortunate situation that put the customers at risk. “The loans and advances extended by these PMBs declined significantly by 31.87 percent to N168.96 billion in 2015”, the commission added, pointing out that 14 out of 42 PMBs failed to render returns to it while unpaid premium from nine PMBs amounted to N238.30 million the same year.

The Central Bank of Nigeria (CBN) says that notwithstanding PMBs’ improved performance in the past couple of years, their loans and advances, deposit liabilities and other liabilities decreased by 6.85 percent, 5.25 per cent and 5.89 per cent to N154.46 billion, N115.77 billion and N68.06 billion, respectively, at end-December 2016 from N165.83 billion, N122.18 billion and N72.32 billion at end-June 2016.

But the operators are not resting on their oars. They are building blocks and putting measures in place to engender growth of this fledgling sector in order to increase access and affordability, and by extension, enlarge the clan of homeowners in the country.

Unbundling of mortgage origination process, further reduction in loan origination period, introduction of computerised land titling registration, land title insurance, introduction of uniform underwriting standards (UUS) for informal sector, enactment of foreclosure law, and wider public awareness for the sector are part of the push by the operators for the growth of the sector.

Mortgage is a sub-sector of the economy and the operators are saying that since the larger economy is not doing well and the mortgage sector is not insulated from what is happening in the larger economy, what is happening to them is not unexpected.

“We know what happened to oil price and the foreign exchange market. These have affected everything in the economy. In the case of oil, both the volume and the price went down. All these affected consumer purchasing power. Don’t forget that the balance sheet of the mortgage banks were not strong ab initio”, said, Ayodele Olowookere, CEO, Omoluabi Mortgage Bank Plc.

He stressed that the problems of the mortgage banks revolve around their small capital base and so there isn’t much they can do. “For all the money that I have, unless I raise additional capital, I don’t think I can do 1,000 mortgages. To do mortgages, you need long term funds and that is the only way you can do long term mortgages”, he said.

Udo Okonjo, vice chair/CEO, Fine and Country West Africa, agrees, emphasizing that the real core factor responsible for the slow growth in this sector is that the banks and the mortgage institutions don’t have long term funds; all they have are short term deposits. “The underlying fundamental for mortgage growth is that we have to have saving culture and large financial base because mortgages are long term funds. In an ideal world, you will be talking about 20-25 years mortgages at very low interest rate”, Okonjo added.

Technically speaking, Nigeria has no mortgage system and Okonjo reasons that the country doesn’t really have a real estate sector. “What we are doing is just scratching the surface. If we really want to create wealth through real estate which is one of the major ways the developed world creates wealth, then we have to develop and grow the mortgage sector”, she emphasised.

But the operators are not deterred. “We are here to stay and grow this sector”, Olowookere assures, revealing, “at Moluabi, we are looking at the best way to do things, especially in credit management and evaluation. We are looking at the informal sector. People in this sector are not collecting salaries, but earn huge and regular income. So, we are finding creative ways of bringing them into the net. We are also looking at new ways to raise capital by bringing in more shareholders”.

Assets: Underwriters grow investment in real estate to N103bn

Nigerian underwriters have continued to experience a boom in the real estate sector as investment in industry increased by N5 billion from N98.11 billion to N103.51 billion within a period of one year.
According to the balance sheets prepared by the regulator, National Insurance Commission (NAICOM), five underwriting firms failed to pick interest in the blossoming real estate sector, while Mutual Benefits Assurance has the least investment therein with N56 million.
New Telegraph’s findings revealed that a total of 43 firms invested in various assets including real state, equipment, goodwill, government, short term investment, shares related companies, among others.
Details, however, revealed that Axa Mansard, Zenith General Insurance Company Limited, Regency Insurance Plc, Goldlink and Cornerstone shunned the real estate sector in their investment spread.

According to the breakdown, Anchor Insurance Co. Limited invested N970 million; Consolidated Hallmark, N809.22 million; Custodian and Allied, N3.08 billion; Equity Assurance, N301.40 million; Fin Insurance, N 494 million; Guinea Insurance N1.57 billion; International Energy Insurance, N2.35 billion; KBL, N2.093 billion; Law Union and Rock, N1.37 billion; Linkage Assurance, N92 million; Mutual Benefits, N56 million and NEM Insurance, N442.55 million.
Others are Nigerian Agriculture Insurance Corporation, N4.01billion; FBN, N105 million; Old Mutual General, N988.77 million; Prestige Assurance N2.28 billion; Royal Exchange Assurance, N3.74 billion; Sovereign Trust, N1.18 billion; Staco, N1.52 billion; Standard Alliance, N1.30 billion; Sterling Assurance, N1.06 billion; Universal Insurance, N1.79 billion; Saham Unitrust, N321.49 million; Wapic Insurance N539.93 million, and Unitykapital, N676.20 million.

READ: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

The list also includes NSIA Insurance, N1.14 billion; AIICO, N990 million; Great Nigerian Insurance, N4.56 billion; Industrial and General Insurance, N15.91billion; Lasaco, N3.34 billion; Leadway, N3.13 billion; NICON, N18.37 billion; Niger, N1.92 billion, and Ensure, N2.42 billion.
Besides, the two indigenous reinsurance firms also invested a total of N18,53 billion in real estate with Continental Reinsurance putting in N2.86 billion while Nigeria Reinsurance committed N15.66 billion into the assets.
NAICOM recently resolved to undertake a verification of the capital resources and assets of all insurance companies in the country in order to ascertain their capital adequacy for the protection of policyholders and other stakeholders.
The commission highlighted issues and requirements that will occupy its time as part of the re-launch process of the Market Development and Restructuring Initiative (MDRI) with special and intensified implementation efforts on enforcement of Compulsory Insurance; diversification of distribution channels; increase in access points for insurance services, micro insurance, Takaful insurance; improvement in data collection as well as promotion of financial literacy.

It noted that verifying the assets of the operators would enable it ensure protection of policyholders and beneficiaries of insurance contracts against unexpected losses of insurance companies, adding that the exercise had become necessary because since the last recapitalisation exercise in 2007, the business environments and the risk profile of all insurance institutions have changed.

“It will entail a verification of the assets and liabilities of all insurance companies. In preparation for this, boards are advised to ensure fairness in valuation of assets and liabilities of their companies when presenting the financial statements for the year ending December 31,, 2016.
“All Professionals that participate in the financial reporting supply chain are expected to ensure their duties in the valuation of assets and liabilities and issuance of opinion on financial reports are discharged creditably in accordance with relevant laws and professional standards,” said NAICOM.
It also lamented the level of expenses of some insurance institutions, saying it was becoming a cause for concern.
“The commission will expect each board to take definite steps to ensure reasonableness of its company’s expenses by ensuring that they are incurred wholly and necessarily for the purpose of the business. Evidence of action in this regard should feature in the minutes of board meetings,” the regulator added.

Expert Tasks Developers On Mass Housing Scheme

Mr Omotayo Awomosu, the Chairman, Association of Town Planning Consultants of Nigeria (ATOPCON), Lagos Chapter, has urged developers to build more houses to crash the cost of rent in the country. Awomosu told Housing News in Lagos on Wednesday that the incessant rise in cost of rent was as a result of inadequate residential buildings. He said that the cost of rent would come down if developers could engage in mass construction of houses. Awomosu, therefore, encouraged developers to start mass erection of residential buildings to make them affordable.

Read: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

“The simple truth is that scarcity increases price while abundance decreases price. This implies that the solution to continuous increment in cost of rent is ‘mass production,” he said. Awomosu, who called for Federal Government’s intervention through provision of enabling environment for the developers to operate, said that the developers’ lacked the financial capability to engage in the mass housing scheme. According to him, the government cannot provide everything; but the creation of credit facilities, access to long-term loans and grants, effective mortgage system, access to land, among others, are areas in which the government can assist. “It is not financially rewarding for developers and landlords. Most of them are just embarking on housing development for the sake of owning house or property,’’ he said. Awomosu noted that until the government and developers desist from construction of piecemeal houses and embark on mass house production, the problem of housing deficit may continue to stay with us. “Today, the cheapest completed house one can get is at the rate of N4 million and above.

“The truth remains that not many citizens can afford such amount. But when large number of houses are built, the prices will reduce,” he said. According to the official, mass housing would not only result in bulk purchase of materials at discounted rate, it would also create room for easy access to mortgage scheme. Awomosu said that the benefit of mass production was ‘low cost,’ which implies that developers would be able to recoup the money they invested within a short time. He noted that mass housing was more economical, saying it remains the only viable way to reduce the high rent in the country.

Deficit in A-grade real estate, economy fingered for REIT underperfomance

Deficit in A-grade real estate compared to similar urbanising environments, coupled with a volatile and on-diversified economy that relies much on crude oil have been fingered for the low investment in Real Estate Investment Trusts (REITs) in Nigeria.
An additional factor responsible for this low investment in REITs is lack of assurance on ambiguous ‘tax pass through’ laws that have not provided comfort to institutional investors, both local and foreign, resulting in a REITs market that has failed to develop to its potential.
Though new reforms hope to address these factors, they have created cycles of boom and bust, which have negatively impacted the real estate sector and investor confidence

A report by Northcourt Real Estate obtained at the weekend notes that despite its existence for more than 10 years, the Nigerian REITs market is underdeveloped with only three established ones, which have a combined market capitalisation of $151 million, or 0.36 percent of the local stock market.
But analysts have predicted a bullish future for the market. At the real estate-focused West African Property Investment (WAPI) Summit, which took place in Nigeria recently, participants were provided with insights into a real estate sector that is set to rebound strongly in 2018.
Foremost real estate analysts, Adeniyi Adeleye, head of real estate finance for West Africa at Stanbic IBTC Capital, and Thomas Mundy, advisory head for Sub-Saharan Africa at Jones Lang LaSale (JLL), raised optimism in REITs in their collaborative white paper on the most underinvested and marginalised markets of the Nigerian stock market.

Read: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018
Adeleye and Mundy provided an analysis of underlying structural weaknesses that have contributed to the historical negative performance of REITs in Nigeria, but hoped that an evolving and reformed REITs market will strengthen and deepen capital markets.
“It will also assist in providing greater transparency and data to a traditionally opaque market, which has resulted in mispricing and undermining confidence in real estate assets”, they assured.
Additional benefits that will follow a reformed REITs market is a greater diversification of portfolios to help break concentration risk and result in increased exposure for Nigeria’s pension funds to the property market. Currently, the pension fund exposure is 0.36 percent compared to South Africa’s pension fund exposure to REITs, which stands at 2.6 percent.
Adeleye and Mundy are optimistic that these changes would lead to a vibrant REITs market that will transform the real estate sector and the larger economy, provided that regulatory improvements take place coupled with the sustainable creation of assets to reduce the supply gap in Nigeria.

Growing economic confidence translates to demand for real estate – analysts

The growing confidence in the Nigerian investment market and the wider economy will ultimately translate into increased demand for goods and services, including real estate space, analysts say.
The analysts note there are already ‘green shoots’ in the macro-economic environment. They explain that factors such as the import and export foreign exchange (IEFX) window introduced in Q2 2017, increased oil prices and stronger production numbers are gradually translating into improved business and consumer confidence.
Though real estate market normally lags changes in an economic cycle, sentiment is already positive in the market. Nnenna Alintah, head, Occupier Services at Broll Nigeria, lists factors such as improved access and affordability of forex, and sustained downward trend in inflation rate as major drivers.
As a result of the above, consumer and business confidence is looking up, particularly in commercial real estate. “In the office sector, activity in the first few weeks of 2018 has overshadowed what we experienced in the corresponding period in 2017. Demand is on the rise, with interest from sectors such as oil and gas, finance, professional services and the technology services sector,” Alintah says.
It is anticipated that the ongoing recovery in the economy will positively inform investment decisions in the commercial office market. Edward Osammor, director at EMC Real Estate, notes that interest in commercial real estate is growing once more with the domestic and international equity investors, once again, considering the development of commercial property in the Lagos.
Already, the market has seen significant interest from foreign investors, especially those from European, South African and Middle East countries. Recently, International Finance Corporation’s (IFC’s) acquired 1,500 square metres office space within the African Capital Alliance’s (ACA’s) flagship Alliance Place office building in Ikoyi, Lagos.
“Yes, there has been increased demand which has remained consistent in the area of land purchase in developing areas especially within Lekki corridor and strong enquires for mainland assets in Gbagada, Ojodu areas. This has led to an upward swing of about 10 percent-15 percent in land prices,” affirms Damola Akindolire in a telephone interview.
He notes that the hospitality sector is also gaining grounds with more hotel investment interest, stressing that hotel apartments are coming on stream, especially with the recent opening of Golden Tulip in Oniru and Radisson Blu in Ikeja. “We will continue to see a strong run in this space with delivery of additional 1000 rooms in 2018”.
But Alintah points out that the office market is still a tenants’ market and this trend is to persist until there is a significant reduction in the excess supply that currently characterizes the market. In the grade A office sector, vacancy levels are at 50 percent in Victoria Island and 75 percent in Ikoyi.
The retail market, according to her, took the hardest blow following the economic downturn. Purchasing power of
consumers declined significantly and as such there has been a shift in demand to more affordable brands. Retailers halted expansion plans and simultaneously consolidated operations to the best performing locations and malls in which they have presence.
She hopes that with increased purchasing power, consumers are expected to resume patronage, but not immediately. For retailers, downsizing and exits from existing malls is likely to stall in the medium term.
“However, we are not confident in any expedient expansion as retailers recover from the recession. We expect that developers who are keen to commence new projects will adapt their plans given the realities of oversupply, shallow tenant pool and slower leasing activity in the market,” she says.

Renewed confidence in investment market seen attracting FDI into real estate

Renewed investor-confidence in Nigeria’s investment market will be attracting foreign direct investment (FDI) into the country’s real estate sector, particularly in the commercial segment, a Q3 2017 report by EMC-Real Estate on market research has shown.

This is expected to inject more life and create more opportunities for developers in a sector that is still smarting from the crippling impact of the country’s worst economic recession so far.

According to the report, Nigeria’s non-oil tax revenue in 2017-2018 is expected to increase in step with the recovering non-oil sectors represented chiefly by the agriculture and manufacturing. This expectation is also buoyed by government’s efforts at widening the tax base, though it will be from a relatively low base, as oil will continue to be the dominant revenue source for the government.

The report notes that, as a result of this positive development in the non-oil sector of the economy, the flow of FDI  into the country has increased marginally through 2017 above the low levels seen throughout 2015 and 2016.

“Interest in commercial real estate is growing once more with the domestic and international equity investors, once again, considering the development commercial property in the Lagos region”, says Edward Osammor, director at EMC Real Estate.

The hope of a consolidated, single foreign exchange system being in place once again by 2019-2020, according to him, supports the realistic belief that considerable volume of FDI will flow into the real estate sector once again.

In spite of the slow down which the economy has passed through in recent time, there remains significant interest in Nigeria from foreign investors, especially those from European, South African and Middle East countries.

This renewed confidence in the country’s investment market, Osammor says, is underscored by the International Finance Corporation’s (IFC’s) decision to acquire 1,500 square metres office space within the African Capital Alliance’s (ACA’s) flagship Alliance Place office building expected to be completed and delivered by the first quarter of this year on Kingsway Road, Ikoyi, Lagos.

“This deal is believed to be the first ‘condominium’ purchases structure of office space in the Nigerian market and was brokered by EMC-RE”, he enthused.

Read More: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

An innovative Grade A office building located in the prime commercial centre of Ikoyi, Alliance Place is a project promoted by Edimara Properties Limited—a joint venture between ACA Holdings Limited and Samges Investment Limited.

 The 12-floor office complex had already recorded 50 percent occupancy rate and Obi Nwogugu, a Principal at ACA, who confirmed the IFC deal to BusinessDay, had assured that they were working hard on the remaining 50 percent.  “A good number of people are coming to us about the building and we are excited about that”, he said.

On completion, the building will boast eight floors of flexible office space and meeting rooms; four floors of multi-level parking, a light and airy reception area and a ground floor café. Expectation is that contemporary and international elements along with select African accents will be incorporated into the style of the complex.

The acquisition of space in this building shows that there is always market for a good product, no matter the slowdown in the economy and the challenge in the real estate market. The commercial office segment of this has, in the past 18 months, seen some downsides reflected in oversupply and high vacancy rate.

But with the exit from recession, rising oil price, stability in the foreign exchange market, increased liquidity in the economy, among other factors, analysts say the real estate sector as a whole presents a bright outlook in the new year. 

Increase in foreign reserve on the back of a stable foreign exchange rate and increased oil production are supporting the naira and leading to naira appreciation at the import and export (I&E) window. It is expected that an appreciating naira will be attractive for international investors as it will give them the comfort that their dollar denominated investments will not be negatively impacted by falling assets values denominated in naira

The analysts also predict that in 2018, a stable foreign exchange rate and a gradual exit from recession will lead to an improvement in real estate growth. They expect this improvement to cut across the local market where stable and increased consumer income will lead to greater support for the market while stable foreign exchange and exit from recession will bring international investors back to the market.

Damola Akindolire, ED, Real Estate Development at Alpha Mead Group, says that, among other factors, increased government spending will also support growth of the real estate sector.

He explains that the  FG intends to borrow additional $5 billion to finance the budget deficit which would be a positive sign for the economy, leading to increase in economic activities and disposable income. “Hopefully they should have the budget approved for implementation by Q1 2018, otherwise this will put the fragile recovery in jeopardy”, he posits.


Why Government can’t regulate tenancy in Nigeria

It is a popular saying that one does not give what one does not have. This, in a sense, means that you should cut your coat according to your cloth. It also means that government will have no legal backing to regulate tenancy in Nigeria. The introduction of laws to regulate tenancy will only be on paper because any landlord who chooses to peg any rate for his property will not be stopped. The worst could be the introduction of black market in property sector.

Regulating rent is most unattainable because since the government did not build any of the houses, it will be near impossible for the same government to put a ceiling on the pricing. It is only what one can control that one can regulate. About five or six years ago, the Lagos State government promulgated laws aimed at regulating tenancy. Most experts saw the government efforts in that direction as white elephant job as no landlord will be willing to subject himself to any external regulation.

Unknown to many landlords in Lagos, the Tenancy Laws of Lagos State, which came into force on August 24, 2011, have provided a panacea for the rising cases of disputes arising from tenants’ inability to pay rents. Section 13, Subsection (1) of the Tenancy Law also prescribes the length of notice to be given where there is no agreement between the landlord and the tenant to determine the tenancy, which are; a week’s notice for a tenant at will, one month’s notice for a monthly tenant, three months’ notice for a half-yearly tenant and six months’ notice for a yearly tenant.

READ: Expert Urges FG to Exercise Strong Political will to address Housing Deficit

However, Subsection (2) of Section 13 further provides that in the case of a monthly tenancy, where the tenant is in arrears of rent for six months, the tenancy shall lapse. In other words, there would be no need for a landlord to issue a notice to quit on the tenant; what will be issued is a seven-day notice of owner’s intention to recover possession.

The position of most property experts is that you don’t regulate what you don’t have. In the opinion of Mr. Chudi Ubosi, an estate surveyor and valuer and a Continental President of International Estate Surveyors & Valuers Federation, regulation of tenancy in the country is an unusual situation. According to him, “available statistics show that housing deficit in the country is more than what is being brandished by semi-experts. The 17 million deficit is not real and cannot be substantiated because most reliable experts are saying that by now our deficits should be about 20 million or above 22 million. 

UN statistics has it that even at 16 million deficit, for Nigeria to clear this deficit, it needs to produce at least 750,000 units of housing every year. Nigeria needs to be able to do that so that in another 20, 30, 40 years, even if that figure remains the same, it will clear the housing deficit by 15 years. Yet we have 16 million and in today’s Nigeria, production is less than 50,000 units of housing in the whole of the country. Nigeria has a situation where even with that 50,000 units of housing, a lot of them are geared towards the luxury end of the market and not towards the low income end that need the products majorly. 

There is a situation where there is enormous pressure on the existing housing stock. What that means is that demands far outweigh the supply. The implication of that is that property prices will continue to be high. If property prices are high, whether for sale or lease, government cannot regulate it. If it decides to put in regulation, what it will have is creating a black market, which means when you come to lease my house, I will give you government price to sign on the paper but under the table, I will tell you, you need to pay this extra. So these are things that experts see as basic economics that everybody should understand and appreciate. 

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Yes, government has a role to ensure that its citizens are housed but the role should focus more on creating the environment that will enable people to invest more in real estate. Reduce the bureaucracy and cost of getting get building approval; reduce the cost of getting titles to land; make it easy for people to get land without having to apply to the government for allocation, which will never come. Or you will go and buy from a family that doesn’t have title and as soon as they collect your money, the man you bought from disappears and a new set of people reappear to tell you you bought from the wrong person. So these are the dynamics of the things that concern real estate. Government’s regulation of tenancy is therefore an exercise in futility.

Going by the Lagos State Law that empowers tenancy regulation, Section 13(5) of the Tenancy Law, Chapter T1 , Vol. 10, Laws of Lagos State, 2015, allows a landlord to give a  tenant seven-day notice of intention to recover  possession as in Form TL5 in the schedule to this Law. Such law is only applicable in a tenancy, which has a fixed  term, and once a tenancy has a fixed term, it only requires seven-day notice after serving an intention to recover possession. The landlord will then file a claim in a magistrate court and the court bailiff will serve same on the tenant.

After servicing the claim, trial will begin where the tenant and the landlord are expected to adopt their written addresses before the court will give judgment on the matter. The sheriff will execute the judgment, especially when the tenure has expired or the tenants are unable to pay rents. This, she said, is different from the previous practice where the landlord is required to serve a six-month quit notice after which he starts with the seven-day notice of intention to recover possession. 

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This law is not obtainable in most other states of the federation but since it is enacted in Lagos, legal experts and experts in the real estate industry are watching to see how it would be enforced. The law is made to quicken the process in view of the court congestion and it must be on fixed tenure. Experts who studied the law and promulgated it advise landlords to have fixed tenure in their agreement to quicken the process. The law was enacted in 2011 but full compilation of all Lagos laws was done in 2015. 

Adding voice to the matter, former chairman, Nigerian Bar Association (NBA), Ikeja branch, Monday Onyekachi Ubani, had posited that the law has reduced cases of getting judgment behind the tenants as it criminalises it.

by Maduka Nweke.  Source: Sunnewsonline

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