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‘Innovation Will Drive Change Needed in Real Estate Industry’

Increasingly, innovative ideas are coming into all facets of real estate—development, investment, marketing, leasing and even advisory—all reflecting the realities of today.

Real estate is the largest asset class in the world said to be worth more than all the stocks and bonds combined. Experts say that, in the last three years, there has been an increased interest in PropTech and other innovations.

Experts and chief executives in the industry recognize the impact of innovation and are progressively adopting digital solutions for their organizations, believing that it is innovation that will drive the needed change in the industry.

“It is common knowledge that innovation has changed the way business is done in the 21st century and there is no doubt that real estate has benefited from improved efficiencies,” Udo Okonjo, CEO, Fine and Country West Africa, confirmed to BusinessDay.

Okonjo said that, given the days of online listings, virtual tours, and e-signing, there has been a significant shift in how things are currently done. With the move towards mobile, emphasis has shifted from efficiency to another dimension.

“Not only are paperless transactions the norm, but mobile-centric technology has essentially transformed the landscape. Access to information, customer expectations, and client service are more different now than they were 5-10 years ago. And there are more changes to come,” she said.

She quoted Alan Watts as saying, some time ago, that “to resist change, to try to cling to life, is like holding your breath: if you persist you kill yourself”.

Okonjo is of the view that with little resistance to change, there are many lessons to be learned, adding that it is of concern that real estate practitioners will sometimes have trouble unlearning old methods and relearning.

She cited instance of mobile business transactions which are not just a new way to conduct business, but a fundamental change in the way things are done.

“It will be hard to find a real estate enthusiast today without a smartphone and a tablet but the new mobile world is filled with apps and capabilities that may be as impactful as the internet itself,” she said.

According to her, “real estate users and owners are faced with challenges that digital enablers and innovations may provide the answer; a clear approach to these challenges will be to redefine the companies; financial, business and operating models in order to embrace innovation and becoming more digital.”

She said that these and other disruptive strategies would be discussed at the Innovation and Entrepreneurial Thinking in Real Estate which is a 3-day programme organized by Lagos Business School in collaboration with Fine and Country West Africa October 15 to 17, 2019.

Source: Businessdayng

Residential Vacancy Rates In Lagos, Others Hit 41 Per Cent

Although the Nigeria real estate market has continued to witness improved activities from last year’s performance, a new report released by Northcourt has shown an increase in the vacancy rates.

In the half year report known as Nigeria Real Estate Market Review, released at the weekend, Ikoyi and Katampe in Abuja topped the list of residential vacancy rates in the country with 41 per cent and 37 per cent respectively.

Also, Victoria Island had 23 per cent, followed closely by Lekki with a 22 per cent vacancy rate.

Oniru, and Apo, Abuja also had 15 per cent and 14 per cent respectively, while vacancy rates in Port Harcourt moved slightly when compared with End of 2018.

Old Government Reserved Area, GRA Phases 1, 2 and 3 recorded vacancy rates of 7 per cent , 9 percent , 9 percent and 15 per cent respectively, while Magodo Phase 11, Lagos has one of the lowest vacancy rates of one per cent.

The low vacancy rates recorded in many parts of Ogun State, South-West Nigeria, the report said was largely due to the affordable cost of housing in its capital city – Abeokuta. High to mid-income areas such as Ewang Housing Estate, Ibara Housing Estate, and Asero Housing Estate have vacancy rates of 1 per cent, 9 per cent and 14 per cent respectively.

Affordability, serene environment, adequate infrastructure, and proximity to both federal and state secretariat offices have been identified as major drivers of the high occupancy levels.

Low-mid income area, like Kuforiji, is a promising residential neighbourhood with a number of pipeline projects such as government-led Orange Valley Estate and AAK Degun Mitros.

Oyo’s leading gated community in Ibadan (another South-Western state) – Samonda Estate (Aerodrome) – is comprised mostly of 4- & 5-bedroom houses and is 98 per cent owner-occupied. Other prime locations such as New and Old Bodija have lower occupancies.

On the Office space, the report said, rents have continued to gradually decline in the Grade A office market. Three towers – Cornerstone, Greystone, and Kingsway brought 12,000sqm, 11,190sqm and 13,317sqm of leasable office space to the market. With Heritage Place, Wings Complex and Alliance Place recording vacancies circa 55 per cent.

In Maitama, rental values are considerably higher than in other areas in the nation’s capital – Abuja. Office spaces on average go ₦45,000 – ₦60,000/sqm. Major tenants include pharmacies, boutiques, and travel agencies. Commercial vacancy rates currently stand at 12 per cent. Rentals in the Utako area average ₦35,000/sqm with commercial vacancy rates at 52 per cent . More development pipelines are in the area as land prices average ₦112,000/sqm. In Wuse 1, rentals for office spaces go for ₦36,000/sqm on average. Shops go for slightly lower – ₦35,000/sqm.

The growing demand for coworking spaces, especially in Lagos state, has also encouraged conversions of grade B officers. Service providers are moving more into the ‘Space as a service’ model – upgrading, fitting out and managing grade B spaces to meet client specifications.

Strong occupancy levels in mainland areas like Yaba have only mirrored demand on the Island where spaces in Victoria Island and Lekki lead the charge.

The millennial demographic, tech start-ups, women-led enterprises and SMEs have remained the leading drivers of demand for coworking office space.

The recently launched Delta State Innovation Hub has also increased the demand for co-working in South-Eastern Nigeria. Leadspace partnered with FCMB to open Hub One, a co-working space in Yaba, Lagos. Grade
Year over year (YoY).

According to the report, security has also grown as a critical selector tool in the residential market.

Secure gated communities are priced higher than estates perceived to be less so as investment thinking in property continues to shift.

The residential real estate market is also gradually picking up as tenants pushed for better deals.

Landlords, the report said, is making little or no reductions. Mini flats, 1 and 2 Bed flats remain favourites.

According to the report, Coworking has continued to grow as business owners are unable to meet up to the dollar rent obligations for Grade A office space.

Most ongoing prime office developments or those that have been delivered in recent years are a testament to the fact that green buildings have come to stay.

Also, demand for Grade A warehousing, the report said has continued to be the case, especially in Lagos state as retailers look to circumvent the economic loss from the city’s traffic situation.

The land has continued to reprise its role as a stable investment, rising YoY in almost all the areas considered. Average prices in Ikoyi, is N450,000 Lekki Phase 1, is N200,000, Victoria Island, N340,000, while it goes for N30,000 in Sangotedo.

In his summary of the report, Northcourt Chief Operating Officer and Director, Real Estate Research & Advisory Lagos, Nigeria, Ayo Ibaru Noted that the demand for property assets will continue to mirror general market conditions fuelled by the efficiencies gained through technological advancements.

Artificial Intelligence, Virtual Reality, and Proptech, he said are changing our interaction with the real estate value chain – from design to construction and completion.

“As materials science breakthroughs force their way into existing construction frameworks, we can safely expect improvements.

Green buildings continue to feature in conversations, waiting for a general traditionalist market to catch up”, he noted. Ibaru stressed that land values have continued to appreciate and the Grade A office market’s struggle with unhealthy vacancy rates remains the case.

“Coworking models are also evolving and, for the first time, we will be including property prices from emerging cities for your investment consideration”, he added.

Source: Guardianng

Nigeria Lags Peers in Home Ownership Rate at 25% for 200m Population

… housing, construction sector accounts for only 3% of country’s GDP

 

Despite its large-size population and self-acclaimed biggest economy in Africa, Nigeria is literally crawling behind its peers in terms of homeownership level in the country.

Whereas home ownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, it is only 25 percent in Nigeria whose population is estimated at 200 million. Going by United Nations projection, the country’s population will be as high as 400 million in 2050.

This implies that the country’s current housing deficit estimated officially at 17 million units will be worse unless there are concerted efforts by all housing sector stakeholders to address identified obstacles to development and delivery.

“The major issues that continue to affect housing delivery in Nigeria, which also account for the wide demand-supply gap, include constraints related to high cost of securing and registering secure land title,” said Nasir El Rufai, Kaduna State governor.

El Rufai who was keynote speaker at a one-day conference organized in Lagos by the Royal Institution of Chartered Surveyors (RICS) Nigeria Group, also listed inadequate access to finance, slow administrative procedures and high cost of land as other major issues affecting housing in Nigeria.

Kola Ashiru-Balogun, managing director, Mixta Nigeria, had in an earlier interview, told BusinessDay that several intervention attempts have been made by private sector operators and agencies of government to improve housing in the country, but such efforts were not succeeding because they are not harmonized.

This, he said, explained why the contribution of the housing sector to GDP is so small and the impact so minimal when it is supposed to be more. El Rufai agreed, saying that in economies like the USA, Britain and Canada, the housing sector contributes between 30-70 percent of their GDP.

“Investment in housing accounts for 15-35 percent of aggregate investment worldwide and the sector employs approximately 10 percent of the labour force worldwide,” he said.

The governor said that the real estate sector could play a much bigger role in the Nigerian economy. He explained that, carefully done, investments in the housing sector could drive economic vitality and create jobs.

“In many developed nations, the property sector in general, and the housing segment in particular, is a bedrock of the economy and an important tool for stimulating growth. Housing construction indices are some of the most common measures used by analysts to gauge economic trends in Organisation for Economic Co-operation and Development (OECD) countries,“ he said.

In addition to growing mortgage finance where much of the economic opportunity in housing can be unleashed, El Rufai also canvassed the development of social housing that must be led by government.

According to him, the federal housing budget was declining as only N30 billion was budgeted in 2019, from N35.4 billion and N141 billion in 2018, and 2017 respectively. “The World Bank estimated in 2016 that Nigeria will need over N59 trillion to close the housing deficit of over 23million.

“The Centre for Affordable Housing Finance in Africa reports that housing production in Nigeria is at approximately 100,000 units per year, while what is needed to bridge the deficit is a minimum of 1,000,000 units per annum,” he said.

Panel discussants at the conference with the theme, ‘Unravelling the Real Estate Sector Challenges in Nigeria’ said regulation as it relates to titling and documentation was also part of the major problems of housing as it places too much burden on developers.

“To acquire land for development, an investor is faced with two critical issues which include the certainty of land title and the process of obtaining the title,” said Hakeem Oguniran, CEO, Eximia Realty.

Oguniran advised that state governments should do something around governor’s consent. He stated further that the states should also reduce their charges on land titles to make it business-friendly and also attract more people who are presently scared by high charges.

Source: Businessdayng

Foreign Investment in Real Estate Nearly Doubles in Greece in 2019

According to official data published recently by the Bank of Greece, foreign investment in Greek real estate grew by a stunning 94.6 percent during the first half of 2019, compared to the same period last year.

Between January and June of 2019, more than €736 million was invested by non-Greek nationals in the country’s real estate market.

This becomes even more impressive if we take into consideration that 2018 already was a record-breaking year for Greek real estate, as it recorded a jaw-dropping 172-percent increase over the numbers for 2017, reaching €1.72 billion.

Since the total of direct foreign investments in Greece totaled a mere 4.25 billion euros in 2018, it is clear that real estate investment attracts nearly a quarter of all foreign investment in the country.

The rapid development of short-term-renting platforms such as Airbnb, along with the increase in tourism to Greece and the country’s steady path to economic recovery, has played a crucial role in this positive trend.

 

Approximately four out of five non-Greek real estate investors are other EU nationals, with Germans, Dutch, British, French, and Italians among the top.

The remaining 20 percent of the investors, who are not EU nationals, are mainly comprised of Russians, Chinese and citizens of Arab countries.

The Greek government’s recent announcement that it will cease imposing a 24-percent VAT on real estate for a span of three years is expected to boost the already rapidly-expanding sector even further.

Source; greekreporter

Low Confidence In Real Estate Drives Banks’ Credit To 4-year Low

…loan to sector slips 21%

Nigerian commercial banks intensified their risk-averse attitude and cautious stance in the property industry as credit to the sector dropped to a four-year low in the second quarter of 2019.

Sectoral credit allocation to real estate shed N13.43 billion quarter-on-quarter and N161.6 billion year-on-year, the half-year data by the National Bureau of Statistics (NBS) has shown.

“Banks’ unwillingness to provide credit to the real estate sector reflects low confidence in the sector, and people’s disposable incomes remains stifled,” Rotimi Olu-Steven, a broker at International Real Estate Partners, said.

Of the N15.48 trillion combined credit given out to 17 sectors by the Nigerian deposit money banks, real estate got N582.96 in the second quarter to June 2019, 2.25 percent lower than N596.39 received in the preceding quarter.

According to industry sources, commercial banks are not ideal or suitable medium for financing real estate projects because whereas commercial bank deposits are short-term in nature, real estate is for long term which is usually vulnerable to the vagaries in the economy such as changes interest rates, exchange rates, and the rate of inflation.

“Nigeria is still a viable market. Capital is a challenge,” Andrei Ugarov, partner at PwC said, adding that “deals are however happening. Players in the industry are making use of other financing options to fund real estate development projects.”

More than 90 percent of new homes that are built in the country utilise funds from personal savings, a statement by the Association of Housing Corporation of Nigeria (AHCN), an umbrella organization for all federal and state housing agencies read.

An analysis of the H1 2019 data by the state-funded Bureau revealed that bank lending to Nigeria’s property industry in the review period is the lowest since the N548.21 billion credited to the industry in the second quarter of 2015.

With a deficit of more than 17 million units, Nigerian property industry contributed 6.44 percent to real GDP in Q2 2019, higher than the 5.57 percent it recorded in the preceding quarter but lower than the quarter before.

After exiting recession in Q1 2019, the first growth from its negative mode, the real estate sector in the second quarter of this year turned back to contraction to post -3.84 percent growth in Q2’19.

“There is no liquidity in the market; no one is releasing the money,” Tosin Ajose, Lead Advisor at DealHQ Partners said. She added that “it will take two to three years for the sector to fully recover.”

A key culprit of the housing industry is the low level of mortgage penetration in Nigeria, industry sources have said.

“Banks run away from mortgage industry now but players in the space understand that it is a sleeping giant; by the time the right antidote is given to the sleeping giant, you will see the potential unleashed,” Banjo Obaleye, CEO, Infinity Trust Mortgage Bank, said.

With single-digit interest rates in some other countries, mortgage industry contributes significantly to economic growth and development. This is, however, not the case in Nigeria as the roaring inflation rate and the attendant high mortgage rate have not only dampened housing demand but has blunted developers’ investment appetite.

Nigeria has one of the world’s lowest mortgage-to-Gross Domestic Product (GDP) rate at 0.6 percent. This lags Ghana’s 2 percent, South Africa’s 30 percent and crawls after the U.S and UK rates of 60 percent and 70 percent respectively.

“The biggest problem in the sector is the high cost of the very limited mortgage that is available. If they can develop a policy to ease housing finance, it will be impactful,” Wole Olabanji, the CEO of CoBuildIT, a Lagos-based real estate firm said.

The typical mortgage interest rate in Nigeria ranges from 7 to 10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15 and 25 percent for commercial mortgage institutions, making it one of the highest in the world.

On September 6, 2019, the Central Bank of Nigeria said in a circular signed by Kevin Amugo, Director, financial policy and regulation department that the “maximum MPR + 5%” is no longer applicable to all financial institutions in Nigeria.

According to Obaleye, the move by the apex bank is in line with the plans to drive down the mortgage rate to a single digit.

Source: Businessdayng

Key Things to Consider When Investing in Real Estate Investment Trusts

One of my avid readers has asked me about how he can get into investing in Real Estate Investment Trusts. He even asked me why he should and whether he should invest directly in real estate properties or in Real Estate Investment Trusts (REITS). I like the audacity, though, because, “my people perish because of lack of knowledge”.

What Is A Real Estate Investment Trust

Traditionally, a Real Estate Investment Trust (REIT) is essentially a closed-end fund created exclusively for holding real properties, mortgage-related assets, or both. In most cases, the purpose of REITS is to provide investors with the opportunity to invest in real properties while at the same time, enjoying the benefits derivable from investment trusts.

Before the advent of REIT, investors could only invest in real properties from the property market by buying completed houses or building one from scratch. Now, with REIT it has become possible to trade units of real properties in the stock market. REIT has afforded the small or retail investor the rare opportunity to invest in real estate.

Understanding is Key

Granting the fact that REITS are pools of properties and/or mortgages traded in the stock market, REIT investors or intending investors need to understand not only the stock market but also the property market so as to be able to make informed investment decisions. Unfortunately, while some investors have a good understanding of the property market, and some understand the workings of the stock market, only a few, if at all, have a proficient understanding of both. That is what makes investing in Real Estate Investment Trusts a little tricky.

Actually, the property market differs from the stock market in many ways. The pattern of price movements in the stock market differs from what it is in the property market. while prices move or change rapidly in the stock market, they do not change so rapidly in the property market. The good thing about REITs, however, is that, like mutual funds, and unlike direct ownership of real estate properties, they (REITS) are managed by professional REIT fund managers that understand the nitty-gritty of both markets (the stock and property markets).

In spite of the fact that they are being managed by professional fund managers in deciding on which REIT to invest in, investors should pay attention to the investment strategy of the REIT, and ensure that such strategies jive with such investor’s overall investment strategy and goal.

Investors should find out if the REIT they are interested in is diversified in both geographical location and property type. On the contrary, investors may be well-served if they buy into REITS that concentrate in a special type of property spread over different geographical locations.

Advantages of a focused REIT strategy

a focused REIT strategy provides a better understanding of specialized markets. it reduces the number of markets a REIT needs to worry about and it enables both the investors and managers to understand the REIT better. Furthermore, it grants both the manager and investors the freedom from having to be experts in all markets and it reduces increased management cost due to the need to take care of many property markets.

 

Disadvantages of focused REIT strategy

Though focused strategy has some advantages, it comes with some disadvantages too. It offers poor-risk reduction and does not allow for better property diversification. It does not offer customers or investors multiple locations that may satisfy their needs and it may increase susceptibility to regional market trends and economic swings/changes which may result in the possibility of large fluctuations in income streams.

 

How to know whether a REIT is focused or diversified

There is no hard and fast way to know whether a REIT is focused or diversified but one way of knowing is to look at the percentage of investment in property types. The norm is that if a REIT has more than 75% of its assets concentrated in one property type, it can be classified as a REIT with a focused strategy.

REITs in Nigeria

Someone reading this article may have asked, are there REITs in Nigeria? there are, but because they have not been that popular, you are not mistaken into thinking or even believing that there are no REITs in Nigeria. There are three major Real Estate Investment Trusts in Nigeria, UPDC Real Estate Investment Trust, Sky Shelter Fund and Union Homes Real Estate Investment Trust. UPDC is the largest of the REITs by asset, having an asset value of N33.2 billion as at June 28th 2019, followed by Union Homes’ N9.9 billion and then Sky Shelter’s N2.4 billion.

 

Union Homes appears to be a focused REIT in that out of its 9 properties, only 2 are located in Abuja, with the rest located in Lagos. Those in Abuja have very low occupancy rate ranging from 0 to 20% while those in Lagos have occupancy rates of between 80% to 100%.

Sky Shelter also appears to be a focused REIT, again, out of its 7 properties, 2 are in Abuja with unknown occupancy rates and they are available for sale. On the other hand, those in Lagos are fully occupied.

Is Real Estate Investment Suitable for you and Your Portfolio?

Diversification, they say, is the milk and honey of investing. This is because a well-diversified portfolio gives an investor exposure to upside potentials as well as shield against downside risk. One investment that improves portfolio diversification is real estate investment. The good news actually is that many are involved in real estate investing, in one way or the other, either as owner-occupied or commercial.

Real estate investments have proved profitable in the past and continue to be profitable today if done right. Performance analysts, worldwide, have noted that real estate investments at times outperform equity investments. Unfortunately, irrespective of the profitable return profile of real estate investments, it may not be suitable for everyone, except of course, when it is for owner-occupation. However, a lot of people, in most investment forums online, advise people to go into real estate, as soon as they ask for advice on the best way to invest a given amount of money.

To invest in real estate, one needs to answer some questions, some of which I am posing in this article.  If you answer yes to these questions, then you are suited for real estate investing.

Can you tie up the needed capital for a minimum of several years?

Real estate investing, unlike investments in equities and bonds require sizable amount of money to build or buy the property in addition to money required to cover unexpected repairs or damages, howbeit contingent. By their nature, real estate properties are relatively difficult to sell within a short period, they are not as liquid as stocks and bonds, as a result, you should be prepared to hold the properties for as long as it takes to sell, which may run into several months depending on some factors.

Are you willing to remain in a certain location for the foreseeable future?

Due to the lack of portability of real estates, it tends to tie the investor down to a given geographical location. In addition, the fact that real estate properties require attention, which may be often frequent, you may need to be near enough to the property for the required supervision or repairs.

Do you have the time and expertise to manage the properties effectively?

Rental property often requires a lot of maintenance, new tenants must be found as vacancies arise, rents must be collected, bills relating to the rental property must be paid and, in most cases, records must be kept. All those demands full-time attention which, if given, may imply forgoing one’s full-time job unless the investor decides to hire a management company to manage the rental property. That option too, has its own pros and cons.

 

If you answered no to any or all of the above questions and still desirous of investing in real estate, then direct investment into real property, except for owner occupation, may not be for you and as such, a better option will most likely be to go through Real Estate Investment Trusts.

Source: nairametrics

Nigeria Losses $6t In Real Estate Investment to Dearth of Data

Nigeria may have been losing an average of $6 trillion inflow yearly as a result of dearth of data and professionals not equipped with current and globally competitive real estate skills for negotiation and relevant data gathering.

This was the position of the Principal, World Citizen Consulting, Chicago, Bill Endsley, on the sideline of the FIABCI International Real Estate Consultant (FIREC) programme held in Lagos.

He spoke to a cross section of experts including Estate Surveyors & Valuers, property financiers, developers and facility managers.

He said huge real estate investment running into billions of dollars daily may have eluded Nigeria for so long as a result of insufficient information on the market, such as interest rate, negotiation skill, policy inconsistencies of government and the ever changing monetary and fiscal policies. He said the average American investor desires to have the necessary information before putting in his money on any investment though they desire high return on investment they are deterred according to him by insufficient information that can attract them to the country.

He said: “What investors want is what is called ‘Clean Window,’ people will prefer to invest where they can see clearly and can prize the risk before investing. There must be market analysis of what the market want and how long it will take to reap on investment, most times this information is not available in Nigeria.”

Director of Operations and Finance, Micheal Consults, Thomas Cardman, in his contribution said investors look out for analysis and the quality of the story behind the numbers in making decisions in real estate investment. According to him they will also look at the return on investment characteristics and cost approach to decide for a particular property.

Earlier, FIABCI president, Nigerian chapter, Adeniji Adele said the workshop is in line with their pursuit towards ensuring that Real Estate Professionals are fully equipped to up their ante in the nation’s built Industry, and compete with their contemporaries globally.

Source: thenationonlineng

Real Estate: Stakeholders Condemn Proposed Tax Imposition on Vacant Houses

Real estate stakeholders have faulted the proposed tax imposition on all vacant houses across Nigeria, saying the move would amount to double losses to house owners and would make life difficult for accommodation seeking residents.

It was reported that a United Nations (UN) Special Rapporteur on the Rights to Adequate Housing, Leilana Farha advised the Nigerian Government to start taxing vacant houses in the country.

Farha, who was on a 10-day fact-finding visit to Lagos, Abuja, Port Harcourt and Kano lamented the housing crises in the country, explaining that most residents in Nigeria’s ballooning informal settlements live without access to even the most basic services.

Reacting to Farha’s advice to the Nigerian government, a Lagos-based estate surveyor and valuer, Stephen Jagun, said it was wrong to categorise all vacant houses as proceeds of corruption, adding that not all vacant houses were products of stealing as Farha might have claimed.

 

Jagun, who is the Principal Partner, Stephen Jagun and Associates, blamed underdeveloped mortgage system in the country for the vacant houses, saying this deprived accommodation seekers the opportunity to access the houses.

To correct the anomaly, he urged government to fix the economy, provide employment, while revisiting the nation’s mortgage system.

Jagun maintained that if government imposes taxes on vacant houses, the poor would suffer more as they would be made to pay more rents for accommodation.

He, however, noted that many people built the houses to store value while others built for investment purposes.

“Many owners of these houses did not borrow to build so they are not in a hurry to reduce rent. There is no obligation to pay loans,” he added.

Another professional estate surveyor, Richard Olodu, stated that taxing vacant properties would amount to double punishment for property developers who borrowed money to develop the property.

 

Olodu stressed that the imposition of tax could discourage people from investing in property which has wider implications for the economy.

“They have to pay both interest and capital to the bank without any income yet from the development. Taxes are payable on income. Why will you tax a property owner for being unable to secure tenants for his property, which is not his fault but due to economic downturn?” 

Source: Nairametrics

Odua Investment to Build N4bn Estate in Ibadan

Group Managing Director/CEO of Odua Investment Company, Mr Adewale Raji, has said the board and management is determined to transform the company and make it the engine room for economic development and competitiveness of western Nigeria.

Speaking at the foundation laying ceremony of the N4 billion medium density estate, Westlink Iconic Villa, which would be built on Odu’a company’s 3.8-hectare land opposite Nigeria Breweries at Alakia, Ibadan, Mr Raji stated that  the foundation laying of the 124 households residential estate is in line with the vision of the board and management of the company to live the mandate of our shareholders .

“We will diligently execute our renewed mandate to be the engine room for economic development and competitiveness of western Nigeria. So, the foundation laying ceremony of Westlink Iconic villa is a testimony of the vision which the company has taken on a larger dimension to quicken the realisation of noble of unlocking value from inherited passive assets,”  he said.

He stated further that  the joint venture investment was another initiative to unlock value from the passive property portfolio of the group and that  the new estate would bring on board a new dimension in structured and luxurious community living in the ancient city of Ibadan.

“Exactly two years, Odua investment had the opportunity of commissioning modest 7 Duplex ACE estate and we asserted that the estate was conceived and delivered as a flagship to announce Odu’s re-entry into property development based on consumer demand and insights. We pledged then that it is the beginning of brand building with all attributes that excites the customer to splash the cash and that the economics behind this thought and the courageous execution is to add quality investment into real estate portfolio that was bequeathed to us by our forebears “.

Chairman of the company’s board, Olusola Akinwunmi, stated  that Odua investment considers the project as a modest contribution to the quality of residential development in the Ibadan axis that has industrial and commercial operations like Nigerian Breweries, Nigeria Bottling Company, Ibadan Airport among others.

CBN’s Cap Removal On Mortgage Interest Rate Means Higher Loan Cost—Industry Sources

Players in Nigerian mortgage industry are optimistic that the recent action by the Central Bank of Nigeria’s (CBN) that saw the removal of 5 percent cap on interest rates for mortgage finance will give room for rate increment.

Prior to the removal, Nigerian financial institutions were only allowed by the CBN to add 5 percent to the MPR as the threshold rate for financing mortgages.

But in a recent circular signed by Kevin Amugo, Director, financial policy and regulation department of the CBN, it was stated that the “maximum MPR + 5 percent” is no longer applicable to all financial institutions in Nigeria.

“What it means is that banks and other financial institutions can add as much as, say 20 percent, to the MPR and then dish out that as their lending rate for mortgage financing and in return Nigerians will access mortgages at a higher rate,” a Lagos-based analyst said on the condition of anonymity.

According to Abiodun Akanbi, Head of Strategy at Abuja-based Infinity Trust Mortgage Bank, in the short term, the cap removal may lead to increase in mortgage rate.

“Yes, it may have an impact on the ability of individuals to access mortgage in a short term but the policy will give the supply side the opportunity to easily access funds,” Akanbi said.

High mortgage rate is considered as one of the key culprits for Nigeria’s housing challenge. Typical mortgage in Nigeria ranges between 7-10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15-25 percent for commercial mortgage institutions, one of the highest in the world.

This has left the industry less attractive for a country that is referred to as poverty capital of the world, where millions live on less than one dollar a day.

Africa’s most populous nation has one of the world’s lowest mortgages to Gross Domestic Product (GDP) rate at 0.6 percent. This lags Ghana’s 2 percent, South Africa’s 30 percent and crawls after the U.S and UK rates of 60 percent and 70 percent respectively.

“I think the Central Bank is trying to see if the market can regulate itself,” Roland Igbinoba, Founder, Pison Housing Company, told BusinessDay on phone.

Igbinoba added that “even before the removal of the cap, mortgage rates in the country has been high and difficult for many to access.”

Nigeria which has the highest population in Africa, has more than 17 million housing deficit and more than 90 percent of new homes that are built in the country are funded from personal savings.

“The biggest problem in the sector is the high cost of the very limited mortgage available. If they can develop policy to ease housing finance, it will be impactful,” Wole Olabanji, the CEO of CoBuildIT, a Lagos-based real estate firm, said.

However a source close to the central bank revealed to BusinessDay that the apex bank was at the final phase of commencing mortgage subsidy, with the aim to achieve a single-digit mortgage rate before the end of the year.

The source who asked not to be quoted because of the sensitive nature of the issue, explained that the recent removal of the MRP+ 5 percent cap on mortgage interest rate was in line with the regulator’s plans to achieve single-digit mortgage rate.

“The new policy is in preparation for the single digit interest rate on mortgages. The CBN has gotten to the board of governance for approval and before the year ends they would have commenced the subsidy,” the source said.

Commenting on the cap removal, Andrew S. Nevin, West Africa Financial Services Leader and Chief Economist, PWC said the CBN was obviously focused on a well-functioning real estate and mortgage market.

He added however that “Nigeria’s Dead Capital locked up in real estate will only be unlocked with reforms to the Land Use Act and more streamlined systems for developing and buying and selling real estate.”

According to data by the National Bureau of Statistics (NSB), the Nigerian property market out performed 19 sectors to post worst growth in the second quarter of 2019, contracting by 3.84 percent.

The sector exited its 12 quarters of contraction in Q1 2019 but fell back to contraction mode in Q2 on slow economic activities, decline in purchasing power and lack of liquidity in the industry.

“The real estate sector is a lagged but this is understandable. Not much progress can be made in this sector with a large portion of Nigeria’s population outside the housing market and mortgage still remains too expensive for many people to access and afford,” Adeniyi Akinlusi, CEO, Trustbond Mortgage said.

Source: businessdayng

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