Evaluating The Nigeria Real Estate Sector
Nigeria real estate was the worst business sector in the country during the pandemic lock down. but now the sector is rising. some many investors are making huge return on investment as of recent. the Nigeria real estate has a lot in store for young investor or foreign investor because of the recent increase in population and government support schemes in terms of mortgage financial assistance.
A lot has happened in Nigeria real estate sector over the years. many things has gone wrong but to our greatest surprise the system is changing and many positive vibes is going holds the real estate sector in Nigeria of recent. evaluating the Nigeria real estate sector is what the blog post you're reading is about so if you care for the recent changes and developments keep reading.
Many insurgencies has emerged in the industry of real estate in Nigeria, starting from lack of capital, inexperienced investors, bad governance and so on. but with our analysis on this blog post i believe you will understand the challenges, prospecting and developing issues in Nigeria.
key factors that clouts the Nigeria real estate sector.
1. Economic Factor.
2. Market Analysis.
3. Nigerian bad Government and Social Factors.
Economic Factor
To evaluate the Nigeria real estate sector, economy is one thing we need to look out. currently the Nigeria economy is going down GDP (gross domestic product) per capital in united states dollar. the economy of the country is under serious illness that needs an emergency health care attention like real estate financial investments.
Real estate investment in Nigeria is one of the business sector that have the highest rate of people's money. Nigeria has the highest growing population in Africa and world at large. so the economic nature of the country really matters to Nigeria and Africa at large.
They're many things the economy of Nigeria is looking up to on the country's real estate sector to help increase the economic value which has been down for a while now and those things include.
- Job Opportunities for youths.
- Providing homes for the common man in Nigeria through residential real estate.
- Infrastructural development of the country through residential, commercial and industrial real estate development.
- Sustainable development goals target.
- To reduce the margin of imported items used in construction/building and focus on natural mineral resources usage.
Job opportunities for youths
There's a general slogan in the country that goes " Lazy Nigerian Youth". so sad president of the Federal Republic of Nigeria Mr. Mohammed Buhari made the statement above. that's to show you how many youths of the country that are staying without doing anything. many have nothing to show for a gift of life, they're living a worthless life. it seems their life is a waste because after their degrees and all the training there's no Job vacancy available for them to get them busy and have something doing in Nigeria.
An unverified source reported that the number of unemployed youths in Nigeria has grown to be more than Ghana population as a whole. if is not true but at least the figurative statement was trying to show the number of unemployed youths in the country.
The problem of unemployment is a storming block in the heart of the country, so the real estate sector is faced with the challenge to provide job opportunities to Nigerian youth. here's the good news for the main time. real estate sector has been providing unlimited job opportunities for the educated and non educated Nigeria citizen.
The real estate business sector in Nigeria is growing the economy of the country for providing job opportunity through:
- Building services done by carpenters, plumbers and others.
- Creating room for real estate Agent services.
- Creating much indigenous investors in the country through property development.
- Property caretakers job.
- Real estate consultancy firms.
- Real estate commercial services. e.t.c.
Sustainable development goals target
The real estate business sector in Nigeria is improving the economic value of the country on the target to improve (SDGs) sustainable development goals. if the economics is about production and consumption, then the real estate is the one of the business sector improving the economy.
SDGs is the Sustainable Development Goals or Global Goals are a collection of 17 interlinked global goals designed to be a "blueprint to achieve a better and more sustainable future for all". The SDGs were set up in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030. so SDGs is providing for the present economic value without compromising the future.
They're many SDGs the economy of Nigeria is looking up to on real estate investments sector, to provide for present increase of the economy without compromising the future economic value of the country.
- Good infrastructural development to attract investors.
- Good health care facilities innovation through real estate construction.
- Good road networks though road construction.
- Zero hunger through job opportunity.
- Improving the school system by adding Real estate courses.
- Providing affordable and clean energy in real estate industrial service.
Market Analysis
Real estate financial investment on the market analysis, in Nigeria differs from western world market analysis result table. a lot of challenging factors in the market. we can't talk about evaluating the Nigeria real estate sector in Nigeria without mentioning the size of the market and the reputations the market structure has built so far.
Real estate market analysis is very broad and seasonal in nature but we will highlight the shortcomings and the strength of the current real estate business in Nigeria.
Real estate market analysis is very broad and seasonal in nature but we will highlight the shortcomings and the strength of the current real estate business in Nigeria.
The Nigeria real estate sector in terms of market value is increasing although some shortcomings are still relative to the success in the real estate market so far.
Positive market sides of the Nigeria real estate sector
The market of real estate in Nigeria has so many improvements and positive side which we have listed below.
- Good environment and climatic nature for construction.
- Societal eagerness to buy.
- Governmental Insurance company.
- Governmental mortgage increase.
- Available workers.
- Natural resources.
1. It's obvious that Nigeria as a country has a good soil to build or develop any type of construction of your choice. this has been proven by so many innovative Nigerian investors, you can check out the highest building in Lagos in terms of height known as Ikoyi 360 apartment. that's an example to show that most construction you see outside country can be constructed in Nigeria safely and sound.
2. The Nigeria social consumption lifestyle is second to none in Africa, many young folks are desiring to own a luxurious homes and a good taste for luxurious home is serious most sought after homes in Nigeria. not only on the residential real property but also other commercial real estate. deliver the right project many are willing to buy.
3 It's no more a rumor that the Nigeria government has set aside some eligible insurance company to insure people's lives and properties thereby increasing a soft landing edge in the business and is quite interesting to attract foreign investors. this process has been on the Federal government agenda.
4 The Nigeria Government has increased the mortgage financial services given to young entrepreneur venturing into real estate after the recent pandemic lock down causing a drastic disaster in the real estate market. with this approach the losing gap such as house deficit can be covered to encourage young folks in Nigeria to start real estate, to broaden the market value in the country.
5 Nigeria population and rate of unemployment has helped in a positive way, in affecting the real estate market by making much people willing to work for money to earn a living. this process reduces cost of labor for most real estate developers in the country. because of high number of available workers to move forward and increase enough result output, much developed investment in the industry.
6 Lastly the country is heavily blessed with Natural resources such as limestone used in building, gravel, sand, coal, bitumen e.t.c many investors don't have to import most construction materials for any project because it's present in Nigeria.
Nigeria Government and Social Factors
The Nigerian government policy on real estate has so many negative vibes on the real estate investments in the country. causing the market down for many years now. real estate investment has a lot do with government policy due to people's choice and is a tangible assets that affects day to day of people's lifestyle and natural configuration of an area.
The cons/ disadvantages of the real estate in Nigeria depends mainly on the bad government and high level of corruption in the country. the mortgage government system is not accessible to the common man because of bribery and corruption in the country. you have to bribe or know somebody to be eligible for the mortgage financial assistance.
Things like natural resources God has blessed the country with is still costly in the market, because some persons has hijacked the market by paying secret tithe to the Politician to play monopoly games in the business. for instance the limestone used in producing cement is one of the common resources in the country. but the cost of cement is still high at least not affordable to the common man in Nigeria.
Social Factors of Single Digit Interest Rate.
Experts in the real estate have expressed worry that the sector which recorded growth of about 2-3 per cent towards the end of 2018 has receded due to uncertainty in the country. The Nigerian Bureau of Statistics (NBS), in its Q1 2019 report, revealed that the GDP growth for the real estate sector was 0.93 per cent.
With the existing oversupply of houses in the market, many landlords have adopted strategic leasing options to attract tenants to their buildings. The options include attractive financial incentives such as extended rent-free periods as high as 12 months, longer beneficial occupation periods of six months and tenant’s fit-out allowance of as high as $400 per square metre.
But the low liquidity in the economy occasioned by poor society and government policies makes it increasingly difficult for tenants to pay rents, while others are moving down to low rental areas to be able to cope with the cost of accommodation.
Experts are blaming the government’s policy of high mortgage interest rate regime as a major hindrance to home ownership among the larger population, while the prevention of money laundering and terrorists financing through property transactions policy of government has led to idle money and liquidity issues in the sector. This has given rise to unoccupied buildings that dotted major cities in the country.
The reality could also be seen from the number of property listed for sales without positive outcomes, even some government agencies, including the Asset Management Corporation of Nigeria (AMCON) as well as commercial institutions are not spared the downturn. As a result, trillions of naira, which could have been used to boost the economy are stuck in the sector which has been considered one of the good things that happened in Nigeria before the recession.
In a recent World Bank projection, about 108 million Nigerians are estimated to be homeless, based on an average family of six people per housing unit, because of government’s inability to provide the required number of houses. It was learnt that the challenges in the real estate has made its contribution to the GDP to remain at 25 per cent, unlike what obtains in other countries.
Experts said addressing the huge housing deficit would require a mortgage finance policy with a single digit interest rate. Should mortgages become cheaper to finance housing in Nigeria, supply, they said, would rise to provide the proclaimed shortage of 18 million houses.
In the developed economies, the mortgage industry makes significant contribution to economic development with a single digit interest rate. In Nigeria, however, this is not the case. The inflation rate and its attendant high mortgage rates impede demand for housing, consequently, developers are not stimulated to build more.
This explains why in Nigeria mortgage’s percentage of the GDP has remained low at 0.5 per cent, leaving it several steps behind other emerging markets such as Mexico, Malaysia and South Africa, where contributions to the GDP are as high as 10 per cent, 25 per cent and 29 per cent.
Currently, Nigeria’s mortgage banks charge between 19 and 24 per cent. And this could go higher, depending on the risk volume, which has affected the real estate’s potential as a goldmine for investors. At a mortgage bank at Admiralty Road, Lekki Phase one, the interest rate offered depends on equity made available by prospective clients.
For instance, a subscriber, who paid N5 million as equity for a mortgage facility of N10 million got a 20 per cent interest rate, while the one with N2 million equity for the same facility was charged 22 per cent.
Another mortgage bank at Broad Street, in Lagos, charged a younger subscriber with longer cash flow 22 per cent, and an elderly person with lower cash flow 24 per cent, because he is closer to retirement.
At commercial banks, the rates are much higher, because the real estate is categorised as a high-risk investment with interest rate at 22 to 23 per cent, depending on relationship with the bank. A major commercial bank at Adeola Odeku, Victoria Island, pegged its mortgage rate at 22 per cent, basing its offering on the high risk associated with recovery of real estate assets because of delay in the nation’s justice system.
A senior official of the bank, who did not want to be named, said getting a single digit rate depends on several factors that include land and building costs as well as litigation cost, which could drag on for up to 10 years because of the right of appeal in court.
The Federal Mortgage Bank of Nigeria (FMBN), which is the only institution offering about six per cent, is overwhelmed with a large number of prospective subscribers. Right now, the FMBN’s impact is about one per cent, because of limited funding.
Also, getting the National Housing Funds (NHF) is a big task because of the bureaucracy and number of people on queue.A frontline real estate operator and Managing Director of Propertygate Development and Investment Plc, M
