Low margins or return on investment, absence of foreclosure laws and lack of critical infrastructure, are the obstacles that scare investors from providing low income housing, analysts say.
The analysts say that though Nigeria’s 16 million housing deficit weighs heavily on the low income end of the market, investors still avoid this end because demand there is ineffective, explaining that what appears as opportunity in this segment of the market is, in reality, a liability.
“People are not investing in this end of the market because of the challenge of repossession in the event of default. Our laws make it difficult for people to invest in real estate. You can be in court for five to eight years over a default in payment, making investment in this area a high risk venture”, Emeka Eleh, the President, Nigerian Institution of Estate Surveyors and Valuers (NIESV) said.
Eleh said a lot of Nigerian laws are so old that they need to be reviewed as a matter of urgency, advising that a functional foreclosure law that would enable developers take back their property as soon as possible, when there is a default, will be a great impetus to low income housing development.
Meckson Innocent Okoro, an estate surveyor and valuer agrees. He says that developers would continue to go for the highbrow areas of Ikoyi and Victoria Island in Lagos, or Asokoro, Maitama and Wuse in Abuja.
“Investors avoid the low income areas because if you put a property for rent there, people will manage to pay for two to three years and tell you thereafter they cannot pay any more; they may even take you to court and you may be in court for longer than you can ever imagine,” he said.
“People invest where they expect quick return on their investment,” says Emmanuel Odemayowa, the CEO of Ambassage Properties Limited. Odemayowa observes that the
low end market which people say has wider demand, is where buyers get land for N500,000-N700,000, pointing out that despite this relative cheapness, these low income buyers still find it difficult to pay .
According to him, a few people who look out for where to pay between N2 million and N10 million get good value for their money, explaining that this good value means good location which gives quick and good return on investment.
An investor who does not want to be named, confirms that the margin is relatively higher in high end housing, adding that exiting from a project is also a lot quicker at the high end. He explained that even with the little challenges in the high end market with its high vacancy rate, a N100 million housing scheme guarantees a minimum of N120-130 million, leaving the investor with a N20-30 million margin.
Jide Awosode, the president and CEO of Grant Properties Limited, says low income housing is the business of government, explaining that lack of
infrastructure and cost of building make that segment of the market unattractive.
“We develop and deliver to the mid-upper end of the property market and we don’t have any apologies for doing that. This is because if you are in business, you are there to make money. People have always asked me why I have remained at the mid-upper end of the market and the answer I give is that that is the only place where I can get quick return on my investment”, he said.
Awosode however, argues that if anybody wants him to do mass housing, he will do it on the condition that he gets land free of charge, or at least it must be given at a huge concession.
“Also, I must get title for the land just by asking, that is, once I apply, I am given. Even at that, it must be given to me almost free of charge, or at a huge concession. This is because once a place that is otherwise fallow is developed by somebody, government will benefit in terms of taxes and tenement rates”, he said