Developers in dilemma as subscribers seek refund, alternatives over rising costs

Besides falling consumer purchasing power which has left them with many unsold houses, property developers are also squeezed and left in a dilemma over what to do with subscribers who, on account of shrinking income, are seeking refunds of down payment or affordable alternatives to earlier choices.
Arguably, no other sector of the economy has been more impacted by the cost-push inflation in Nigeria, than the real estate sector, where prices of major inputs such as cement and reinforcement (iron rods) have gone up by about 50 percent and 100 percent respectively, pushing construction cost to new highs.
“On the average, the cost of building a four-bedroom house, on the construction side, has gone up by more than 20 percent from January 2016 to date and this came to the fore when we were doing fluctuation exercise with our contractor on Lekki Pearl estate development, a couple of days ago”, said Damola Akindolire, Executive Director, Real Estate at Alpha Mead Facilities, in a telephone interview.
Though the price of other materials such as sand, water, etc have remained relatively stable, the prices of cement and iron rods, which are the major components of any building, have gone up significantly, and according to Akindolire, cement price has risen from N1,500 to N2,450 depending on brand and location, while the price of iron rods is now N330,000 per ton, up from N160,000 a few months ago.
“The situation we find ourselves in”, he said, “is dicey, because we now have cases of subscribers who are asking to have their money back. We are however ready to oblige them because, given the present realities, the price at which they bought can no longer deliver the products to the market”.
Olisa Ebigwei, CEO, Soe Properties, agrees, saying, “our experience thus far, trying to deliver our Yellow Gate Estate, which comprises town houses and terraces in Lekki, is a sobering one”.
Ebigwei estimated the rise in construction cost at a little above 50 percent, explaining that depending on location, the price of granite, in addition to that of cement and iron rod, has also gone up by nearly 100 percent to N290,000 per ton, from N150,000 per ton last year.
“These increases have affected construction costs significantly, and so we can no longer deliver at initial price. Some of our subscribers are opting for refunds of down payment, while some others seek affordable alternatives, and we are obliging them because we have to sustain our business”, he said.
He expressed fears of a possible shrink in housing supply, as developers might not go into new projects, while on-going ones might be put on hold, “until prices return to acceptable levels”.
What is happening in the market is expected, Omo Aisagbonhi, CEO, Omais Homes, observes, arguing that if subscribers are asking to have their deposits back, it is not because they no longer want housing, but because they are now more concerned about what to eat and how to get well.
According to him, the impact is not on developers alone, but also on businesses, especially small scale and start-up businesses that need space to operate from. “No matter how small a business is, it needs a space to operate from, and this space comes from developers who cannot deliver because they are challenged by economic realities”, Aisagbonhi lamented.
Taking a view of historical trends in the prices of completed buildings over a ten-year period, Gbenga Olaniyan, CEO, Estate Links, revealed that the price of a four-bedroom house has moved progressively to N80 million from N1 million at the beginning of this period.
“A four bedroom semi-detached house that was sold for N1 million in 1993 at the Dolphin Estate, Ikoyi Lagos has moved progressively to N4 million in 2,000; N70 million in 2013, to N80 million in 2016”, Olaniyan disclosed, blaming this on the economy which does not seem to support housing development and an efficient mortgage system that supports mortgage-backed home-ownership.
The wider implication of all this, according to close housing market watchers, is that it is shrinking job opportunities for both artisans and building professionals because some developers are now closing sites, hoping that prices might drop when the foreign exchange market gets better as it has started to.

 
CHUKA UROKO