Genuine real estate investors seen emerging as anti-graft war rages

Indications  are mounting in the Nigerian real estate market that fruadulent investors would be located and flushed out as anti-graft  agencies are now questioning sources of  suspicious wealth and fraudulent investments.

Nigeria has one of the most flourishing real estate markets in Sub-Saharan Africa with very strong growth potential and opportunity value, estimated at $850 billion by the World Bank, making it a compelling investment destination for local and international investors.

The market which has seen billions of dollars invested in its various segments, including residential, commercial and retail, has however been infested by all manner of investors including honest and genuine ones and money launderers who  tend to be crowding out genuine investors.

According to close industry watchers, the lull in the market is not only  because of the uncertainty in the economy which has affected demand, but also because “it is safer now to keep your cash than do what will attract the attention of government to yourself”.

A private equity investor who did not want to be named confirmed to BusinessDay  that at the very high end markets like Ikoyi and  Victoria Island in Lagos; Maitama, Asokoro and Wuse 2 in Abuja, where some investments are not made for profit, activities have slowed down.

“Many developments that have got approval are now waiting.  Some developers are even selling approved plots”, he said, hoping that what looks a hopeless situation at the moment might turn out good for the market, just as it did in Dubai where a market crash chased away  speculators, leaving it stable but mature for genuine investors.

Emmanuel Okechukwu, an estate manager, notes that the real estate market has always  been suspect as a safe haven for laundered money, pointing out that “many of the unsold and unoccupied mansions in the market are products of these pseudo-investments”.

Okechukwu said whereas the low to middle income property market remains very active, with very few products on offer, the high end market, especially in Abuja, is oversupplied, with many of the houses unsold and empty, which at a time prompted a threat by the Federal Capital  Development Authority (FCDA) to auction such empty houses if they continued to be vacant.

Obi Ejimofo, MD, Lamudi Nigeria, says “the high end market in Nigeria somewhat defies the law of demand and supply because if the demand is low, it should impact on pricing, which should come down in order to meet demand; again, if supply is high and demand is low, pricing should also come down to meet demand.

“But at the high end market, especially in Ikoyi, Lagos, the occupancy rate of completed buildings is very low. The same thing happens in Abuja”.

Continuing, Ejimofo notes that “in a typical demand and supply market, you save money to produce a particular product. Your whole objective is to make a profit. As long as you are able to sell at even a kobo above your cost of production, you have made a profit.

“But if the money invested in producing that product has no relationship with making a profit,  that may be the reason why pricing is not changing. This could be the only explanation for what is happening at the high end market. A lot of the houses in this market are not for profit motive”.

The market might through all of this see realistic house prices going forward, Okechukwu reasoned, explaining that, as an estate manager, he sees price-tags on houses in many parts of the country which are totally unrealistic because they are unaffordable by majority of Nigerians.

CHUKA UROKO