The housing deficit in Nigeria, estimated at 17 million units has created immense opportunities in the country’s real estate sector, making it a preferred destination for local and foreign investors.
The middle to the lower-middle class market alone needs about four million housing units, representing about 20-25 percent of the deficit and Richard Nyong, CEO of Lekki Gardens Limited, estimates that the value of this market is about $400 billion.
Nyong, who spoke in an interview with CNBC Africa, on the ‘Growth Opportunities in Nigeria’s real estate sector’, said his company plays at this segment of the market, explaining that their housing model has enabled them to deliver housing at prices almost 50 percent lower than their competitors.
“For us, the business is about the customer. The question we always ask is, what do people really want? We don’t start our business by saying this is the kind of houses we want to sell, rather we ask of the kind of houses that people want”, he said.
Nyong disclosed that from research, his company has discovered that increasingly, people want their houses much more affordable than before, compelling his company to find ways of coming to the market with a lower price model and to also come up with some strategies to achieve this.
Part of these strategies, he said, was de-emphasising too much profit by charging their customers lower that they could possibly get elsewhere. “Most people want to make as much as 50-70 percent margin on their product, but for us, 5-10 percent margin is okay, which leaves a lot of money for the customer.
“An average real estate developer takes three to four years to deliver 350 housing units, but for us, we look at how to achieve that in nine-12 months and when we apply that speed, we can bring down the administrative cost of the project by 30-40 percent, which translates to savings for the customer”, he stated.
He said with their Just-in-time model, they have been able to control waste, explaining that with this model, they don’t build what they have not sold, in which case, there must be a subscriber for any housing unit they are building at any point in time.
“We focus exclusively on customers paying their money for us to develop for them”, he said, adding that as much as possible, they try to avoid any model that would expose them to bank financing.
The internal competence and skill to price differently with construction partners and suppliers, he said, saves for them about 10-15 percent on construction cost, stressing that squeezing money from all these strategies saves about 80 percent delivery value to the customer.
Curiously, Nyong is not so much worried about competition as he is about what is good for the customer because, as he put it, “we are not so much about growing the business big, but serving the customer, and this is our mantra”.
Continuing, he said, “we have modeled our business plan after the Walmart strategy whose progenitor, Sam Walton, was not after growing the business big. Our concern everyday is how to serve the customer, and as long as we focus on the customer, we don’t need to worry about competition”.
Nyong says he believes that the real estate market is large enough to accommodate multiple players. He points out however, that as open as the market is, it is only for those who deliver value because the customer wants value.
“We will continue to focus on the market fundamentals and not on hype”, he assured, stressing that whoever focuses on hype will not be able to deliver.