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Tenants’ shrinking wallet unsettles rental market

Affordable Housing targets low-income earners with new scheme

Funso Olusola is an estate developer and a landlord. He is the developer of an expansive, middle-class estate located off Lekki-Epe Expressway in Lagos.

Olusola’s present headache is not how to make a fresh investment to increase his projects portfolio for more rents and increased income, but rather how to settle rising cases of rent payment default from his tenants.

The implication of this situation is that as an investor, Olusola’s expected returns on his investment, in terms of rent, is not only being delayed but also denied, meaning that he cannot, in all possibility, be considering new investment while even maintaining existing properties have become difficult.

What this means too is that, apart from the frosty relationship that has arisen between some landlords and their tenants, rental properties will suffer from lack of maintenance and sustainability. Additionally, new investments in build-to-let or buy-to-let properties will drop significantly.

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The inability to invest in new housing projects means more Nigerians will continue to be ‘homeless’; rent will continue to go up, while the housing demand-supply gap will continue to widen with health, social and economic implications that include low productivity in the economy.

Olusola has many tenants at the serviced apartments section of his estate. Many of his tenants work(ed) in banks and other blue-chip companies. Before now, no tenant owed either rent or service charge. Payments were made promptly and fully. But the story has changed, no thanks to the combined impact of a Covid-19 pandemic slowing economy.

“It is real hard times for us here and, I am sure, for other landlords out there,” Olusola laments while briefing newsmen on the realities in the rental market and how his company is responding to them.

“Some of these tenants have lost their jobs while others have taken pay-cuts as part of their employers’ measures to remain in business, meaning that these tenants either don’t have income again or what they now have is no longer enough even for their feeding,” he notes.

According to Olusola, “it is a whole lot of pain for us as landlords and also for the tenants whose main concern now is how to feed and get well. Even this is not easy because the money you in your hand is worthless as inflation has eaten up the value.”

Olusola is not alone in this dilemma. Akeem Soremi is also a landlord who owns a property in Akoka, Yaba, Lagos. “In the past three months, many of my tenants have been telling stories whenever I asked for my rent and I don’t even know what to do,” Soremi informs BusinessDay.

Much as Soremi is disturbed about the current situation, he remains considerate and sympathetic with his tenants. “I think as landlords, our consideration for tenants at the moment should centre on flexibility in payment; we should be looking at monthly or quarterly instead of annual payment,” he says.

It beats the imagination how the combined impact of Covid-19 and economic slowdown on individual, household and organisations’ income has left many landlords cash-strapped as a good number of their tenants have either defaulted or delayed in paying their rents.

According to the Olusola, the greater challenge is that as tenants are defaulting in paying their rents, costs are rising by the day and there is very little he can do about it, citing the price of cement that has gone up by over 40 percent in the last four months, which cannot be transferred to tenant because they cannot pay.

“These are unprecedented times and, in the industry, we need to put aside personal conveniences and come together for the greater good. At Landmark, we are engaging with all our tenants with a cocktail of relief options ranging from rent-free months, flexible payment plans, lease extensions and reduced escalations,” Paul Onwuanibe, CEO, Landmark Group, told BusinessDay in an interview.

Landmark Group is the developer of the expansive Landmark Village, a destination for living, working and leisure. Onwuanibe said “consideration for rent-free period depends on the tenant sector. Some get one month while some get two months. We can’t afford three months.”

The present situation is not restricted to residential properties. Landlords of commercial buildings also have their own share of the current headache in the market.

An analysis of this segment of the market by Muster, a prop-tech company that offers shared housing services, shows that tenants in retail, hospitality and film production industries, (which are sectors hit hard by Covid-19) are the ones that delay in their rent payment.

According to Tunde Balogun, CEO of Rent Small-Small, occupants of some commercial properties in Lagos are already negotiating the terms of paying their service charges as a lot of companies are still working from home and so they are proposing instalment payment.