• Thursday, September 28, 2023
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Sustaining investor confidence in construction industry amid building collapses

Sustaining investor confidence in construction industry amid building collapses

Nigeria has a thriving construction industry that is expected to grow by 3.2 percent annually between 2021 and 2025. This is coming on the back of a 7.7 percent decline in 2020 because of COVID-19 restrictions and a drop in demand for oil and gas, the main source of government earnings.

According to a National Bureau of Statistics (NBS) report, the industry, together with real estate, contributed about N20 trillion to the nation’s GDP in the first three quarters of 2022. The industry’s market size was valued at $135.9 billion in 2022 and is expected to achieve an average annual growth rate (AAGR) of more than 3 percent from 2024 to 2027.

The industry has, however, within the last decade seen a high incidence of construction failures, especially building collapse incidents, that is currently denting investor confidence, hence the need for stakeholders to do the needful to sustain the confidence it has enjoyed over the years.

Real estate and housing development have become an alternative booming business for investors following the collapse of the stock exchange and manufacturing. So many business-oriented people who possess no training in building and construction have flooded the construction industry with little respect for professionalism and due process.

When there are no eligibility criteria, requirements, or qualifications that restrict admission into a sensitive and critical sector, the consequences will endanger much-cherished human life and property. And being an ‘all comers affair’ where professional advice is hardly adhered to as profiteering is elevated above safety, compromise becomes the order of the day.

After the November 2021 collapse of a 21-storey building still under construction in Ikoyi, Nigerians thought they had seen the last of such high-profile building collapses in an upscale neighbourhood.

This was why the recent collapse of a 7-storey building under construction in Banana Island, Ikoyi, Lagos, sent cold shivers down the spines of not only real estate developers, but also the investment community and sundry stakeholders.

The building industry in the country had seen numerous collapse incidents in the past, such as Reigners Bible Church, Uyo, Akwa Ibom State, Lekki Gardens 5-storey building, the Guest House of the Synagogue Church of All Nations (SCOAN), etc., but these two incidents in Ikoyi are quite spectacular.

Ikoyi and Banana Island are the top-rated, most exclusive, and most expensive locations in Nigeria. The expectation is high that whatever goes into or is done in these locations, where society’s crème de la-crème have their homes and property, is of high value, and must be the very best in terms of quality and standard.

Though the Banana Island collapse has no record of casualties, unlike the Ikoyi incident, which had high casualty figures, concerns are that both incidents have the capacity to kill investment interest and investor confidence in Nigerian real estate.

Questions are being asked about whether real estate still remains a store of value or a preferred investment asset class in a country where other investible instruments such as stocks, bonds, treasury bills, etc. have become unattractive with return-on-investment trending south on an incremental basis.

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Experts have always argued that the positive growth trajectory that real estate has recorded in the last five quarters, as reflected in the National Bureau of Statistics (NBS) quarterly and annual reports, is a product of the confidence of investors who have continued to invest in the sector in spite of the economy.

“Besides the loss of lives and investment, what these frequent building collapse incidents, now happening in unexpected locations including Banana Island, have done is that they have bruised badly, if not eroded, the confidence of the investment community in our real estate,” Bidemi Asenuga, a real estate consultant, noted.

“Nigeria is an investment destination because of its large population, and real estate is a major attraction. A good percentage of diaspora remittances, on an annual basis, go into real estate. Because of this, it contributes significantly to our national GDP,” he added.

For that reason and more, Asenuga said that a lot needs to be done to save the sector and sustain the confidence investors have in it, pointing out that aside from good human resources for quality and standard building and construction, regulatory and supervisory activities must be thorough and firm.

Arkan Aljbaie, General Manager, Construction at BCL, shares this view, saying, “Quality construction demands that any building should be given the right and adequate team. Construction is not one-man-show, but teamwork. Human resources should be enough for the project. There should be adequate checking and control on the structure and the finishing,

“If a company has good human resources but lacks the necessary equipment, it will still go back to the same thing. There should be good equipment and good skilled professionals with experience working together. There should also be adequate funding; local firms lack most of these things.” he said.

Aljbae noted that the most important thing to ensure the stability of any building is to follow the design and specification 100 percent, insisting that building failure could occur anywhere in the world, including America, Asia, or Europe, where this is ignored.

He lamented that some developers look at just the cost of construction and are, therefore, looking for who gives them the lowest cost. Beyond the cost, consideration should also be given to knowledge, experience, and teamwork,” he advised.

Similarly, Aliyu Suleiman, Resident Site Manager at Trevi Foundations, says that quality construction of any building, be it low or high-rise, starts from the foundation. “The kind of structure you want to build will determine the kind of foundation you should have. Once your foundation is wrong,” he said.

Though he believes that there are many local construction firms that are also involved in construction, like Trevi, Suleiman said that they have their limitations. “The local companies need to invest in their resources, especially their human and material resources,” he advised.

It is instructive to point out that, in spite of the unfortunate incidents the construction industry has seen, the country still boasts great projects by great developers and construction firms. Trevi, Julius Berger, Cappa D Alberto, Lambert, Trevi Foundations, BCL, etc are good construction companies operating in Nigeria with a stamp of quality and integrity on the work they do.

Reputable Nigerian developers whose developments occupy prime locations in Nigeria’s big cities of Lagos, Abuja, and Port Harcourt don’t lose sight of the multinational firms when choosing their contractors and other project partners.
At the forefront of such developers is Palton Morgan Holdings, the parent company of Grenadines Homes, whose name, by no accident, has become synonymous with quality and luxury buildings.

There are also other good and reliable developers, such as UAC Property Development Company (UPDC), The Address Homes, Refin Homes, and Cruxstone Development and Investment Limited, among others.

These reputable ones that deliver quality work in the industry are just a minute fraction of a whole lot in the market masquerading as developers. Operators in the industry say they are worried by the ugly incidents and are therefore appealing to the developers to play by the rules.

“We hereby appeal to developers to abide by the building regulations and engage the appropriate professionals in the pre-construction, construction, and post-construction stages of building. They should consider the risk involved in building construction more than the gains,” Sulaimon Yusuf, National President of the Nigerian Institute of Town Planners, said.

Yusuf appealed to developers embarking on multi-storey building construction to desist from the direct labour method and engage the services of reputable construction companies. It is a clever way of mortgaging risk. Subscribers are becoming scared of high-rise buildings constructed by developers.

“Saving cost at the expense of human life could result in huge financial losses, chorusing the foolhardiness in pennywise, pound foolish. We equally appeal to the government to lessen the burden on developers by reducing the high development fees and taxation,” Yusuf said.

He reasoned that expensive preliminary costs incurred in building plan approval, etc., tempt developers to cut corners or cheat, adding that delays and bureaucratic bottlenecks in the building plan approval process embolden developers to commence construction before the approval is granted in order to avert inflation.

The issue of greed has been spotted as a major weakness of most developers, which is why many of them do not comply with setback requirements for the building. Again, as in the case of the 21-storey building, many of the developers changed their building plan midway through construction, adding more floors not included in the original foundation of the house.

There is no denying that investment in the housing sector is an important developmental contribution that provides appreciable returns. Unfortunately, what we see now is an investment in buildings that will not stand the test of time and endanger the lives of their occupants. Every developer should, therefore, endeavour to deliver a building with the heart and intention of occupying it by himself or herself.

By no means can the importance of building insurance be overemphasized. Any developer who is in doubt about the stability or quality of the building(s) he has already constructed should have the courage to contact the relevant professionals for remedy or do the needful by demolishing.