Why government should regulate real estate sector, by Ejidiran
Yemi Ejidiran is the managing director of WEMABOD, a property development firm. He is also a fellow of the Nigeria Institute of Quantity Surveyors and a project management professional. In this interview with NGOZI OKPALAKUNNE, the real estate practitioner stressed the need for government to regulate the real estate sector in Nigeria. He also attributed inadequate mortgage facilities in Nigeria to the high level of poverty ravaging the country. He also spoke on the challenges facing the sector as a result of Covid-19 and measures adopted by his company to navigate through. Excerpts:
Real Estate sector is facing challenges such as dwindling consumers’ disposable income and inadequate mortgage facilities. How have this affected homeownership in Nigeria?
Inadequate mortgage facilities have affected homeownership negatively in the country. The reality of the matter is that the mortgage facilities, both primary and secondary, have not evolved to a state what you have in Europe and America, where there is government intervention in terms of mortgage investment that enables prospective homeowners to buy their homes and be happy thereafter.
One of the major reasons is the purchasing power of our people, especially in Nigeria which had dwindled considerably even before the Covid-19 pandemic. A mortgage facility operates at the back of your ability to be able to repay the loan and the guiding principle is that at least 33 percent of your monthly or your annual income must be available for that repayment.
In a situation where workers had to spend literally all their earnings on daily living, feeding, clothing extended family system, there is practically nothing left to fund mortgage repayment and that has badly affected home purchases.
I also observed that the cost of building is also skyrocketing and that makes it practically impossible for people to access home.
The primary mortgage system also requires a lot of fine-tuning, while the secondary mortgage system is literally not even there. Ability to raise finance to fund the secondary mortgage system is not really there and the government has not done much in this area. So, those are the challenges I see in mortgage facilities that have affected home purchases in Nigeria.
Most of the graduates are unemployed in this clime. What opportunities are there for young entrepreneurs in your set-up?
With the rate of unemployment in the country and the inability of employers of labour to employ credible human resources, there is an opportunity to engage most of this young force on a contract basis. When I say on a contract basis, there are many companies that have the data of some of these unemployed youths and because of the fact that the nature of work we do require a lot of skilled and unskilled labour; chances are that opportunities may arise for us to be able to tap into those resources, those unemployed youths, those young entrepreneurs that want to make a living, we tap into that.
I believe that opportunity exists for us and currently, we are tapping into those opportunities in our company to be able to ensure that we train those young entrepreneurs in real estate and property development. We also enable them to earn some reasonable amount of income while undergoing such training.
WEMABOD is positioned to attract those young entrepreneurs, and I think that we can make it on a sustainable basis as much as we grow in the number of project that we execute.
The pandemic has stunted the performance of private developers making the sector one of the worst-hit in the current crisis. What strategy could be employed to reposition real estate?
Covid-19 has badly affected real estate and generally speaking, I think that real estate is the worst hit. The reality of the matter is that when there is poor disposable income, people do not worry about buying homes, people are interested in eating. In some cases, they may find one or two clothes to wear. But real estate is the least of their priority; so it has affected us badly.
So, we find a situation wherein most of our commercial premises, we lost our tenants, it has been difficult recovering service charges.
There has been increase in rental payment default, most of our tenants are actually leaving premises to work from home or go to some co-work office spaces to be able to exercise their franchise.
So, that is the problem that we are facing; however, we have a couple of opportunities that have arisen as a result of that. So, there is opportunity around effective cost management, in order to reduce your service charge expenses; there is opportunity in that.
There is also opportunity to leverage on Information Technology (IT) infrastructure for service charges recovering; there has been huge opportunity and we are already applying some of that.
There is also opportunity for us to invest in co-work spaces, notwithstanding the fact that most of these tenants still prefer to work from home, they still, want an address where they can continue to access their mails, their physical letters and other related documents.
They still need conference rooms, syndicate rooms to be able to engage with people. I believe that opportunities also exist in that, so we are already taping in to that, we are investing in co-work offices, this I believe that with time, we will definitely have Covid-19 symptoms, causes and the effects behind us.
Most huge buildings are still being done by foreign firms. Is there capacity challenge among the local estate developers?
I do not think that we have local contractors that do not have the technical requirement. Most of our contractors locally are technically sound.
However, the investment require in forming and operating a business like a construction company that can stand the test of time, in the realm of executing huge capital project, it is really not there and the reality of the matter is that, just as it affect other sector of the economy. It is not always easy to access funds for most of our local contracts. There is hue investment that is required for you to become a global contractor.
Take for example, investment in equipment like tractors, cranes and other mobile equipment that is used in construction site, to be able to acquire access and maintain a sustainable and longtime bases, it is not that easy.
So, getting access to funds is difficult and that has been the challenge of some of our contractors. For them to prove their mantle in the construction industry, it is not that easy. It is not that they are not technically sound, but their foreign counterparts have access to funds; they have access to these equipment. The funding system as it operates within their own countries is not the same here.
There is a credit system that is sustainable for them to access these equipment and when they get them, what they will pay on the long run will be with ease.
In our own case, Nigerian contractors will borrow at a very high cost, so that is one of the major problems we have.
Do you think that government should regulate real estate and why?
Yes, I think the government should regulate real estate for many reasons. The real estate sector in Nigeria especially within Lagos is awash with all sorts of fraudulent practitioners. The real estate sector itself is fragmented, everybody is doing real estate. It is the business of everybody, a banker has retired from office, the only thing he thinks he can do is real estate even though he is not well-grounded in the business of real estate practice. A school dropout thinks that he can just buy land, begin to develop and sale.
Anybody that makes money from the government, the next thing he will think of venturing in to is real estate.
So, the practitioners who are serious with the business and have invested much in it cannot compete favourably with those guys because some of the things they do, we as a company cannot do, we cannot afford to cut corners and that is why government must regulate the practice of real estate business.
Another reason it must be regulated is because there is no quality control. We have cases of building collapse because people are not abiding by the regulation.
We need to think about the real estate practice both from the government side and the practitioner’s side.
From the government side, I think the government has tried a lot in trying to regulate the practice of real estate. We have Lagos State government instituting the Lagos State Real Estate Regulatory Agency that regulates the practices of the sector that is at the background of the fact that Lagos State government has identified with the fact that there is a lot of fraudulent activities taking place in the real estate sector of the economy.
We also have Lagos State Building Control Agency in such a way that even when you secure approval from the planning authority; there is a building control agency that also goes round the site to monitor what you are doing. When you finish the development, you also have an outfit of the Lagos state that must ensure that you have a certificate of fitness for habitation, so the state government is doing a lot in that area.
From the practitioner’s side, there is a lot of ground to cover, it has become a kind of all-comer’s kind of affair and that is the reason regulatory agency needs to do more than what they are doing now in order to arrest the decay that is already setting in, in terms of property development.