You need to active Javascript on your
Nigeria's leading finance and market intelligence news report.

Why investment in real estate is growing despite slowdown in economy – Agida

The slowdown in the Nigerian economy has impacted many sectors including real estate. In this interview, OLADIPO AGIDA, CEO, Dradrock Real Estate, explains why the real estate sector has seen increased investment and activities despite the challenges posed by the economy. He also speaks on opportunities and challenges in the sector, plus the giant strides his company has made in the last 10 months. He speaks with CHUKA UROKO, Property Editor.

A couple of months ago, the Minister of Works and Housing said Nigeria had no housing deficit. If you were to react to that view, what would you say?

There are many perspectives to any problem. So, for me, I would say housing deficit in Nigeria is real; it is a problem. But we should not be focusing on the problem, but rather on the root causes of the problem. We should be asking ourselves what led to the problem. There are houses that developers have built but are yet to be sold because buyers have not come for them. That is because people cannot afford those houses. This may also be due to lack of a financing structure that could help them to buy.

So, the problem could be linked to financing and also infrastructure deficit that makes it difficult for people to build or buy houses in areas where it is affordable to do so. If there were infrastructure like good roads and railways, then we can create new cities where we can do mass housing that people can pay according to their budget and taste.

What do you advise should be done?

We shouldn’t push all the solutions to the government. We all should be part of the solution. But there should be infrastructure which creates enabling environment for businesses to thrive. There should be more alternatives to road transportation. These encourage development of new towns.

Building materials hike has been a major source of worry to real estate developers and investors like you in recent time. How have you been responding to the price hike?

In fact, the hike in the prices of these materials is the worst nightmare for any developer at the moment. It is a critical issue that we are facing. It is making us realize that we can no longer do things the same way we used to do it in the past. It is also making us become stronger and firmer in our financing game.

One impact it has is that it is now increasing the amount of finance that we need to operate. Today, we are no longer talking about the cost, but the volatility of the exchange rate. Majority of our building materials, especially finishing materials, are imported. So, I can start a project now but cannot tell exactly how much I need to finish it. Our currency is no longer stable unlike other African countries. All these are not good enough for business. If you are in a country where you cannot tell what will happen when you wake up, how can you live in, and plan for the future?

Read also:   Two reasons real estate is world’s most preferred store of wealth

National Bureau of Statistics (NBS) says real estate sector grew by 3.85% in the second quarter of 2021. It attributed the growth to increased activities in the sector. How true is this?

Real estate business is a very competitive business. Though we will always pass on price increases to the buyers, we also have to be more efficient. If you are not efficient in your construction, cost and labour management, you may have challenges. So, we and our customers have to share the rising cost; we have got to be very efficient even in our design which is very unique and cost-effective.

I see the increased activities as a form of cycle. At a time like this when the economy is a bit uncertain and people are looking at where to put their funds, real estate has always been a means of preserving funds. The sector goes beyond just providing houses. People are looking for a perfect mix of investments and real estate has attracted a lot of investment.

When return on investment in other asset class like bonds, treasury bill, equities, etc started falling, people started converting their money into dollars or putting them into real estate. So, we have seen a larger shift of funds into real estate because if you put your money there, when you come back, you will see increase.

The sector is a bit more balanced now than during Covid-19. For us as developers, now is the time to build and we attract a lot of funds now for construction. The increase in activities in the sector is also fuelled by the belief that it is better to deliver now even at a loss because if you fail to deliver now, you don’t know what will happen tomorrow.

Now, our economy is in crisis. There is no money and whatever is available has no value because of inflation and devaluation. Yet developers are building and selling. What factors are driving this?

Using our company as an example, the question to ask is ‘who are the people buying from us?’ Nigeria is a very large economy, larger than many African countries put together. There is a growing middle class. We also have high-net-worth individuals (HNIs) with 10 to 15 percent of their wealth going into real estate. There are also those who want to own homes in spite of the economic situation. There are first time homebuyers who have been saving towards buying these homes. These people may have worked for years in an organization or they have access to mortgage from the federal mortgage bank of Nigeria.

I believe that this industry would have grown bigger if it were better structured. There is also investment from Diaspora Nigerians, which is also huge. These people have currencies that are stronger than that of Nigeria and they put these into real estate in Nigeria because their buying power is stronger. Majority of the top HNIs have all the wealth. These are the reasons there is demand despite the economic crisis.

Now, Let’s talk about Dradrock Real Estate. When we met in February this year, you made some interesting projections including the delivery of about 200 housing units before the end of this year. Eight months after, what is your story?

We are happy to announce that just a couple of weeks ago, we delivered some terraces in our Pacific Manor Phase 1. Others will be completed in the next few weeks. Work is going on in our various projects but we have experienced a bit of setback because of Covid-19. Our customers are happy that despite the challenges in the economy, we were still able to deliver. We have not really met the 200 units projection but, to an extent, we have done well.

Tell us more about the Pacific Manor

This is a moderate estate of 48 units in all. It comprises 2, 3 bedroom apartments and terraces which have been delivered 100 percent. Work is on-going on the apartments and hopefully they will be ready this November. Delivery date for others has been extended to early next year. Altogether, we are looking at 128 units that are not fully delivered.

Beyond developing your own schemes, you are also creating investment platforms and doing other things by the side. Tell us how you are faring with all these, which could be termed ‘private practice’?

This has been quite fantastic as much as people have been willing to use their funds. We have the buy-back option, co-ownership option and project partnership option. To do this, we also have the right mix because we believe that every investment comes at a cost. We are always asking ourselves, ‘what is the cost of the project and the finance?’

You have just started a new project called the Millennial Bay. What is it all about?

This is our introduction to high-rise building in Lagos. It is a project that I am personally passionate about. Each time I look at the design, I feel fulfilled. It is functional. It is meant to change the skyline of Lekki Phase 1. It is one project that came from a research perspective. We did not just come up with the idea. Instead, we realized that there is need for luxury 1-bed, 2-bed and maisonettes with a private pool. The design is very functional and beautiful, and the prices are fantastic. The project is in a nice location in Lekki Phase 1, very close to HiMax Cinema.

We are right in the last quarter of 2021. What are market expectations from Dradrock as the year winds down?

The year is coming to an end, but for us it is the closing of one chapter and opening of another. As Nigerians, we are very resilient because that is the strength we have operating businesses around the world. There are challenges, but we are not giving up. In short, we are even growing stronger this year. We are already looking to new markets that may be unveiled before the end of this year and many others will be unveiled next year. We are very aggressive on our revenue.

We have introduced another Millennial Bay of recent. There will be altogether 52 units of Millennial Bay. We are expecting to get more share of the market and also expecting to make more impact. We want to build a strong and enduring organization where people will be inspired and also aspire to achieve their full potential. We want to build an organization that will be impactful on our community.

QUOTE: We have seen a larger shift of funds into real estate because if you put your money there, when you come back, you will see increase

Get real time updates directly on you device, subscribe now.