Infrastructure deficit and developers who don’t subject themselves to development regulation are hurting and narrowing opportunities derivable by genuine industry players in the Nigerian real estate market, experts have said.
Infrastructure financing gap remains a critical global challenge for sustainable development and economic growth in developing economies. In Nigeria, the situation is dire and, according to the experts, the country’s low infrastructure stock is reason for the low performance of its real estate market.
Emmanuel Odemayowa, MD/CEO, Cavalli Business and Investment Group, explained in an interview with BusinessDay that the value of Nigeria’s total infrastructure stock which includes road, rail, power, water, telecoms, airports and seaports, represents only 35 percent of the country’s GDP.
“This is far below the level of peer emerging market countries where the average is 70 percent,” he said, pointing out that to optimise the contribution of all these sectors, “Nigeria needs to invest $3 trillion in infrastructure over the next 30 years”.
Adetokunmbo Ajayi, CEO, Propertygate Investment and Development Company, affirms, noting that infrastructure is reason development is not happening in some parts of the country, including areas where land is available and ‘cheap’.
He explained in an interview with BusinessDay that there are many places that developers could have acquired land for development purpose but they can’t because the land is not accessible due to poor infrastructure.
“In fact, there are developers who have gone ahead to take development in places that are far off thinking people would come but as at today, there is serious trouble because people would rather be tenants than buying property in places that are very far from their work or business area,” he said.
“I have also seen cases of people abandoning their houses and moving closer to become tenants because they don’t see the essence of living in one’s house if one is spending an average of seven to eight hours commuting as a result of bad roads infrastructure,” he said.
Besides the near-absence of mortgage which is also a major obstacle to the real estate market’s ability to unleash its full potential, there is the challenge of people whom Ajayi calls unregulated developers whom, he explained, take undue advantage of weak regulation or weak enforcement on the part of government.
“These people don’t follow the rules but just build whatever they want to build. Ironically, because they cut corners, they are able to bring out products that are cheaper,” he said, noting that their activities distort competition in the market.
Because of these unregulated developers, major companies like UAC Property Development Company (UPDC) and others are not doing well any longer because they cannot compete with the army of these pseudo developers that are coming into the market.
If, for instance, a genuine developer has a parcel of land on which he cannot do more than 20 housing units because of planning regulation, he will stick to that in which case the cost per land for him would be a function of the total cost divided by 20. The story will be different for another company that does not follow regulation building on same size parcel of land.
Because such a company is unregulated and is also profit-driven, it will decide to do 40 housing units, thereby creating an uneven ground for competition and because the market is price-sensitive, people will patronise him more.
“But, the overall implication is that such a company is destroying the market environment because putting specification on what to build in terms of quantity and others is based on density. This is because those specifications are determined by the ability of the environment having the requisite infrastructure to cope with the number of people,” Ajayi noted.
CHUKA UROKO
