• Friday, April 12, 2024
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Private developers seek role in Lagos State’s rent-to-own initiative

Private developers seek role in Lagos State’s rent-to-own initiative

Stakeholders in the real estate sector have said the Lagos State government needs to encourage private developers’ involvement in its rent-to-own initiative to help bridge the housing deficit in Nigeria.

They said this at the BusinessDay Property Investment Conference 2024 themed, ‘Navigating Real Estate Dynamics: Balancing Rural to Urban Migration Population Growth, and Economic Impacts,’ on Thursday in Lagos.

“Rent-to-own initiatives, especially in well-populated areas like Lagos State, will enable migrants in the urban area to comfortably own a home within a specified period of time,” Shola Orunmuyiwa, group director, bureau of legal affairs at Adron Homes, said.

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The rent-to-own initiative is one the ways buyers can access housing from the 19 housing schemes in Lagos State which have delivered 5,000 housing units, according to Moruf Akinderu-Fatai, commissioner for housing in the state.

Some of the houses were allocated at a discounted price of N3.5 million-N10 million to the low and middle-income groups, while attending to the yearnings of the high-income individuals as well, he said.

He said: “It is based on a 10-year monthly payment plan with a six percent interest rate; with an initial payment of 5 percent of the total cost, a resident who has met the minimal conditions will gain access to the homes.

“As the population in Lagos swells, so do the complexities of ensuring equitable access to affordable housing, basic amenities, and economic opportunities for all residents.”

According to data by the UN-Habitat, approximately 70 percent of the population in Lagos currently live in informal settlements or slums.

Orunmuyiwa highlighted some of the challenges facing real estate developers. “We have issues with ready land available, the high cost of building materials which is affecting a lot of developers right now, and then we look at the issue of project financing.”

Nigeria is currently battling with rising inflation, which quickened to 29.9 percent in January, eroding Nigerians’ spending power while increasing the cost of doing business.

The recent rate hike by the Central Bank of Nigeria to 22.75 percent from 18.75 percent has further made borrowing costlier for businesses.

Tola Akinsulire, chief commercial officer at Mixta, said that compared to big developers, small developers have a hard time getting financing.

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“The biggest providers are the banks, but presently rates are over 20 percent. But we can come together as practitioners to make presentations to the government on how real estate is a significant catalyst to the economy,” he said.

Akinsulire said that as a group, developers can push for part of the cash reserve ratio (CRR) by banks to be used for house financing.

The CRR is a specified minimum fraction of the total deposits of customers which commercial banks have to hold as reserves either in cash or as deposits with the central bank. It is set by the central bank.

At the last MPC, the CRR was raised to 45 percent from 32.5 percent.

“Is it possible to push for banks to use part of the cash reserve ratio to provide capital for the real estate sector? This will enable us to access that capital to do what we want to do in the industry,” he said.

Akinsulire said the real estate sector needs to come together with solutions the government can implement instead of problems.

On implementing technology in the real estate sector, he said there are certain technologies that cannot be incorporated yet into housing development in Nigeria. “But also there are technological solutions like solar power currently being incorporated over generators by developers.”

“The way I see some of these innovative technologies, until we start producing locally, it’s going to be difficult implementing it on a mass scale due to the sustainability of such technology. But I also think that like the case of solar power, a large demand for it will enable local manufacturing of such products,” he said.

Kems Nzekwe, president of Nigerian Institute of Quantity Surveyors, stressed the need for assistance and collaboration among real estate developers.

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“There are a lot of challenges facing real estate like the exchange rate. For developers, there is a need for more partnership. All hands must be on deck to make things more in the construction industry and then we can have affordable housing,” he said.