Real estate in Nigeria is on its growth trajectory. Real estate is Nigeria’s 3rd largest sector ahead of oil and gas. Smart investors, the elites, the political class, and the higher-income class keep a close peep on the growth of the sector. The “real estate gamble” has proven to be a worthy return on investment. Although strong concern remains as there seems to be a growing number of unoccupied buildings in major Nigerian cities while over 24.4 million Nigerians lack access to affordable housing, the highest globally. Why is this quagmire on the rise?
Investment in real estate is a reliable safety net for asset storage. The sector draws speculations as those with deep pockets have identified a good alternative to store wealth, especially with land banking and flipping. At least, its time value offers a higher return on investment than the interest rate on savings from deposit money banks. Real estate offers an unmatched value for money and less volatility than other investment options. Underprivileged Nigerians remain in the shackles of poverty, struggling to meet their hunger needs and basic necessities, and are less likely to take investment risks.
Real estate is a trusted means of transgenerational wealth transfer. It is a futuristic guarantee for wealthy protection across generations, especially when Nigeria’s business environment is volatile, unpredictable, and could be disruptive. Purchasing power is low, and businesses are stifling and shutting down in numbers. Real estate assures investors of continuity. Real estate offers prestige, class difference, and social capital for investors. The more land and physical infrastructure acquired, the greater social status one assumes in the society. This is an age-old traditional practice in Nigeria. Asset acquisition and ownership equal certain social status and rights in society.
In 2025, a post-election year to 2023 and a pre-election year to 2027, many political players could consider storing their assets in real estate. Real estate affords political actors access to credit worthiness from lenders if the need arises. It presents a viable collateral to close associates for bargains. Another key factor is diaspora ownership. The devaluation of the naira implies that Nigerians in the diaspora can own property even though they are less likely to occupy these properties due to uncertain security and livability concerns even in major cities in Nigeria.
High rental costs in the midst of low purchasing power among Nigerians is another contributing factor. Many properties are vacant as prospective occupants are reluctant due to the high cost of rent and maintenance. This is exacerbating housing constraints in major cities in Nigeria. Some investors speculate on political, social, and economic uncertainties and are hesitant to return and occupy this property. Poor urban planning is another contributing factor. Overcrowding and lack of basic infrastructure in cosmopolitan cities are fuelling these ‘Buy-and-Not-Stay’ cultures in Nigeria. Insecurity is a challenge as it exposes the rich as prey to criminals who have flooded Nigeria’s capital city, Abuja, due to insecurity concerns in neighbouring states. How can we address this challenge?
The government is proposing taxes on owners of unoccupied houses. Could this be the game changer? I don’t think so. The policy impact will be minimal or ineffective. Data poverty and privacy concerns are major hindrances to knowing exactly the number of unoccupied houses and who their owners are. Sometimes, property owners could purchase houses using proxies, especially for politically exposed persons and high-net-worth individuals. What are other significant and more effective alternatives to address the challenge? The government must address inflation, exchange rate devaluation, and the widening inequality gap in Nigeria. Provide funding options to middle-income Nigerians to own properties and homes through rent-to-own schemes, building low-cost houses in semi-urban locations. Rehabilitate slums, shanties and provide infrastructure in rural communities. The government must declare a state of emergency on affordable housing in Nigeria. The federal and state governments must provide more innovative strategies similar to the Ministry of Finance Incorporated (MOFI) Real Estate Investment Fund (MREIF) of N250 billion to plug the gap. The budgetary allocation on housing must be expansive and sufficient to accommodate more Nigerians through the mortgage banks and wholesale impact funds to catalyse growth in the sector. It requires more than just pronouncement but political will to solve these challenges as shelter remains a basic need for good human existence. Real estate now offers a greater contribution to Nigeria’s Gross Domestic Product (GDP) and employment generation. It deserves more of the government’s attention than ever.
Victor Alikor is a development economist and innovation & strategy manager at Mshel Homes.
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