In recent times, the real estate sector in Nigeria has witnessed tremendous growth and advancement both for investors and service providers in the sector.
Over the years it has advanced into a more institutionalised system wherein several corporate bodies have ventured into the industry as real estate development service providers, also a large number of the Nigerian populace are now well informed about real estate and a lot of people are actively participating for investment purposes.
Though the growth in the sector has not been without challenges, it is expected that the real estate development outlook in the coming year would be more promising. As we all anticipate a prosperous year 2020, the real estate development sector will be at the centre of rapid social and economic growth compared to the past four years. While it was one of the most negatively impacted sectors during the recession, it is set to bounce back after stabilising itself in 2019.
In 2020, there will be a broader range of opportunities with new value drivers as a result of some economic and social policies which the government has started implementing. There will be migration to new areas, new markets and cities especially for the middle class thereby increasing the demand for specific types of real estate.
One of the major government economic and social policies that will attract investment into the real estate development sector is the Central Bank of Nigeria (CBN) new policy direction instructing Commercial banks to increase lending at lower rates to stimulate aggressive growth of the economy. This effort has given more entrepreneurs and SMEs accesses to funding for their business, which will, in turn, impact their socio-economic status. This policy by the apex bank will generate more activities and income for the real estate sector from rentals of new business premises to change of accommodation as social status improves when people can easily access funding at competitive rates without stringent and cumbersome procedures.
Another government policy which would greatly and positively impact the Real estate development sector is the recent drop in the Nigerian treasury bills (NTB) rates which was occasioned by the decision of the CBN to restrict participation in its Open Market Operations auctions to just banks and foreign investors.
Investors invested in Treasury bills as a result of its relatively high yield compared to other forms of Money Market and even Capital Market investment. Consequently, the current low yield rate of treasury bills would lead investors into exploring other viable investment options and this would, of course, make investments in real estate development a juicy option for investors considering its appreciable and not depreciable.
One of the setbacks which real estate development has experienced over the years is the deplorable state of infrastructure, especially access to roads and interstate highways. However, with the recent infrastructure projects being undertaken by the federal government across the nation, a window has been open for real estate development in Nigeria as there would be increased migration across states leading to the need to rent or own residential apartments and commercial buildings. Thus, with the reconstruction of areas like the Lagos-Ibadan expressway, Ibadan-Ife-Ilesha road, Ibadan-Iwo road, Aba-Owerri Road, Oba-Nnewi-Arondizogu-Okigwe Road, Kano-Katsina Road there would be easy ingress and egress to states in the country. Individuals can conveniently own houses in one state and carry out their daily business in a neighbouring state. Also, with the commendable reconstruction of railway service and new rails across the country making it easier for exportation of goods and items across states, people do not need to worry about having access to commodities they would need when they decide to own a property and migrate.
Also, the Federal Mortgage bank recently reduced the equity contribution expected of persons who intend to access the National Housing Fund loan (NHF) to purchase properties. Thus, with the reduction of the equity contribution to as low as 10 percent for a property of N15 million, it makes it a lot easier for individuals to own houses through the National Housing Fund scheme. Low-income earners can conveniently invest in real estate and make payment for the property over several years.
The real estate development sector would in the coming year recover from the hard-hit of the recession and experience a boom as one of the most sought-after investment options available to both individuals and organizations.
AJIBOYE OYELEKE
Dr Oyeleke is the group managing director, Efficacy Group. He can be reached at [email protected]
