• Sunday, June 23, 2024
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COVID-19: ‘Impact on real estate may take 3 years before rebound happens’

Juls Homes’ N2000 land payment plan opens opportunity for low-income earners

As Nigerian economy commences gradual reopening amid widespread fears that it may slip into recession post Covid-19, practitioners in the real estate sector say the sector, being a laggard, may take about three years before it turns the corner.

Describing the impact of the novel virus on the sector as the biggest in history, the practitioners feared that the current experience arising from the coronavirus impact could take the sector back to a similar situation in 2005 when the global economy passed through a crisis.

The practitioners, drawn from different African countries including Nigeria, South Africa, Botswana, and Ghana, spoke on the ‘Effect of COVID- 19 on real estate in Africa: The impact of Foreign Direct Investments (FDIs) and palliatives’ at a webinar hosted by the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos State chapter.

As part of the effects of the virus, many companies are struggling financially such that rent and lease renewals are becoming, increasingly, difficult. Many of the companies have resorted to wage cuts and lay-offs in extreme cases. It is expected that there would be a 50 percent drop in revenue and this may be more in the real estate sector.

Nigeria or Africa is not alone in this. Advanced economies such as US and UK are also hard-hit. In the US, for instance, Edison Research says over 62 percent of renters are concerned about being able to make the rent. “Welcome to the newest symptom of the coronavirus: the 2020 Rental Housing Crisis,” it says.

A PropertyWire report notes that, with over 43 million renters nationwide, the rental market makes up nearly 40 percent of all housing in the US, where at least 20 million jobs were lost in April. “While out-of-work renters scramble to make their payments, landlords are wondering how to service an avalanche of debt and unpaid taxes,” the online property portal says.

But it is not going to be all gloom all the way, according to the African practitioners. “FDIs will still come into Nigeria as the nation is an emerging market as witnessed in the last recession,” Jemil Dawodu, managing director, CBRE Excellerate, Nigeria, hoped.

“There might be a reduction in FDIs returns,” he added, hoping further that “foreign investors would still come in because opportunities are there in Africa and we haven’t started to scratch the surface. If you take co-working, for example, it is a new concept in Africa and after COVID 19, you are going to see a huge number of investment in that spaces. People are going to change in line with the dynamics of the market.”

Adedotun Bamigbola, chairman, Lagos NIESV, was worried that many proposed and some on-going developments have to be suspended for 12 to 24 months in different parts of Africa, especially in countries where oil revenue constitutes about 60 percent of their GDP.

He noted however that African real estate market was not immune from the shocks of COVID 19, stating that the impact was being seen and was hitting the high-end tourism/leisure, commercial and residential developments in the short to medium term.

“Post-Covid-19, different African governments, through their central banks and mortgage financing regulatory agencies, must urgently work out different palliatives for real estate industries in order to sustain investments, save millions of low-income jobs and sustain the production of housing for low to medium-income earners,” he advised.

Bamigbola was of the view that commercial and retail developments could enjoy sustainability if FDIs were encouraged with different forms of incentives, including a substantially improved ease of doing business index in the economy.

While Jonathan Kohler, managing director, Landsdowne Properties, South Africa, said the effect of Covid-19 in the real estate sector was huge, especially in the residential space, Neltah Mosimanegape, CEO of Tespest Gold in Botswana, described the pandemic as a double shock to the sector, noting that professionals were worried about the effects, especially about FDIs coming into his country.