In real estate, particularly in land transaction, unfavourable government policy has left much in the informal sector of the economy, depriving government of well deserved revenue and slowing down the growth and development of the sector.
Analysts estimate that over 90 percent of transactions on land are unregistered because of government policy, which imposes all manner of charges on land buyers, ranging from titling that attracts as much as 15-21 percent of the value of the land to perfecting a mortgage, where available, for which government demands as much as 6 percent of the value of the land from buyers/applicants.
A source close to Lagos State government disclosed to BusinessDay that only 7 percent of land transactions in the state were registered, leaving the rest in the hands of vendors, speculators and even native land owners popularly called ‘omoniles.’
In many cities of Nigeria, especially in Abuja, Lagos and Port Harcourt, land is of immense value and because of the high demand it enjoys, the government in these areas make its purchase not only expensive but also difficult.
In Lagos, for instance, land is gold and an average state government official readily tells whoever cares to listen that land is their oil well, adding that because of its scarcity, it goes to the highest bidder.
Oluyemi Madamidola, a real estate consultant, affirms that government policy is making things really difficult for this sector.” Land titling, for instance, is crazy at 15-21 percent of the value of the land. There is no mortgage of any form. When you get mortgage, to perfect it with government costs another 6 percent. To get the C-of-O, you still have to spend more. The cost is prohibitive and it is killing the industry,” he laments.
According to him, construction in this country could be double of what it is today, but for government policy, appealing to the government to reduce the cost, at least, for the sake of the employment that construction generates and the revenue it generates in terms of property and/or income tax.
“The real estate market is not liquid in this country; elsewhere, houses are traded like stocks – you buy and sell and move on. It is not done here because most houses don’t have appropriate titles. Here, people buy houses and land and don’t register them because of the cost. Every property carries Deed of Assignment and so, the liquidity of the market which the citizens and the economy should benefit from is kept in the grey economy,” Madamidola observed.
He reasons that if the cost of land comes down, it would be unimaginable the number of people that would be going for property registration, saying, “this high cost of registration is damaging; it is suffocating the industry and it needs to change. If Lagos should lower its cost, they would be overwhelmed with the kind of income they would generate from that. They won’t have enough capacity to cope with surge.”
Olusola Olubode, former managing director of Refuge Homes Savings and Loans Limited (mortgage bankers), had noted a paper titled ‘Unlocking National Wealth through Housing Development Revolution,’ that Nigeria lags behind countries like Ghana, Thailand and New Zealand in ease of registering property just as the country’s mortgage sector had the least contribution to Gross Domestic Product (GDP) relative to other countries of the world.
To Olubode, registering a property in Nigeria takes an average of 12 procedures, lasts nearly four months (except in Lagos State which has improved on this) and costs about 15 percent of the property value as against neighbouring Ghana, where it requires just five procedures, 34 days and 1.3 percent of the property value.
By: Chuka Uroko
