Besides finance, property registration is a major challenge for real estate investors in Nigeria. Getting land documentation or titling in the country is very difficult, given the rigorous process, bureaucracy, corruption and the high cost of acquiring the title.
As a result, PwC recommends that Nigeria can use block-based land titling initiative to unlock the estimated $900 billion worth of dead capital in residential real estate and agricultural land. Dead capital is described as assets that cannot be converted to economic capital.
“Approximately 95 percent of household dwellings in Nigeria have no title or a contestable title,” PWC said in its recently released report, adding that in Lagos, for example, it takes an average of 12 procedures and 105 days to register a property or as long as two years.
This triggers the costing up to 11.1 percent of the property value. “This process is made difficult due to the low quality of land administration in a city like Lagos. This does not encourage formal declaration of assets and discourages people from registering their properties,” the professional services firm noted.
According to the London-based firm, Nigeria ranks 149 on the Ease of obtaining Construction Permit and requires 17 procedures, 118 days, and 27.5 percent of property value, a factor that encourages more informal construction of properties and increases risks in the real estate sector.
About 97 percent of lands in Lagos are unregistered. This makes it difficult for banks to validate claims to land or for land occupants to use their land to create wealth. This is one of the reasons the country with the highest population in Africa has more than 17 million units housing deficit.
“The cost of building a house is the same, whether you are building in V.I or Ikoyi, but it is the land value that drives the cost of properties high,” Adekunle Abdul, Managing Director, Metro & Castles Homes, a real estate development company told BusinessDay in recent interview.
A further probe into the report revealed that through the use of the Block chain-based titling initiative, the distributed public ledger database system can bring tremendous potential applications to property rights and recording of property titles for those who operate in the informal sector.
This new technology will also give communities the opportunity to bypass many other private services which assist parties in the West to sell and track titles and deeds. These include solicitors and notaries, appraisers, insurance firms, mortgage brokers and banks, custodians of documents, etc.
These new ways of trustworthy registration and authentication would help the communities to secure and manage their capital when selling and renting, their assets. It will also list every single transaction and other people in the system would be able to instantaneously verify these transactions, protecting people or community’s privacy but at the same time giving enough transparency to allow for oversight from anyone.
The block chain-based land titling concept captures and permanently records each transaction throughout the sale of a property. This means a buyer achieves near real-time traceability and transparency into the state of the property as BusinessDay survey shows.
For example, envision two citizens in the ancient city of Benin- a buyer and seller -who have negotiated the sale of a house and wish to register their sale deed with the local authorities. They would proceed to the government services offices as they normally would to register the sale deed, which they have in their possession.
The government office will then enter the sale deed into their system, one that is now powered by the blockchain technology. This blockchain-enhanced system then takes over and registers the sale deed in the presence of the buyer and seller. It will also process the sign-offs by both the buyer and seller and push the transaction to the approval stage. After the transaction is made, an automatic transfer of ownership is completed. And importantly, the system will also be able to handle land titles with multiple owners.
From the administrator’s perspective, there are significant transparency, accuracy and efficiency gains to be made. They will be able to view and monitor the state of the property and sale deed in near real-time, as well as have instant access to a complete and permanent transactional history for each property and sale deed.
“The conversion of dead capital to live capital through structural reforms would help convert most of the capital in the informal economy which is currently valued at 65 percent of GDP into the formal economy,” Andrew Nevin, Partner & Chief Economist, PWC said.