Infrastructure deficit opens $300bn investment opportunity in housing sector

Nigeria’s infrastructure deficit, which gave rise to the 30-year National Infrastructure Master plan (NIM), has opened huge investment opportunities for private sector operators in the housing sector of the economy.

The Federal Government, through the NIM which was released late last year, estimates that the housing sector requires $300 billion investment over the next 30 years to close the lingering housing deficit in the country conservatively put at 17 million units.

The NIM also says that the country needs to deliver about one million housing units annually for 30 years to be able to provide decent and affordable housing for Nigerians as contained in the 1991 National Housing Policy as amended.

The housing deficit in the country is a direct product of the dearth of affordable housing and government’s failure to provide an enabling environment for private sector operators which the NIM expects to make 60 per cent of the $300 billion investment required to close the deficit.

The Nigerian housing sector presents compelling opportunities but the reason these opportunities are not being tapped, according to Obi Nwogugu of African Capital Alliance real estate unit, is because the structures needed to do that are not yet in place.

Housing demand in the country is quite strong because people want to house, but the houses on offer are largely unaffordable such that what would have made it affordable is a mortgage instrument.

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“Up till now, the country does not have up to 50,000 mortgages for a nation of about 170 million people”, Nwogugu says, adding that people are not investing in residential housing because the thing that will open up that sector hasn’t crystalised yet.

“So I am not so much worried about how much is needed or where it comes from as I am about what will make it work, that is, how people can get a mortgage that is reasonably priced to buy houses. If the government gets all that needs to be done right, you will find that investment in residential housing will explode and that will have a positive effect on the economy”, he assured.

It is estimated that 60 per cent of the 17 million housing units deficit in the country resides in the low-income housing market which is explained by the fact that people in the low-income bracket cannot afford what is on offer in the market without some form of a mortgage.

The Nigerian Mortgage Refinance Company (NMRC) launched by the Federal Government in January 2014 to provide liquidity in the mortgage system and encourage investment in affordable residential housing came with much hope and Nwogugu describes it as a good initiative, believing that “if that initiative is done properly, it will single-handedly unlock housing in all its ramifications including construction, bricklaying, roofing, furniture, services and all the whole value chain that goes into somebody’s house”.

Asides from the mortgage which challenges the demand side of the housing, the supply side is also constrained by the near-absence of critical infrastructure and land titling which comes with enormous cost and tortuous process which, analysts note, can frustrate the good intentions of the master plan.

“Well-intentioned, the $300 billion investment in housing, to me, is not a big deal for even local investors alone, but a lot of issues are there to contend with. When you talk to the government about affordable housing, they will tell you they will give you land which is not free as if that is all you need to provide housing. A lot still needs to be addressed such as land titling, import duties and all that”, said Omochiere Aisagbonhi, the president/CEO, of Omais Investment Group.

Erejuwa Gbadebo, the CEO, of Cluttons Nigeria, agrees, pointing out, however, that “one of the biggest problems that we have in the housing sector is lack of data. People still quote a 17 million housing units deficit many years after because there is no other data to prove or disprove it. Many houses have been demolished, burnt or new ones built, but no one is taking record of the new houses being built or the ones being lost”.

The master plan projects that the housing deficit would snowball to 30 million units by 2043, hence Gbadebo’s advice that the housing sector should start taking stock of what is available—what house-types there are, and what they change hands for, adding, “there must be a way of doing this so that we can have accurate data that will help us to stop fighting a battle we may have won or will never win”.

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