Hope is in the air in the Nigerian property market that the pronouncement by Lagos State government, giving a three-month amnesty on unregistered existing structures in the state, will help to ease the country’s huge dead capital burden that, according to a PwC study, is close to $1trillion.
The state governor, Babajide Sanwo-Olu, announced recently that for three months, starting from May 2 and ending on July 30, 2024, owners and developers of unregistered existing structures in the state will be allowed to obtain planning permits or approvals without penalty in terms of fees.
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Such owners, however, have to provide the necessary documentation requirements including survey plan, as-built architectural drawings, structural, electrical, and mechanical drawings (where applicable), non-destructive integrity test report (where applicable), letter of structural stability and indemnity (where applicable), land use planning analysis report, and evidence of tax compliance.
The governor’s announcement was re-echoed recently by Oluyinka Olumide, the state’s commissioner for physical planning and urban development, who spoke at an International Investment Summit hosted by the Association of Estate Agents in Nigeria in Lagos.
For reasons bordering on cost and cumbersome processes, a lot of private builders as well as commercial estate developers circumvent the state’s building plan and regulatory laws to do their development, leading to a large stock of buildings in the state without legal titles.
It is estimated that more than 50 percent of Lagos properties lack legal titles, raising concerns among stakeholders who have categorised those properties as dead capital because they are neither bankable nor tradeable as collaterals for loans.
Victor Alonge, first vice president of the Nigerian Institution of Estate Surveyors and Valuers, who lamented this huge waste in the real estate sector while speaking with newsmen at the launch of Edge FM in Lagos, noted that there is always a link between land titles and economic development.
“This dead capital is unusable because owners lack legal titles,” Alonge said, adding: “Wthout a legal title, you can’t access financing for anything. Banks require security or collateral for loans. That security is a Certificate of Occupancy, and without it, they won’t lend.”
It is in the light of this that experts see the move by the Lagos State government as one that will help reduce the dead capital stock in Nigeria, where it is estimated that only 5 percent of available property has formal title. The remaining 95 percent are regarded as dead capital.
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In his recent quarterly real estate market insights, Chudi Ubosi, principal partner at Ubosi Eleh + Co, cited a 2022 report by the Nigeria Institute of Quantity Surveyors which said Nigeria had over 56,000 abandoned projects owned by states and federal government.
Ubosi said these projects were scattered across the country’s six geopolitical zones, with South South having 11,000; South East, 15,000; South West, 10,000; North West, 7,000; North Central, 7,000; North East, 5,000, while Abuja had 2,000 projects abandoned.
“Nigeria has over 300 real estate properties worldwide many of which are abandoned and underutilised; thousands of kilometres of road projects at various stages of construction have all been abandoned nationwide,” he said.
Ubosi pointed out that of the country’s land size of 923,000 square kilometres, less than 10 percent is titled, placing it ahead of just Mozambique and Zambia, where only 3 percent of land is titled.
“Namibia has 44 per cent of its land titled while South Africa has 72 percent of its land titled,” he said, quoting the African Development Bank as estimating that 64 percent of land is owned by the state while 36 percent is in private hands.
Dead capital abounds in many countries of the world, just as it is in Nigeria, and they exist as underutilised infrastructure, machinery, unproductive land, and unclaimed financial instruments.
This informed a study by Hernando de Soto, a Spanish explorer and conquistador which is captured in ‘The Mystery of Capital.’ This study affirms that assets are locked away because of the absence of title which makes it impossible for such assets to contribute to economic development.
De Soto reasons that unlocking dead capital for growth and development is an imperative not only because they are informal and, therefore, not legally recognised, but also because unlocking them holds the potential for significant economic growth for nations of the world with economic challenges.
According to him, 70 percent of the global population holds dead capital valued at $9.30 trillion while PwC study in 2020 says the value of Nigeria’s dead capital is close to $1 trillion.
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Despite this study and the research work done by PwC, Ubosi said there are still factors making it tough for valuers and other professionals to estimate the exact value or worth of dead capital in Nigeria.
These he listed as lack of clear property rights, informal land ownership, unregistered and un-surveyed land, disputed boundaries, absence of a formal market and the Land Use Act which vests land in state and federal governments who see land as a revenue source, not a factor of production.
