Experts at BusinessDay’s Property Investment (PRINVEST) conference have pointed the way to closing identified gaps in residential communities that are the dream of prospective home owners in Nigeria.
Andrew Nevin, chief economist at PWC, and Ayo Ibaru, chief operating officer at Northcourt Real Estate, led the discussion at the event which had over 30 other experts looking at the various aspects of property investment and homeownership with special focus on opportunities and challenges.
Nevin who was the keynote speaker painted a lurid picture of the gap in the Nigerian residential real estate. Besides $900 billion worth of dead assets in residential real estate and agricultural land which Nigeria holds, he estimated the value of federal government’s abandoned properties at about N230 billion, quoting Nigerian Institute of Builders (NIOB).
The Chief Economist noted that while Nigerian population is growing at a fast rate, annual output of housing in the country is lagging the growth.
“It is projected that by 2100, Nigeria will be the second largest country in the world after India. China is projected to be the third. According to a Lancet study, the five largest countries by 2100 are projected to be India, 1.09 billion; Nigeria, 791 million; China, 732 million; USA, 336 million; and Pakistan, 248 million,” he pointed out.
He noted that for Nigeria’s 17 million housing units deficit, 700,000 houses are required to be produced yearly for over 10 years to close the deficit. But only 200,000 units are estimated to be annual output of the formal housing sector. Added to this, he said, about 50 percent of Nigeria’s 200 million population live in cities while 80 percent live in substandard conditions.
Nevin said that to close these gaps, the country needed to grow, listing innovation hubs, industrial clusters and education as growth catalysts.
To grow its economy, he advised that Nigeria needed to do something about what he called “The big 3 distortions” which he named as exchange rate, fuel subsidy and the power sector.
“These distortions need total structural and policy reforms as they are largely distorted. They affect the growth of the real estate sector,” he said, adding, “the CBN wants to operate a market-determined exchange rate, but this has not been implemented.”
Continuing, he said, Nigeria spent about N10 trillion on petroleum subsidy between 2010 and 2018, quoting Petroleum Products Pricing Regulatory Agency (PPPRA),
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Nigeria’s power and electricity industry, he explained, was challenged with low generation, poor transmission infrastructure, liquidity issues, high electricity consumer debts among others, attributing these to non-cost reflective tariff.
Ibaru, in his presentation, spoke to the theme of the conference, ‘Dream Residential Communities: Closing the Gap’, explaining that the gap could be looked at in terms of what people wanted.
He cited a survey that took a look at people’s housing/apartment interest. The survey shows 23 percent of the respondents that are interested in a standalone detached house; 20 percent are interested in a 2-bedroom flat while 18 percent and 16 percent are interested in a 1-bedroom flat and a studio apartment, respectively.
“In terms of affordable rent, 54 percent of the respondents consider affordable rent as very important, 11 percent considers it as slightly important; 27 percent considers it as important. 8 percent are neutral while 1 percent does not consider it as important,” he said
“For those who want their workplace close to home, 35 percent of the respondents considers workplace close to home as very important, 16 percent considers it as slightly important; 32 percent considers it as important. 10 percent are neutral while 7 percent do not consider it as important,” he added.
Ibaru argued that gated communities were generally dream residential communities for obvious reasons which he listed as the communities’ exclusivity, security, sense of community, high command of value, less traffic, shared amenities, green open spaces, and serenity.
The communities are, however, not without their low points which include estate rules/policies, high maintenance cost, longer check-in procedure, societal segregation, poverty, retreat from civic responsibilities, etc.
The experts noted that it was not all gloom for the residential real estate in the country as, according to them, there were still mortgage facilities in the mortgage sector that could help those who wanted to own homes through mortgage.
Despite macro-economic issues, including inflation and high interest rate, Gbenga Olaniyan, Principal Partner/CEO, Estate Links, stressed that now is the time to take mortgage because, according to him, the mortgage market at the moment, is the borrower’s market.
“Looking at the interest rate on mortgage loan, it would seem as if the borrower is going to lose in the long run, but he is the gainer instead,” he said, explaining that a 10-year mortgage loan of N5 million, for instance, would not be worth N2.5 million by the time the 10-year repayment tenor is finished.