Victoria Crest Homes is a real estate company that is passionate about delivering excellence and providing affordable housing solutions that exceed clients’ expectations. In this interview with CHUKA UROKO, the company’s Group Managing Director, KENNEDY OKONKWO, PhD, shares their experience while Coronavirus pelted global economy. He also speaks on the Nigerian real estate market and his company’s activities in the market, among other issues. Excerpts:
The year 2020 has come and gone as a year of the pandemic which swept aside many businesses including real estate. Many are yet to recover from that pandemic. How did you cope; what kept you going?
Thank you for your question. As regards the COVID 19, I would say that 2020, despite the COVID was a fantastic year for real estate, especially in Nigeria, and all the other parts of the world. The pandemic created an opportunity for people to re-access their businesses and homes. In line with that, there was a lot of focus on housing as the first human known vaccine that could stand the attack of COVID 19. That is why many states and countries shut down and everybody went into their homes. By the time the lock down was eased out, it created a huge demand for housing all over the world, not just housing, but homes where people can live, work and play.
The resilience of real estate investors like you and the sector itself was demonstrated recently with a 3.85% growth recorded by the sector in the second quarter of 2021. What other factors do you think made that growth possible?
The advent of Covid-19 reminded everyone that they needed a great home, a home where they could live, work and play. It was not strange when the statistics for the first and second quarter of 2021 came out, it was evident that as a sector, real estate in Nigeria was holding strong.
The factors that were responsible include increase in demand, a lot of people trying to fulfill their home ownership aspiration; some stocks that have been built earlier in the market that people were picking; the dollar came out holding its position quite strongly against the naira, so we had a lot of remittaances from non-resident Nigerians who are in Diaspora who took advantage of the rising cost of the dollar to lock in housing development back home in Nigeria.
In addition to the factors responsible for resilience in the sector, the creativity of many real estate developers in adapting to the new normal, adapting to the use of technology is also very much responsible for the success of the real estate sector.
Do not forget that physical viewing used to be the norm, but now people host virtual open house, virtual viewing, some rely on digital technology to view the homes they are buying remotely rather than physically visiting the property in question.
We have a lot of exposure coming to the buyer with ease than we used to have in the past. So, the social media has also played an important role in pushing the narrative. These are some of the factors that are responsible for the growth of this sector.
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Analysts are doubtful that the sector would sustain this growth. They explain that the sector has some threats coming from macro-economic issues. What threats to the growth of the sector do you see?
I do not think the growth of the sector is fragile or not sustainable because, over time, we often get to a point where everyone wants to keep their money in a safe investment and so, after the Covid-19, everybody felt the safest place they could keep their money was in the real estate sector.
A lot of people stepped away from importation so focused on in-grown businesses like real estate. So we have a lot of money coming into the real estate sector and that’s why we are having the number of people doing development as we presently have.
I do not think it’s not going to stay there for long. The money will not leave in the immediate, because real estate is not the business you just drive in and drive out money immediately. It takes a lot of strategic planning and time before projects are conceptualized, designed and executed. So, I feel the funds that came into real estate in 2020-2021 are going to be here till the next 3 to 5 years.
The deficit in the housing sector is a huge opportunity for investors, yet the sector is not among top performers in the economy. Why? What could be done to shore up its contribution to GDP?
A sector cannot be deprived of funding and be expected to outperform itself. So, for the real estate sector to thrive, a lot still needs to be done.
Many governments are not looking at the real estate sector as an industry in a very critical state. Because of that, they do not understand the emergency required to build good homes, especially social homes. This is affecting the sector because you do not starve the sector of government subsidy and funding, and expect it to do magic.
Opportunities in the real estate sector needs to be tapped into, especially at the point where we are losing a lot of our foreign reserve. This is the point where government needs to support the industry to out produce what they are presently producing, because a lot of opportunities abound in the sector.
This industry employs a lot of people. You need to come out in the morning to see how many construction workers resume at different sites across Lekki, FCT, Abuja and different areas where construction is going on. If the government really wants to support the industry, they have a lot to do. This is because many of the sectors government wants to thrive, it is supporting them.
For the housing sector, we need to start thinking of creative ways that we can support it with financing at single digits rates. It’s absurd that Nigeria is still one of those countries where you have so called mortgage loan running at about 15–16% or more interest rate. , It’s tough for anyone to take a mortgage loan and pay such ridiculous amount as interest. Again, I say, a lot still needs to be done so it’s only at that point we can get a fair understanding of how buoyant this industry is.
Looking at Victoria Crest Homes and its management at the moment, what is occupying your mind in terms creating ‘affordable housing solutions that exceed client’s expectations’?
As the cost of construction begins to rise at an alarming rate, we as a company have focused on cost reduction mechanisms that would improve quality, maintain standard and most importantly improve the operation of the efficiency on our organization.
For us a company we believe that affordable housing should not be horrible. So, in line with that, we seek scientific ways, using data readily available to us, to design homes in a manner that in the long run, it will reduce the cost of construction without affecting the overall quality of construction that we are doing and we do this using technology and research.
We have a couple of houses that are in the middle income bracket and, with the way Nigeria is running today, we are beginning to find that the millenniums are coming out strong and they are seeking to invest their funds in sustainable real estate organizations that have the capacity to deliver.
What is the size of your project portfolio? How many projects do you have completed and ongoing? How many families or individuals have been impacted by your operation as home builders?
The value of our project portfolio is today in excess of N80 billion. We have been able to deliver over 3,000 homes within the city of Lagos, Nigeria. We presently have over 1,200 units under construction in different parts of Lagos. We believe in a very strong and growing middle class population. We believed strongly that, as a company, we will make living affordable.
In Nigeria, the economy is slowing that is affecting income and reducing consumer purchasing power. What is your experience playing at the luxury segment of the market where demand is elastic?
I think it is not totally true that we only operate in the luxury segment of the market. We as a company we have different product portfolios across the different cadres of the market.
We build luxury houses with a different brand name and we also build for the middle class, because today in Nigeria we have a strong and growing middle class society. The bulk of our products today is tailored towards satisfying the growing middle class that we have.
And we have come to recognize that smaller single family dwelling units are doing quite well in the industry due to a significant drop in consumers’ purchasing power. Again, consumers are beginning to look for products with lower entry barrier and companies that are catering for that sector are doing quite well in the industry.
