Real estate is one of the five fastest growing sectors of the Nigerian economy, experts have said, adding that the sector has seen about 10 percent growth in the past two years.
The sector comes behind telecoms, building and construction, hospitality and solid minerals in the overall growth index, the experts add.
Yemi Adedeji, chief operating officer, 3Invest Limited, a real estate intelligence provider, affirms that, though this positive growth in the last 24 months is yet to solve Nigeria’s housing deficit of about 16 million units, there is still room for improvement if the current challenges can be arrested.
Adedeji, who spoke at a forum in Lagos recently, is optimistic of opportunities for more growth, pointing out that with about 87 percent of Nigerians living on rented accommodation, it is clear that real estate is a viable market with opportunities for investors to provide housing needs for the people.
According to her, government alone cannot meet the housing needs of the country, hence the need for private public partnership that will further spur investment opportunities in the sector, leading to increased growth figure in the sector and contribution to GDP.
Adedeji also discloses that only about 30 percent of Nigeria’s 193,200km total road network are paved, relative to an average of 70 percent and 58 percent for frontier and emerging markets, respectively, adding that this is of great concern for the industry that seems to be the most affected by this ugly development.
Other issues militating against a rapid growth in the sector, she points out, are the prevalence of under-performing contractors and inadequate skill that often drive up the cost of development and increase the risk of investment in the industry.
“The resultant effect is the neglect of Nigerian labour by developers who import foreign labour, both skilled and unskilled, to execute projects. Other common malpractice found in the industry include fraudulent pricing and contract breach by professionals,” she notes.
Jim Ovia, former Zenith Bank CEO, canvasses at a forum in Lagos, for the overhauling of the Federal Mortgage Bank of Nigeria (FMBN) which has, since its inception, grossly under performed due to political instability, administrative problems and uncoordinated policies.
To him, this reluctance by the bank to finance housing projects has restricted the development of the sector to the hands of few developers who can never meet the housing needs of the entire population.
Another constraint of the real estate sector, Adedeji notes, is that major cement manufacturing plants like Obajana and Ewekoro still operate below capacity, with at least 30 percent of national consumption imported.
On the way forward, Adedeji recommends the enactment and effective implementation of securitisation laws, strengthening of mortgage institutions, establishment of a construction bank such as the China Construction Bank, India Construction Bank and the Malaysia Construction Bank, which have played a vital role in the real estate sectors of these countries.