Though the real estate sector of the Nigerian economy remains in recession long after the wider economy exited same in the second quarter of 2017, investment interest in the sector continues to grow as individual and institutional investors are upbeat, raising capital and putting into the sector.
The property market in the country has been dull following the sector’s continued dwell in negative growth territory which is reflected in the figures released by the Nigerian Bureau of Statistics, showing that the sector grew by Q4 2018 -5.92 percent as against 2017 full year growth rate of -4.27 percent.
In Q1 2018, the sector recorded -9.40 percent and -3.88 percent; -2.68 percent and -3.85 percent in Q2 2018, Q3 2018 and Q4 2018 respective. Full year 2018 growth rate was 4.74 percent
But investors say they are looking beyond either the recession or market slowdown or both, explaining that they have confidence in the market which derives from their belief that there is demand and can always identify products where there is demand even in a recession seen in the market at present.
“The fact that there is a recession does not mean that is how the market is going to be forever. There will be changes and forceful improvements that will improve project attractiveness.
“We are not really concerned about where we are right now. We believe that we are investing at the right time; when people are not investing is the right time to invest because that is when you get a better deal for your development,” explained Obi Nwogugu, Head, Real Estate, at African Capital Alliance (ACA) in an interview with BusinessDay recently.
ACA, in collaboration with Elalan Group, have raised $165 million to develop the best-in-class Blue Water Lagos that promises to deliver to the mid-income property market about 600 luxury apartments comprising 1,2 and 3-bedroom.
Investment interest in this sector also derives from investors’ realization that real estate is not a trade, meaning that, as a long term game, any investor coming into the business has to look at economic cycles rather than any moment in time.
“When you are planning any real estate development, you have to do so in a even to 10-year cycle. Usually, when the demand side is strong, that is when the supply side is weak and vice versa. When you plan, you cannot put both the demand and supply side into your cycle”, Paul Onwuanibe told BusinessDay in an interview, adding, “people shouldn’t wait to buy real estate, but instead they should buy real estate and wait”.
Onwuanibe whose group is developing the ambitious Landmark Village in the Oniru area of Lagos, pointed out that investment interest also derives from the people issue or strong demography.
He explained that “Nigeria has a large number of people who are very aspirational. The same thing with Lagos. I understand that the median age in Nigeria is 19 years while the average age is 27. So, we have about 75 million people between the age of 16 and 27.
“This tells any investor that the future is bright because all these people have to live, work, eat and play; go to school and hospital somewhere and real estate envelopes all these and provision has to be made for them. Eventually, the real estate market, with the right government enablement and right financial dynamics, will always prevail,” he said.
Similarly, the commercial real estate sector is receiving investment interest despite the supply glut in that segment of the market. As Dayspring Property Development Company is busy developing a 20- storey tower on the corner of Alfred Rewane (Kingsway) Road, in Ikoyi Lagos, a group of young men, under 40 years old, are also on Freedom Way, Lekki developing what they call ‘This Present House’.
This development, according to Olufemi Babalola, CEO, Gravitas Investment, means that notwithstanding the reported gloom in the market, there is still demand, explaining that the upcoming facility has a catchment market of at least 250 people from Monday to Friday and 750 people on weekends.
CHUKA UROKO
