TADE CASH, Chief Executive Officer, Wealth Island Properties Africa, a real estate investment and development company, speaks on the gaps and challenges facing the industry in this interview with CHUKA UROKO. He also speaks on other salient issues in the real estate sector. Excerpts:
What is your projection for property investment in Nigeria in the coming years?
My projection is that despite a couple of people moving out of Nigeria, the population of the country still makes it the biggest consumer market for a lot of products, including housing. For instance, in Lagos, looking at the next decade with the growing population and being the fifth largest economy in Africa, housing will be in high demand.
There are some people who would not be able to afford to live again in the city because it is going to be one of the most expensive cities to live in. The value of land in Lagos would become a gold mine, and people that can positively take advantage of this anticipation now would be lucky then.
How do you think the securities exchange could help the real estate sector in Nigeria?
What differentiates real estate and the securities market which is also called ‘paper assets’ for now, is both markets’ elasticity to inflation. I give credit to some of the industry pioneers who are listed on the Nigerian Exchange Limited and are leveraging public funds to expand the real estate market. The size of the market presently does put some limitations on the attractiveness of real estate as an investment portfolio.
Whereas the industry provides a magnificent cushion against inflation, it is, for now, still attractive as a unilateral portfolio for a company that does not have other baskets of products that can assure investors. Private placements can work, but that will have to come from a place of experience, proven track records and, most of all, the depth of the team promoting the investment. A paper asset is real but can be a difficult vehicle to invest in from the property’s perspective. But I dare say there are exceptional cases, and I give credit to those who have pushed those boundaries.
Why has there been a gap in raising funds from government institutions to help the real estate market?
The real estate market in Nigeria is quite interesting as it presents a lot of opportunities at the same time. One of the issues we face today is short-term funding for long-term projects, as opposed to long-term funding.
The real estate industry is a unique ecosystem and being where a unilateral approach to pricing only complicates its functioning. As a developer, the proposal of short-term funding can be underwhelming for practitioners and promoters of projects.
In Wealth Island Properties, we do what is called ‘Urban Development’ which deals with revitalizing cities and abandoned or marginal lands. These are capital-intensive ventures that involves seeking government approvals and consents, allowing access to those lands and approving the works which basically is salvaging the difficult terrains through engineering solutions. Funds for these are usually invested with the hope that the solutions we are deploying will run through a course of time before the natural space is finally transformed.
So, dealing with the financial houses on our projects has been very difficult because the short-term perspectives only pile pressure on us and most of the time is not realistic for our business plans. I am hopeful that one day some of the financial houses in the country will see value in long-term investing.
What kind of impact do you think high inflationary pressure will leave on the real estate sector?
I think before work, a home is needed. Again, the trend that has merged the workplace and the home into one also puts pressure on exclusive commercial real estate. While this is not totally forgoing the value it holds, and I must say the value is very significant, it is our deliberate strategy in Wealth Island Property to be focused on the fundamentals through the residential development.
The fifth biggest economy in Africa is also the commercial nerve center of Nigeria, and that automatically underscores the purpose of commercial development in the state. The potential is huge and can’t be undermined, but as I said earlier, our strategy is to foray into that through mix-development.
How has the current increasing rate of inflation affected your company?
Inflation has been a major challenge to all sectors of Nigeria’s economy. It has been a huge growth impediment to the real estate sector. However, one of the ways to navigate these issues is by buying things in bulk, and to do this, you must be able to access funding.
Having been on ground for over a decade, we have learned the ropes and have developed a strategy for managing tough seasons like this. What makes property prices seem ridiculous is inherent in the fact that the materials being used for property development are really pricey, and this increase in the whole property, once concluded, is the business of real estate developers. Our model has been able to keep us afloat and has also helped us maintain a reasonable pricing regime for our products.
Commercial real estate, especially office space, is still smarting from the impact of Covid-19 with high vacancy rates in some locations. Do you invest in this segment of the market?
Yes, we do. However, that should be five percent of our portfolio. 95 percent of our portfolio is residential real estate because we believe that, as a 21st-century real estate firm, bringing the comfort of housing to the populace will naturally empower them.
Recently though we have evolved into building mixed-developments which we call a freedom lifestyle apartment, connoting that people can live within these apartments and also work. All these are what the industry has pivoted to from the recent disruption that Covid enabled.
The goal of mixed development is to create an environment that promotes living and working in the same space, cutting out commuting marginally or even totally while forging a healthy community that promotes a deliberate lifestyle.
What is your opinion on renewable energy as an alternative energy source for the real estate industry?
There have been calls for real estate practitioners to prioritise renewable sources of energy due to the global shift towards the reduction of carbon emissions. This is an inevitable reality; global warming, carbon emissions, and ozone layer depletion are keywords for the environment, and as developers, we are well aware of the risk we are facing.
For us, all our developments are built to be adaptable to renewable energy sources. In one of our developments in Ibeju-Lekki, Lagos, we harnessed wind energy to generate power. Because of its nearness to the Atlantic Ocean, we have developments across the city where solar energy and alternate power sources are installed.
In a nutshell, I believe we are aligned with the global shift, but I just think we should have more government support, in terms of standardization of alternative energy devices, so we can have a direction. It is definitely a way to go.
You have just talked about global shift to renewables. How can real estate practitioners align with this shift that has become a global trend?
I believe developers and stakeholders can come together to standardize the infrastructure for a sustainable environment. And I believe it starts with the government setting benchmarks through policy enactment for different elements of the environment.
The salinity of the water, sand component and mixture, cement mixture, iron rods, up till electronics that are high on voltage consumption and regulation electrification are to be considered. The amount of electricity consumption of an average apartment is designed into the building from the start and all these elements come together to affect the environment at the event.
I believe that when we remember that at some point Lagos will become the most populous city in the world by 2100—about 77 years from now—the urgency to regulate housing will become a matter of urgency.
Read also: The case for investments in Nigeria’s renewable energy
Has your company, in any way, benefited from real estate products such as the Real Estate Investment Trust (REIT)?
We have not benefited from the Real Estate Investment Trust in Nigeria. There are many things that you cannot keep waiting for, and you have to find alternatives. The important thing is to ascertain if it is a fair-playing atmosphere. For us, we have no access to any of this funding except for private investor funding, which comes from those who believe in the vision and are ready to key into it.
The mortgage structure in Nigeria is evolving, and you can be rest assured that they are on-boarding a lot of properties onto the programme, more than at any other time in the history of the country, but with the growing population and the need to properly verify recipients, the issue of social trust, and innumerable complications and an identity management quagmire, we may not be able to say it is perfect yet.
I am sure the government is also concerned and working to solve the problem. From the private sector, it will help us reach the mass housing market, especially with government backing; hence, we are building our systems in readiness.
How is your company positioning for the population surge projected to happen in the country?
We are one of the major investors in mainland properties, and the reason I said this is because Lagos started on the mainland and is coming back. The signs are there.
We have a couple of properties; however, one of the prime ones is at Magodo Central at Magodo Phase 2 in Lagos. We are building more than 20 acres of land to create more avenues for residential accommodations. This is what we are bringing to society to meet the housing needs in Lagos.
Why do higher interest rates cause real estate purchase prices to decline?
This definitely discourages developers like us from entering into financial transactions with institutions that peddle such rates. For the housing needs we are trying to meet, it’s just sensible to shake hands with investors who can move at your pace and won’t dump additional risk on you and your stakeholders.
According to a recent report, over 70 percent of the global population will migrate to urban centres by 2050. We are near that figure in Nigeria already. Today, Lagos accounts for nearly 11 percent of Nigeria’s population, and the lack of proper planning that should have preceded such development is biting back at us now.
That is why the infrastructural development moves by Lagos such as the fourth mainland bridge and the Light rail project are a welcome development. I believe adjoining states like Ogun and Ondo states should also step up their game as well, as they have everything to gain as alternative cities to serve Lagos’s growing population. Twenty minutes train ride from some settlements in Ondo state can be a plus to the Lagos megapolis project.
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