Besides finance and the scourge of an emerging economy, tax legislation and the right people with the right skills are major downsides in real estate investment in Nigeria, investors in this sector say.
The investors insist that their biggest challenge is in getting the right set of people to work with, because to do well, an investor in this sector needs people who are well trained, well-educated with high moral and ethical standards, and it is becoming very difficult to get people in this class.
This challenge explains the ‘importation’ of labour from overseas and neighbouring West African countries including Togo, Ghana and Republic of Benin, who are in various building and construction sites as bricklayers, tilers, plumbers, site supervisors, engineers, etc, leading to capital flight in the economy.
“If you get the right people, you do extremely well, and if you get the wrong people, you do badly. We have been very fortunate to have gotten the right set of people to drive our ambition and execute our dreams,” Paul Onwuanibe, CEO, Landmark Group, says, adding that training, nurturing, rewarding and motivating them remain a fine balancing act in a very competitive marketplace.
As an emerging economy, Nigeria is a place where there are huge regulatory limits, very little enabling and huge unplanned expenses on basic infrastructure expected from the municipal, state or federal authorities. This is why for everybody who runs a business in Nigeria, the challenges are similar. What differs is the size of the challenges and what resources and personnel each a person has to tackle them.
Onwuanibe reasons that working within a system that occasionally appears punitive rather than supportive is a huge challenge; more so where there are no rebates for financing infrastructure costs that are outside your “patch.” “The regulatory environment is sometimes hostile and expensive to navigate; it is often unclear and bureaucratic,” he notes in an interview in Lagos.
Tax legislation, as far as real estate is concerned, is fuelled by duplications and a bit too hard on a sector that is already reeling from issues including supply chain problems, which are compounded by an inefficient import platform.
“I support and promote the payment of taxes but would like to see a more transparent system where education tax benefits are seen in the education output, the same for health, IT and infrastructure taxes,” he says, adding, “as far as the real estate industry is concerned, a system where tax rebates are given to institutional developers based on creating employment, provision of local infrastructure and improving on the local streetscape, should be developed.”
Nigeria is a special case when it comes to growth and development. This is why, contrary to what obtains in mature economies, Hakeem Oguniran, former managing director of AUC Property Development Company (UPDC), says an investor in this country has to be his own government.
“You have to buy your own electricity generator, sewage plant, water treatment, provide your own security and improve the local environment around your business, by putting in place local infrastructure such as roads, beautification, drainage, etc.
“None of these costs directly brings income and as such creates a major challenge to ensure your product is affordable. These things are often a distraction too as it shifts your focus from your core business,” he says.
