Understanding importance of available data in Nigeria real estate sector

In February 2018, Real Estate Developers’ Association of Nigeria (REDAN), in collaboration with the Central Bank of Nigeria, the Federal Ministry of Power, Works and Housing, and other stakeholders established the National Real Estate Data Collation and Management Programme (NRE-DCMP) to make available data about the sector.

Ugochukwu Chime, REDAN president and chairman of NRE-DCMP told BusinessDay recently that the maiden real estate report for 2018 will be released in a few weeks.

What is NRE-DCMP

NRE-DCMP is an institution set up to generate data on the real estate sector of Africa’s largest economy, with special focus on land administration, the housing condition, affordability of properties and business survey data. The less than one year old body was established with the aim of monitoring the country’s property sector and providing information that can help industry stakeholders in decision making.

Nigeria real estate sector

With the highest population in Africa, Nigeria has more than 20 million housing deficit and, according to the Association of Housing Corporation of Nigeria (AHCN), “underdevelopment of Nigeria mortgage sector in driving home ownership is worrisome as more than 90 percent of new homes utilise funds from personal savings for incremental construction.”

Typical mortgage interest rates in Nigeria range between 7-10 percent for FMBN and between 15-25 percent for commercial mortgage institutions. This makes the rate one of the highest in the world.  Africa’s highest exporter of crude oil therefors has one of the lowest mortgage to Gross Domestic Product (GDP) rate at about 0.6 percent, which obviously lags Ghana’s 2 percent, South Africa’s 30 percent, the U.S and UK rate at 60 percent and 70 percent respectively.

The property industry which lacks data and readily available information contracted by -2.68 percent in the third quarter of 2018. This was despite the 1.81 percent (year-on-year) GDP growth reported for the country.

Why NRE-DCMP

One of the constraints of Nigeria’s property industry is the little or no data about the various sub sectors and, according to industry players, this makes it difficult for foreign investors to easily access the market despite its viability. The sector is very opaque and so records a lot of informal transactions, making it difficult for the government to keep track of the sector’s performance.

For example, the often quoted 17 million housing units deficit has remained unchanged for over a decade despite the fact that the average population growth rate of the country stands at about 3 percent per annum.

Sectorial information and data compiled by NRE-DCMP as proposed by real estate analysts will be helpful in strengthening the housing industry that has remained in contraction mode for 11th consecutive time through to Q3 2018. Chime told BusinessDay that “there is need to monitor the real estate sector through the use of data in order to solve the challenges in the industry.”

What the real estate sector stands to benefit from NRE-DCMP

Nigeria is yet to realize its real estate sector’s potential, considering it was only able to contribute 6.50 percent to the country’s GDP in Q3 2018 as against 6.83 percent it contributed in the second quarter of last year, and the 5.63 percent contribution it reported in the preceding quarter.

Whereas in South Africa, the region’s most industrialised and second largest economy after Nigeria, real estate sector contributes about 30 percent to GDP, and in the UK, the property industry contributes about 70 percent.

What both countries share in common is a monitored and information driven real estate sector. With the establishment of NRE-DCMP, industry players see Nigeria’s real estate sector following suit in spurring the sector’s contribution to the growth of the nation’s economy.

Endurance Okafor