Why land banking is profitable real estate investment- experts
Though investment in other forms of real estate such as residential, commercial, industrial, and hospitality are also profitable, land banking goes a step higher by being convenient. But there are risks too, experts say.
Land banking is one that can be obtained easily by real estate investors – corporate and individual and, according to experts, it is also a good investment vehicle for investors that don’t have all the money for further development.
Abudulsalam Olayinka Abdulrasaq, an estate surveyor and valuer, notes that in Nigeria today, real estate investment companies and individuals have embraced land banking as a veritable and profitable investment option, adding that even in the midst of decreasing disposal income of individuals occasioned by the current economic realities, land banking remains a thriving business in major Nigerian cities.
As the Nigerian population continues to grow on a geometric basis, the demand for housing will continue to go higher and this is one of the major factors that make land banking a most profitable business, especially in a fragile economy like Nigeria where investments in bonds and other financial assets are being eroded by inflation.
Abdulrasaq sees land banking as an investment vehicle and scheme that involves and encourages investment in an undeveloped landed property at a reduced rate with the aim of holding unto the land within a given period and selling it for a profit as the value appreciates.
The estate surveyor and valuer, who is also the director of land & estate services at the Railway Property Management Company, advised that to succeed in land banking investment, investors should be looking out for landed properties that are not developed, especially in the non-highbrow areas of a city, semi-urban cities, and even rural areas with potentials for development.
He, however, pointed out that, though this lucrative economic activity, land banking also comes with its corresponding challenges and risk factors, adding, ‘’however, one of the greatest motivators in this line of real estate business is the empirical fact that land appreciates over time irrespective of its location and economic climate of the country.’’
Land grabbing is one of the many factors bedeviling the land banking business in Nigeria. This forceful acquisition of land by a higher authority is a major threat to land banking. In major Nigerian cities like Abuja and Lagos, so many low-income investors and even recognized real estate companies have lost their hard-earned investments to the government and big organisations due to evolving policies on development control overtime. The inability of the investors in the land banking real estate space to obtain the necessary land documentation from the relevant government authorities is another factor militating against it.
In the event of development by the government, the land bankers lose their investment with little or no compensation from the government due to an obvious lack of documentation. Other factors affecting land banking business include inconsistency in government policies on land ownership and management, ecological problems, community land ownership problems, among others.
On the way forward for addressing the myriad of challenges that are confronting the land banking space in the real estate industry, proper documentation of the land upon acquisition is very key.
And in this regard, the government through its relevant agencies and professional bodies in the built environment should work in harmony in arresting this challenge.