Stakeholders in the real estate sector have said that granting developers and investors tax break, creating a real estate fund and one-stop desk for building approvals/title registration are positive steps, that, if taken by the government at all levels, can walk the sector and the economy out of recession.
Real estate, one of the key sectors of the Nigerian economy, was listed among the non-oil sectors that slipped into recession in the Q3 2020 GDP report released recently by the Nigerian Bureau of Statistics (NBS) which revealed that the economy recorded -3.62 percent growth within the quarter.
But in terms of contribution, the real estate sector contributed 30.77 percent to the overall GDP in real terms in Q3 2020, which is higher than the contribution in the corresponding quarter of 2019, and the second quarter of 2020 which stood at 29.25 percent and 24.65 percent respectively.
“We saw the recession coming, more so with the crash in commodity (oil) price in the international market, Covid-19 pandemic and the EndSARS protest. These were social and political risks that added to the economic risk in the country,” Paul Onwuanibe, CEO, Landmark Group, said.
Onwuanibe noted that real estate had not really come out of the earlier recession of 2016, adding that there are no conscious efforts to grow the sector given government’s refusal to provide the enabling environment for the private sector investors to invest and get return on their investment.
“It is a tough situation for investors with challenges coming from infrastructure deficit, currency risk, regulatory issues, multiplicity of taxes which is affecting supply, lack of cheap credit or mortgage facility which affects demand, slow promotion of technology, among others,” he said.
He was of the view that, if government wants to end recession anytime soon, it should create a special real estate fund, bearing in mind that the sector is a big employer of labour. According to him, every one square metre of real estate activity creates jobs for three people, adding that the sector is a platform for other sectors of the economy.
Kola Ashiru-Balogun, managing director, Mixta Nigeria, says the current recession would be worse than that of 2016, explaining that inflation was already taking toll on both real estate sector and the economy at large and this, he said, would affect construction cost significantly.
“Material prices are going to go up much higher and this will make housing affordability a lot tougher for both the developers and home buyers. This is not going to be felt in the immediate term given that real estate is a laggard,” he noted.
Sharing Onwuanibe’s view that government should give tax break and create special real estate fund, Ashiru-Balogun advised that time has come for the government to be bolder and more ambitious with its existing housing programmes such as the National Housing Fund (NHF) and Family Homes Funds (FHF).
He explained that the tax relief should be for private developers who demonstrate capacity to deliver 500—1,000 housing units in a year, pointing that this has the double benefits of solving social and economic problems by providing housing for the homeless and creating employment for the jobless.
The combined impact of hyper inflation and recession, according to Femi Akintunde, Group Managing Director of Alpha Mead Group, is, no doubt, being felt in the economy but more in the real estate sector.
He noted in an interview with BusinessDay that home buyers’ purchasing power has been eroded because jobs and businesses have been lost to both Covid-19 and EndSARS protest. “ Even for those who still have jobs, the value of their income have been eroded,” he added.
Continuing, Akintunde said, “people now prioritise their needs and survival is number one, not housing. But let’s not get it wrong. People still need housing because they have to live somewhere to eat their food or get their healthcare. So, after food, shelter comes next and then health and children’s education.”
For this reason, he said, developers have to continue putting housing on the market but they have to be a lot more creative and innovative in their offering. He added that they have to realize that the days of asking buyers to make 30—50 percent deposit is over. “They have to restructure their payment plans,” he advised.
“Rent-to-own is the way to go now and for us at Alpha Mead, it is the new normal. We offer Rent-to-Own in our own developments and Rent-4-Let in other developments which we acquire from other developers, pay the rent in one or two years and rent them out to tenants who pay rent to us per month,” he explained.
