Mixed reactions trail Lagos’ executive order on land transactions
DEVELOPERS and other professional groups within the real estate industry have continued to examined the recent executive order by the Lagos State Government on land transactions in the state, saying the new regime has two sides of the coin, as some are likely to benefit while others, particularly investors may be at disadvantage.
The new order as handed down by the State Governor, Babatunde Fashola, has essentially reduced land transactions in the state from 13 percent to three (3) percent.
According to the Governor, Consent Fees, which was from six (6) percent, has now been reduced to 1.5 percent while Capital Gains tax, which was previously two (2) percent, is reduced to 0.5 percent. Also cost of Stamp Duty has been reduced from two (2) percent to 0.5 percent while Registration Fees has been reduced from 3 percent to 0.5 percent.
In his remarks before signing the Order, Governor Fashola said the Order was intended to improve the internal revenue management of the State government and not to create any rights or benefits, substantive or perpetual, enforceable at law or in equity by a party against Lagos State, its departments, agencies or entities, its officials, employees or experts or any other person.
The Governor said at the time when the State’s economy was challenged, there was need to continue to grow the information on capital, business concerns and industrialization adding that some of the expectations in expanding business in the State’s enterprise zones and the Free Trade Zones could only be achieved through the reduction of cost of land acquisition.
“We expect also that if we, as government play a role, by reducing a cost of setting up business, we have made a huge impact by enabling private enterprise to thrive and in that way, we hopefully provide employment opportunities to businesses that will be formed as a result of this policy intervention”, the Governor said.
In his reaction to the development, Managing Director, Gran Imperia Group, Mr. Adeyeye Ogunwusi, said the initiative would drive more real estate developments in Lagos, urging all stakeholders to deemphasize politics, but explore the emerging opportunities associated with the reduction of land transactions.
Ogunwusi, and investment banker, who is promoting ‘EssentialHomes’ product and other real estate projects in Lagos State, said that the news about major reduction in land charges in Lagos was exciting, adding that it would encourage property registration and seamless transactions on land.
An investment expert and Managing Director, Propertygate Development and Investment Plc., Mr. Adetokunbo Ajayi, said unlike in the old regime when there was stipulated value for land across the state, the new development would take cognisance of the market value of landed properties, which would make investors to pay higher.
He said, “In a place like Lekki Phase One, the value of land is N10, 000 per square metre; so, for 1,000 square metres, which is the typical plot size, you have N10m as the consent fee. Before now, the consent fee was about 11 per cent of the value of the property; but now, they want to be looking at the actual value of the land and take the valuation from there.
“So, if you have a land with a market value of about N100m, you will be paying more than what you were paying before for consent; that means a typical value now is going to be higher than the previously stipulated value.”
According to Ajayi, the new regime of charges will bring about a situation where land transactions will no longer be predictable but subject to the opinion of the valuer.
“This will bring about bottlenecks and unintended corruption. Initially, the value of land was known for all areas in the state, but now, valuation can be influenced. Anyone can influence the value of land by asking the valuer to undervalue it; this will bring about sharp practices,” he noted.
He added that ultimately, the consumers in whose favour the government made the policy would pay more.
Ajayi said, “It is typically the buyer that pays for consent; so, what will happen now is that if a property valued at N10m initially has an actual market price of N50m, the buyer pays more despite the lower percentage. Invariably, people who are buying land will have to come up with more money and pay more under the new regime.
“The total property cost is not just the money you pay to a developer; you must also consider what you pay to perfect your title. So, the end users are not benefitting in any way; rather, the government will benefit in terms of revenue coming to it. If for instance a property was N10m and is now valued at N120m, even if they give you N30m discount, you are still going to pay more.”
He added that some people could exploit the new regime, while government officials and consultants might begin to take undue advantage of their clients.
According to him, the government can make the policy effective by making proper arrangements to check sharp practices.
“Sharp practices will definitely arise with consultants and government officials acting as middlemen. So, the government must check this; if not, we may be going back to where we were before the reduction,” Ajayi said.
But the Nigerian Institution of Estate Surveyors and Valuers, who agreed with Ajayi that the rich would pay on land transactions, backed the order, saying that is the trend all over the world.
Addressing journalists last week in its secretariat at Alausa, NIESV’s Chairman, Mr. Stephen Jagun, Fashola and his cabinet should be commended for the new order, which would among other things tries to make a level-playing field for all investors in the state.
“We appreciate the listening ear of the Governor, Mr. Babatunde Raji Fashola SAN and his Cabinet for the assiduous work they have done in yielding to the advice by our Noble Institution. He has been able to reduce the cost of transaction from 13% to 3%. It is an achievement that the Government needs to be applauded for, although it can be improved upon.
In October 2012, the President of our Institution presented a position and several meetings were held thereafter with the Commissioner and other Senior Government Officials. We believe that this culminated into the results we have today.”
According to Jagun, the government’s action would provide more liquidity in the property market thereby generating more revenue for the state Government, adding that, it was common practice for people to refuse or abandon their documentation due to the heavy burden that has just been addressed, which he said, has over the years resulted to significant loss of revenue to the State Government.
Part of the improvement, according to Jagun is for the Lagos Government be requesting for valuation report from certified estate surveyors and valuers before issuing consent on any land transaction in the state, Jagun submitted.
He called on all and sundry to ensure that the state government is held accountable for the implementation of the new policy.
A Lagos-based quantity surveyor, Mr. Wasiu Akewusola said, signing of land transaction in Lagos state is a welcome development, having agitated for it sometime. “The cost of documentation in the state has not been attractive and this has not given them the opportunity to maximize the opportunities that exist on the possession of such highly liquid commodity such as landed property to be used as collateral for securing good loan.”
He added: “I think the property owners will have to reciprocate and extend the gesture to their various tenants and users of their property so that everybody will benefit from this.”
Similarly, Mr. Olayemi Shonubi, a Quantity Surveyor said, it is a very good development most especially from the perspective of major estate development, the cost of land transfer as well as documentation, saying this should result in reduction of price per unit.
“So, consistently in Lagos the cost of land transactions have come down from 30 percent or thereabout in Pre- 1999, down to 13percent around 2005, and finally now to cumulative total of three (3) percent and I hope that the investing public will respond to this favorably especially local investors because for me local investors are the most important investors”, he said.