Forum highlights pitfalls in real estate market investment

EXCEPT the government at all levels evolves environment-friendly regulations on land administration and real estate sector, the enormous potentials will remain untapped to the fullest at the expense of the country.

This was the submission of participants at a one-day forum called Lekki Gardens Investment Forum (LGIF) under the theme: “Unlocking Sizable Investment Opportunities in The Nigerian Real Estate Market”, held at the Civic Centre, Victoria Island, Lagos.

Unarguably, real estate has been proven to be one of the most profitable investment opportunities currently available in Nigeria with relatively low variability of returns. Activities here involve the purchase, ownership, management, rental and/or sale of real estate for profit.

Immense opportunities inherent in the sector has to do with some factors, namely, population, development in various sectors such as tourism, ultra-modern malls and event centers, office buildings, recreational centers, restaurants and fast food outlets, among others. All these are embedded in residential real estate market that created huge opportunities for investors.

Notwithstanding this positive reality, experts, notable personalities drawn from private and public sectors, who spoke last week during highlighted some challenges and pitfalls that would-be investors should note in residential real estate market.

The speakers include the Managing Director, FSDH Merchant Bank Limited, Mr. Rilwan Belo-Osagie; CEO, Lead Capitals Plc., Prince Bimbo Olashore; Managing Director, The Infrastructure Bank, Mr. Adekunle AbdulRasaq Oyinloye; Managing Director, Crusader Sterling Pension, Mr. Adeniyi Falade, among others.

Speaking on the topic, “Unlocking Opportunities in the Nigerian Residential Real Estate Market-Banker’s Perspective”, Belo-Osagie, noted that Nigerians’ sentimental attachment to housing ownership that “except you own a house, you are not yet arrive speaks volume”.

According to him, the population of the country presently and future projection revealed that residential real estate market would remain attractive for a long time to come, not only in housing accommodation, but also office space, hospitality industry, malls, event centers and others.

However, as rosy as the scenario might look like, Belo-Osagie listed fundamental challenges that must be addressed. These include long-term financing, high interest rate, cost of land title and problems associated with land administration in the country.

“Apart from funding related challenges, issues of infrastructure that are lacking in many of the estates are of fundamental importance. Before a housing project is embarked upon, it is imperative that certain infrastructure should be on ground. These include access road, power and water supply, drainage facilities among others, adding that these should not be left to the developer, because the cost would be factored into the the project, which would create room for high cost of the products”.

Besides, he lamented lack of low interest mortgage facility in Nigeria, which he said does not create room for low-income earners to access mortgage facilities. “Unlike in Britain where interest percent is between six to eight percent, South Africa 22 percent and Namibia 18 percent, Nigeria’s interest rate is 30 percent and above, this high rate regime must to be addressed”.

He concluded that housing delivery is not for banks to provide funds alone, but also government should see into title or property registration to allow little charge and hasten the process, while developers should endeavour to provide “bankable” projects.

Prince Bimbo Olashore, who addressed the issue from “Housing Finance in Nigeria: Mortgages and Alternative Funding Channels for Real Residential Estate Market”, an investors’ perspective, said it was a bold venture for developers to take short-term loan to fund long-term investment.

According to Olashore, the climates at which investors are operating in Nigeria are filled with landmines, despite the humongous opportunities available in the country’s real estate sector.

The landmines include lack of long-term loan, infrastructural challenges, affordability, land administration policies that are being strangulated by the bureaucratic bottlenecks.