Professionals chart new course for real estate revival
This is not the best of times in the nation’s real estate sector, as it has continues to slide negative despite insinuations that the country has exited recession. For instance, in 2018, the sector witnessed downturns largely due to several factors ranging from government macro economic policy to over-supply in commercial and retail sectors as well as inappropriate supply in the residential sector.
This also impacted negatively to the sector’s contribution to the National Gross Domestic Product (GDP).The latest GDP figure shows a negative growth of -2.68per cent at the end of October 2018 and the Q3 contribution to GDP dropped from 7.09 per cent in Q2 to 6.88 per cent in Q3.
With the conclusion of the presidential election, which saw the incumbent emerged winners, experts in the sector urged the Buhari administration to come up with more robust policies, programmes that will revive the sector and reposition it as the second largest employer of labour behind agriculture.To these experts, housing is a sector, which seriously deserved appropriate intervention from government.
According to them, international standards have set the maximum amount that can be dedicated from a workers’ salary, which should not exceed 30 per cent of the gross pay. Regrettably, rents for descent accommodation in most urban areas in Nigeria exceed this benchmark. The immediate past president, Nigeria Institute of Architect, Tonye Braide said housing is a starting point in ameliorating the high living standards in urban centres.He stressed that when rents are excessively high, alternative sources of earnings are normally sought, which leads to corruption.
Braide however believed that Government would take pragmatic steps in its second term to make housing affordable and available. According to him, simple economics states that where the supply rises and demand remain fixed the price should fall.“There are critical factors responsible for the high cost of housing. The first is land cost. The cost of land in most Urban centres are artificial. Speculation and greed are factors, which drive the prices.
“The actual cost of procurement of government acquired land is relatively low and affordable but speculation and greed push prices to figures up to 500 per cent.“The result is that in building an affordable house, the actual construction costs are almost at par with the cost of land. This should not be. Land should be no more than about 15 to 20 per cent of the cost of the final development costs.
“People buy land at highly inflated rates because so many are pursuing so few plots with appropriate infrastructure”, he said. Braide therefore urged government to embark on a massive public works programme, which should include development of site, and services housing projects to give access to cheap land complete with infrastructure.
According to him, Executive Order 7 should extend to urban roads and site and service projects.He stressed that Government can raise 40 year money to be secured against Land Use Charges and Property Taxes in order to present low cost serviced plots.Apart from that, Braide is of the view that government can change the age-long payment of compensation, which is being subjected to corruption, and replace it with a debt-equity swap
Communities, he said, can receive Schools, Primary Health Care centres or percentage of housing development thereon in lieu of direct cash compensation.Inner City areas should be redeveloped and zoning laws modified to allow for medium to high rise which will reduce the Land Constant in the computation of the disposal prices of the housing, while government should flood the country with small scale building component manufacturing plants.
To create employment, the renowned architect said there should be one SME factory making one building component or the other within 100 kilometers of every local council headquarters. This, he said, will also bring down construction costs because over 25 per cent of construction costs go to the logistics of transportation of the materials, while a reasonable reduction of cases of double taxation on building materials can be achieved.He further urged government to provide credit guarantees for affordable housing projects and put the onus of performance on the developer.
According to Braide, the developer must seek appropriate professional input to develop houses that will be acceptable to the public at a price that can be afforded. Developer, he said, gets paid upon hand over of keys to a willing buyer, while the credit guarantee scheme will be revolving to ensure constant chain inflow from the amortization process in the various mortgage schemes.
Braide is of the view that it will create a multitude of activity in housing delivery in Nigeria, creating a millions of jobs and put the development process directly in the hands of the consumers. “There will be no mark-up of digits in disposal prices. Affordable Housing output will rise by over 300 per cent as Current Operating prices will build up to three houses per lot.
“The launch of a massive housing construction project will fast track a parallel skills acquisition programme for youths as learning will be accelerated trough hands-on learning directly on the construction sites.“With the injection of 500,000 units of affordable housing every year, the current level of the minimum wage will become more meaningful as even the lowest paid worker will have access to an entry level one bedroom house”, he added.
Also, the Chairman, Estate Surveying and Valuation Registration Board of Nigeria (ESVARBON), Sir Nweke Umezuruike, said the government should sincerely assess itself whether it has done well to continue the policies or if there is need to readjust in their policies for the next four years.
Describing housing as one of the very disturbing areas that should be tackled frontally, he said construction industry along side agriculture is two key areas all over the world that normally creates massive employment.
Unfortunately this aspect of these areas, Umezuruike said is not being tackled. He also regretted that over a decade, Nigeria has established itself, as a trading nation even though, there is no country all over the world that has made progress being a trading nation.He urged the government to change that attitude by leading Nigeria into more productive activities in the two areas of agriculture and construction industry.
According to him, taking a census of all our housing stocks is important in knowing our housing needs and how to tackle whatever deficit we have. “ As at today, it appears to me that there is no shortfall for supply of houses for the rich and so whatever short fall there is whether the 17 million or any other number we will come out with we know the housing stock we have the area we are lacking is for the masses.
“Government owes a duty to this country to engage in massive housing construction for the masses, those who cannot build for themselves. “We are often reminded how there are many vacant houses in Abuja, those houses are not there for the masses. They are made for the rich”, he said.
The ESVARBON chairman also want a change of policy in the area of provision of artisans because it is generally believed in Nigeria that the best artisans are those that comes from Benin Republic and Ghana.“ I want to see government to put together a positive policy that will train and empower Nigeria artisans. They should lead in the provision of housing.
“Private developers want to recover their investments within a very short possible time and the only way to do that is to build for the rich, those who can afford it. “The only way they can do it is to build and sell. Building and selling put Nigeria housing sector in cash and carry system, which cannot work all over the world.
“Government should enable the mortgage sector to work properly. “We heard that there are plenty of money about N8 trillion in the pension fund, what is that money doing there? All over the world, pension money is used for housing and we allow such money to un-utlised or for commercial ventures, which do not assist so much for the ordinary man”, he added.
For the 1st Vice President, Nigerian Institute of (NIOB) and Chief Executive Officer, Reo-Habilis Construction Limited, Mr. Kunle Awobodu, the economy has not been favourable to the real estate because most of our construction materials are imported and the value of Naira has made it almost impossible to import quality materials for building and for affordable housing.
According to him, at the just concluded international builders forum in Las Vegas, there were several attractive building materials and new methodologies but by the time you convert the prices to Naira, you discovered that it will be overall building production will beyond affordability, so it is very worrisome for most Nigerians at such fora. He urged the incoming government to seriously work on the economy and come out with favourable policies.
“Government has pulled its weight in this dispensation but they still need to fix power, because some of manufacturers informed us that power happened to be number deficiency in production processes that made finished products to be very expensive. “There are things we should be manufacturing locally, we should have enabling environment to assist manufacturers.
“Many have moved to neighbouring countries because of power and the finished products are now exported into the country. “The overall infrastructural development is also very key, the Apapa- Oshodi Express road to our seaport has been a hell for our importers, so is the Lagos Ibadan expressway where Julius Berger has not lived up to expectation, so sluggish, so slow over the project and people spent hours on traffic and the lorries break down in traffic. Government, he said should relax the tax policy so that manufacturers could survive under our unfriendly conditions.
They should give financial supports to our manufacturers the same way the Chinese and Indians are receiving from their governments.“We are very hopeful that the government has learnt from its experience so far and will use that knowledge to galvanise into serious action that will result in economic improvement”, he added.
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