It is a trying time for real estate players in Nigeria, most especially in Lagos, as the cost of housing materials, high cost of diesel, and inflation have become the major threat to the sector.
Property
developers have been badly affected especially in the year 2022. Most of them
have been speaking to the government to come in and help the sector. They are
of the opinion that it’s only government policies that can change the narrative
as most of them are helpless.
Many
of these players have been suggesting factors that are affecting the business
of real estate in Lagos.
This
week, City People lists out 5 key things Developers want Governor Sanwo Olu to
do for them.
LAND
REGISTRATION BUREAUCRATIC PROCESS
Top
on the list is the bureaucratic process of land registration. Lagos is among
the worst when it comes to registering property, according to the World Bank’s
Doing Business 2013 report, which ranks it 182nd out of 185 countries. The
registration process can last for as long as 6 months to 2 years, taking an
average of 12 procedures, and costing about 20.8% of the value of the property.
The
lackadaisical attitude to work is the major cause of undue delay at the land
registry. Oftentimes, a developer’s application would pass from office to
office over several weeks and by the time the necessary approval is obtained,
he may have lost his source of funding or incurred huge interest on a loan
obtained for development.
Bribery
and corruption are also issues affecting Nigeria's real estate
industry. And it’s also similar to the first point because some of these
applications are delayed when the applicant refuses to bribe his way out and
it’s been said that, Nigeria suffers from elements of corruption, lack of
fundamental data and poor environmental sustainability programs when building
large-scale properties.
Bribery
and corruption have a negative effect on the Nigerian real estate sector. There
are instances where developers who have not satisfied the preconditions for
allocation of land are granted allocation while those who are qualified are
denied.
TAXATION
Real
estate investors are subjected to multiple taxations, the taxes and levies paid
by them include development levy, income tax, building plan approval levy,
property tax, land use tax, and we also have cases whereby real estate
investors are expected to pay renovation tax whenever they want to renovate
their properties.
LIMITED
SOURCE OF FUNDING
Nigeria
possesses all the key factors for real estate investment — a growing
middle-class population, growth in consumption, rapid urbanization and a young
demographic compared to more mature economies.
Yet,
financing remains a problem both for property developers and prospective
homeowners. So whether you’re thinking of investment property financing or
securing real estate loans for financing a personal home purchase, you will
still have to deal with the familiar problem of insufficient capital sooner or
later.
This
could be attributed to underdevelopment in our mortgage industry as it
generated less than 100,000 transactions between 1960 and 2009.
LACK
OF COMPETENT BUILDERS/CONTRACTORS
There
is a dearth of competent and professional builders/contractors in Nigeria. This
is also one of the issues affecting Nigeria's real estate industry. Most Nigerian
builders/contractors are quacks who place more emphasis on money and the
initial mobilisation fee instead of getting the right workforce and
professionals that will execute the project.
When
this becomes the case, the workforce is chosen based on availability and not
competence and having the right skills. Experts have blamed incompetent
artisans and weak supervision of workmen as one of the major reasons for
building collapse and this is where the government can come in. They can
regulate the industry and ensure that only competent and professional builders
are licensed to work in the sector.
OMO-ONILE
The
existence of Omo-Onile especially in the Western part of the country is also
part of the issues affecting Nigeria's real estate industry. They are a pain in
the neck of real estate investors. Their activities lead to an increase in
labour cost, cost of building materials and finally in the cost of completing a
building project.
They
demand levy for the foundation of a building, fencing of land, erection of
gate, and lintel stage. Roofing stage, plastering stage. They levy the builders and
artisans, levies are also charged for every building material transported to the site. All these are enough reasons to frustrate anybody who wants to invest in
real estate. Another key point is that most investments are liquidity.
One
of the factors that motivate investors is the ease of converting their
investments to cash whenever the need arises. Unlike most other markets,
investors can have a hard time finding statistics with basic information such
as deal prices, supply, leasing activity and property ownership. In Nigeria, it
takes months or years to convert a real estate investment to cash.
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