TOP 10 ISSUES AFFECTING NIGERIAN REAL ESTATE INDUSTRY

According to recent research by PricewaterhouseCoopers (PwC), Nigeria’s real estate industry value is going to hit $13.65 billion by 2016. Without doubt, this is a clear indication that Nigeria’s real estate industry is very viable. Nigeria is experiencing rapid urbanization, with an estimated annual national population growth rate of just over 2% and an annual urban population growth rate of about 4%.

The population is becoming more and more focused on urban areas, towns, and cities, with just under 50% of the population living in urban areas, and this number will continue to grow. This is one of the factors responsible for the viability of the real estate industry. But despite these encouraging figures and trends, the Nigerian real estate industry is still burdened by several issues that are hindering its growth.

These issues affecting the Nigerian real estate industry are the focus of this article. We will be looking at the top 10 issues affecting the Nigerian real estate industry in no particular order.

  • Land Registration Bureaucratic Process

Top on the list of issues affecting the Nigerian real estate industry is the bureaucratic process of land registration. Nigeria is among the worst globally 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 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 the loan obtained for development.

  • High Costs Of Property Development

Building a house is very expensive in Nigeria. A three-bedroom house, for example, will cost about US$50,000, compared to US$36,000 in South Africa and US$26,000 in India, according to Finance Minister Ngozi Okonjo-Iweala. The cost of construction is high for three reasons: high costs of building materials, high skilled labour costs, and costs associated with poor roads and sewerage systems. About 75% of dwellings in Nigeria’s urban areas are built of concrete. Cement prices in Nigeria are about 30–40% higher than in neighboring countries and world market prices. The lack of public infrastructure adds as much as 30% to the total costs of the development.

  • Collapsing Buildings

Building collapses are also one of the top issues affecting the Nigerian real estate industry. From 1974 to 2010, as a result of over 60 building collapses in Nigeria, 401 people have died, and several more haven’t been reported or accounted for. Nigeria is so blessed as a nation that we rarely ever experience natural disasters such as earthquakes, tsunamis, or tornadoes. Yet, despite the absence of all these collaterally damaging natural disasters, our buildings still collapse in Nigeria.

Why?

Because of our own man-made infrastructural disasters. Since we didn’t have our own natural disasters to bring down our buildings, we simply created our own version through sheer negligence. Privately owned buildings, both commercial and residential, account for the highest number of collapsed buildings in Nigeria.

  • Omo-Onile

The existence of Omo-Onile especially in the western part of the country, is also one of the issues affecting the Nigerian real estate industry. They are a pain in the necks of real estate investors; their activities lead to an increase in labour costs, the cost of building materials, and finally, the cost of completing a building project.

They demand levy for the foundation of a building, the fencing of a land, the erection of a gate, the lintel stage, the roofing stage, and the plastering stage. They also levy the builders and artisans. All these are enough reasons to frustrate anybody who wants to invest in real estate.

  • Liquidity

One of the factors that motivates 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 into cash.

  • Devaluation of Naira

The recent devaluation of the naira is also among the top issues affecting the Nigerian real estate industry. This is because the Nigerian construction industry is heavily dependent on foreign importation for the raw materials and equipment they use for construction. With a devalued naira, the cost of purchasing these raw materials and equipment will definitely increase. As a result of the high costs of doing business, property developers will have to pass on these additional costs to the market. According to industry experts, the estimated rise in the costs of housing is 25%–35%.

The effect of the naira devaluation would have been much milder if construction materials were produced locally, thereby cutting down on the cost of construction and, in turn, making properties more affordable for the average Nigerian.

To contact BUDIPLUS for all your real estate Deals, call 08146702129

Send us a mail on [email protected]

Or Visit our office at NO. 14 OJIKE STREET, AZIKIWE ROAD, UMUAHIA.

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