As inflation bites harder, construction works at different sites across the country have slowed down as the real sector is grappling with multiple inflation, stagflation and general free fall of the Naira which have weakened negotiations for projects.
This is just as developers and property managers have expressed fears over the slow activity in the construction sector.
Investigation revealed that Nigeria’s economic challenges were underpinned by record-high inflation, a weakening currency, retail inflation, high exchange rate, high import duty tariffs amongst other confluence of factors.
The construction business sector of the real estate economy is shrinking in response to the crippling effect of inflation and other adverse macroeconomic conditions bedevilling the economy.
Even though the domestic demand for residential housing has increased, stakeholders believe that developers and institutional investors can’t cope with the inflation surge.
Speaking during a media briefing in Lagos, a realtor who is also a director of studies at School of Estate and Business, Debo Adejana explained the negative impact of the current economic pressure in the country on the sector, citing soaring prices driven by high inflation as a major factor affecting sale and slowing activities at construction sites.
He said, the real estate sector prices are going up because the rate of inflation is high and, on the reverse side, people’s disposable income is also shrinking and it’s telling on sales. Prices are going up and sales are not really at the level they used to be, Adejana said.
According to him, “this has also led to slow supply in the industry leading some sites to be dormant and projects unfinished. He added that some sites are either dormant at the moment or really slow in terms of construction activities because of the state of the economy. So, these are some of the effects.”
He explained that the issues surrounding the real estate sector would help scholars to get more aspirations to draw inspiration and expand the goals and frontiers of the sector.
While commenting on this, Senior Analyst, Estate Intel, Dapo Runsewe noted that, “the macroeconomic climate is difficult to ignore.
It has particularly subdued construction activity across the board with developers and investors opting for a cautious approach in general.”
He noted that macroeconomic headwinds had subdued the rental market as occupants opt for reduced space.
He, However stated that companies have opted to downsize or exit the market altogether, adding that occupancy rates are being impacted.
On the other hand, he said, the retail sector continues to be subdued with the bulk of development activity driven by hypermarkets and neighbourhood supermarkets, saying, ‘as a result, the larger retail developments make up 70% of the pipeline, which is currently on hold.’
