Experts Point Ways To Unlock Opportunities In Real Estate Market

Industry experts have projected that Nigeria’s real estate sector will grow alongside the country’s anticipated overall GDP growth, buoyed by the reform policies of the new administration of President Bola Tinubu as well as increased investor confidence.

The experts, who spoke on a panel session at the DETAIL Real Estate Business Series in Lagos, said some major reforms are expected under the new administration, including tax credit initiatives, lower interest lending, unification of the foreign exchange (FX) rates, and economic growth through higher oil production.

Speakers at the forum say the reforms, as well as macroeconomic factors such as interest rate and inflation rate will have significant impact on the real estate sector.

The panel discussion, which took place on June 8, 2023 at DCS Place in Lagos, was put together by DETAIL, Nigeria’s first commercial solicitor firm to specialise exclusively in non-courtroom practice.

Themed ‘Unlocking Opportunities: Real Estate Financing for Success’, the session featured MD/CEO of Urban Shelter LTD, Saadiya Aliyu Aminu; executive & head, real estate finance at Stanbic IBTC, Tola Akinhanmi; CEO of Veritasi Homes Limited, Adetola Nola; and MD/CEO of Cardinal Stone Trustees Limited, Ereifemi Akeredolu. The event was moderated by associate partner at DETAIL, Olawunmi Alade.

Nigeria’s real estate sector grew at 5.31 percent in the first quarter of 2023, making it the country’s 5th largest contributor to GDP growth in the quarter.

Many believe that the sector has the capacity for further growth. Those who spoke at the forum said noting that there will likely be a boost in demand for the residential asset class following approval by the National Pension Commission (PenCom) for the use of Retirement Savings Account (RSA) as equity contribution for mortgages.

The experts called for regulatory reforms such as direct financial interventions to drive the desired growth.  

They agreed for the need to simplify and remove bureaucratic bottlenecks in processes for owning and transferring ownership of real estate in Nigeria and improving land management systems. This will require amendment of laws and regulations guiding real estate, such as the Land Use Act.

The discussants observed that there is a risk of mismatch between the duration for real estate projects and the duration of financing. They, therefore, advised that there should be a healthy mix of debt and equity financing options, as against relying on a single financing option for projects.

Amid the stifling cost of funding real estate projects, the experts said that bank loans are better used as bridge financing.

They noted that the activities of other developers in the sector can impact ease of accessing financing.

As a buffer, they counselled real estate companies seeking to raise funds from the capital market to ensure that they have a good investment grade rating and adhere to good corporate governance practices.

They further advised real estate participants seeking financing to always consider certain key factors, including positive leverage, capital structure, and nature of project/asset type being financed.

For customers looking to buy housing products in Nigeria, the experts urged them to imbibe the culture of demanding for quality test certificates and evidence of acquired approvals.

The speakers recommended a cross-sectoral collaboration with strong lobbying groups like the Nigeria Economic Summit Group (NESG) in order to achieve improved public sector engagement on behalf of real estate industry stakeholders.

Nigeria’s incessant building collapses, loan defaults, and other hurdles continue to confront players in the sector, a reason many say there has to be extensive due diligence for real estate projects.