Nigeria’s real estate sector: Challenges and the way forward

BY AYOOLANREWAJU KUYEBI

In Nigeria, the real estate sector has experienced remarkable growth and development in recent years, fuelled by factors such as population growth, urbanisation, and rising demand for housing. Despite notable achievements, the sector still grapples with challenges that must be addressed for sustainable growth and improved investor confidence.

Let’s delve into the investment landscape of real estate during the previous administration, assess its accomplishments, and discuss the current challenges faced by the sector. Additionally, we’ll examine the effectiveness of mortgage banking in Nigeria and explore the role of the government in revitalising and repositioning the real estate industry.

Under the previous administration, real estate emerged as a premier investment option in Nigeria, offering substantial capital growth opportunities due to the high demand for housing. With a population exceeding 220 million and projected to reach 400 million by 2050, Nigeria faces a persistent housing deficit of over 20 million units.

Notably, areas like Lekki in Lagos state have become thriving hubs for real estate acquisitions, witnessing robust demand for both sales and rentals. In terms of contribution to GDP, the real estate sector accounted for approximately $3.9 billion in the last quarter of 2022, with further growth projected. These figures underscore the immense potential and profitability of real estate investments in Nigeria.

While evaluating the achievements of the previous administration in the real estate sector, it is crucial to consider contextual factors and geographical location. One notable development during this period was the establishment of Dangote’s refinery, which had a significant impact on the real estate market in Ibeju Lekki. However, the sector continues to face challenges, including a lack of public credibility, rampant professional quackery, scarcity of skilled labour, and an alarmingly high rate of building collapse.

Nigeria leads Africa in building collapses, with Lagos state alone reporting 322 incidents over the past 48 years. These challenges highlight the pressing need for enhanced regulation, enforcement, and quality control in the real estate sector.

Turning our attention to mortgage banking, it is worth noting that while mortgage banks offer extended repayment periods compared to commercial banks, accessibility remains a challenge. Despite the existence of intervention funds, their impact on the population often falls short due to implementation and accessibility issues.

The processing time for mortgage applications can be lengthy, resulting in missed opportunities for potential homeowners. Furthermore, loan amounts may not adequately meet the needs of the real estate market, and accessing funds directly can present challenges.

To revive and reposition the real estate industry, a concerted effort is required. This includes sustained infrastructural development, improved foreign exchange rates, and a strengthened local currency. Lagos state has demonstrated promise with its infrastructural advancements, but further progress is needed to keep pace with rapid population growth.

The government’s role should focus on effectively implementing policies, ensuring accessibility to intervention funds, and addressing regulatory gaps to boost investor confidence and foster sustainable growth.

In conclusion, Nigeria’s real estate sector presents lucrative investment opportunities driven by high demand and a persistent housing deficit. While the previous administration achieved notable progress, challenges such as building collapses, lack of credibility and skilled labour scarcity continue to impede the sector’s growth.

Additionally, mortgage banking accessibility and effectiveness must be improved to cater to the needs of potential homeowners. To revitalise the sector, the government must focus on infrastructure development, policy implementation, and regulatory enhancements. By addressing these challenges and leveraging the sector’s potential, Nigeria can unlock the full benefits of its real estate industry.

Kuyebi, CEO of GMH Luxury, writes in from Lagos.