Business

Experts express hope in Nigeria’s residential, commercial real estate

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1 year ago

DESPITE the nation’s current economic environments, which have slowed down activities, experts are not losing hope in the real estate sector, in respect of investment and development.

Rather, they are expressing hope in rebounding Nigeria’s residential and commercial real estate, suggesting the necessary impetus to turn around these particular segments of the market.

The experts, who gathered at the West Africa Property Investment Summit in Lagos, pointed out that despite the harsh macro-economic environment, real estate has been resilient.

With theme, ‘Rewriting the Narrative: Positioning and Strategies for the Future’, participants at the summit cut across local and international real estate practitioners, developers, finance providers and government officials.

Speaking at the sideline of the summit, Manager, Real Estate Finance, Stanbic IBTC, Tola Akinhanmi, said that real estate sector has remained resilient despite the happenings in the economy.

According to him, it’s an industry that has been impacted by the macro-economic environments, namely: inflation, forex volatility and interest rates as well, saying these are key to how assets are funded.

Talking about assets class, he said:”Our prospective is that, firstly, the assets’ class is long-termed. It provides more business, infrastructure, support people’s business, how people live and work and play.

“So given the long-term of the asset class, it is expected to be resilient through different economic cycles.”

He said the bank has been working with its sponsors, understanding the asset and structuring those solutions, allowing the assets stabilised and continue to be relevant in providing basic infrastructure.

While providing loan, he said the bank is also funding existing assets and prospecting new property.

On residential space, he explained that the bank has been providing catalysts for mortgages, where people could draw on their pension savings and catalyse the demand side.

“One key important area I want to stress is around the residential space and steps we are taking to ensure that, even by providing a catalyst for mortgages where people can draw on their pension saving, and catalyse that demand side,” he said.

Besides, he said the lender is also supporting developers in developing new properties.

“On the other side also, we are supporting developers in developing those new properties. So we are expanding that option beyond the commercial real estate offering, but also trying to catalyse and grow the housing sector,” Akinwunmi said.

In reducing the deficit, he described the Pension Reform which allows access to mortgage savings as “a new innovation.”

He disclosed that the bank has commenced engagement with developers, working with those that have the spread and range to solve housing shortfall.

“So, it’s this year that we really started the engagement, working with developer first. I think there is a need to streamline developers we can work with. I mean developers that have speadsnd range.

“We are also looking at how to finance developers and finance buyers. If we don’t get the equation right, there will be a vacuum. We are ensuring funding to the developer and ensuring funding to upper buyers. We know that interest rate is higher, but that should not stop us from assessing loans,” he said.

On what should be the government’s role, the banker urged the authority to create cheap land, describing such initiative as a ‘key- cost element.’

On modality to follow, he urged the government to partner with developers to provide access to land.

“Government should also expand infrastructure to unlock value, opening new areas for development,” he added.

He said there is also a need for the reassessment and amendment of the Land Use Act to meet current realities, urging the government to act quickly.

Some of the participating companies at the summit included Stanbic IBTC, grit, JLL, GREA, NMRC, ACCOR, Radisson Hotel Group, Marriott International, IFC, GFS, KOFISI,, SESO Global and Edge, among others.

Director, Capital Market, JLL, South Sahara Africa, Pepler Sandri, said the state of commercial real estate cycles are at a relatively low point, foreseeing a green shoot of recovery in the sector soon.

“Looking back the COVID-19 era that affected the market globally, a number of countries have adopted strategies of recovery. I will say that Nigeria also have macro issues that affected recovery and, as such, it’s a difficult stage in the cycles,” he said.

Looking forward, as interest rates, and inflation stabilised in most markets, he predicted recovery as interest rates crash in the next six to 12 months in the global development market, foreseeing strong trajectory recovery for Nigeria in the next one to two years.

For this to happen, he said it would require local and foreign investments.

In terms of local investment, he said the source of capital is centred on local pension fund.

He said “If you look into Nigeria’s pension fund activities, in commercial real estate, there is a mechanism or structure used in order to grow Real Estate Trust in Nigeria.

“There is regulatory changes that are needed. Also, the Real Estate Development Trust needed to be developed.

“Grade assets are typically large assets vote at scale. This may be large office development, large residential complex, large retail centre or large industrial distribution centre. And those assets have been bought and starting to be bought. So the product sales are the regulatory environment that needed to be updated. That will lead to much-needed equity for further development because when one is developed, one needs equity to do the next development.”

“It’s definitely from a local perspective. And from the foreign direct investment perspective, if some local issues that you all are aware of in Nigeria around forex issues and exchange control are resolved, the economic issue surrounding real estate development will be resolved.

“I don’t believe that it will be resolved in a short time. Local capital needs to step out,” he said.

IFC, Cooperative Edge, Temilola, who spoke on how to build in order to reduce the effect of climate change on the environment, said the mandate is to see Nigeria market with green buildings rather than brown.

“We are here to show developers how it is easy to do green; that it is not as expensive as they think. And in going green, you probably need about three to five per cent on top of your carpet rather than 30 per cent in some cases that we had,” she said.

In terms of climate change, she added that IFC has a full department of business development that deals with clean energy.

“We believe that we can reduce emissions in building. Then we will have done a lot in terms of reducing the greenhouse gas going into the atmosphere. One of the first things is to bring awareness to the environment, to the market.

“Currently in Nigeria, we have Edge rating buildings right now, we have done about 300,000 square metres of edge-certified buildings and we are getting more coming in to reduce the impact of climate change on the environment,” Temilola said.

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