Why real estate market may thrive in Lagos over Abuja, others, in 2017

On the premise of federal government’s soon-to-be-rolled-out housing finance initiative, Tunde Alao takes a look at effects of this initiative on Nigeria’s real estate, and highlighted some business opportunities for investors in the sector.

The announcement made by the Finance Minister that the federal government is planning the delivery of 300,000 housing units next year has brought to the fore, argument of where would be the attraction of real estate market in 2017.

Real estate watchers are having different views over where construction activities will be booming in Nigeria in the year 2017, in the face of paralysing economy, occasioned by activities of militants in the Niger Delta, the general insecurity the sickening Naira vis-a-vis foreign currencies and the announcement by the Federal government to get seriously involved in housing delivery.

To some, the pull will be Abuja, while some picked Lagos as the possible epicentre of construction activities. In the first instance, those that favoured Abuja argued that being the seat of federal government, which hosts headquarters of multinationals, including headquarter of foreign embassies, stands to attracts real estate market than Lagos.

The additional advantage, according to them is that President Buhari’s administration has revealed its blueprint on the real estate activities, with a plan to provide 300,000 housing units in the year under review.

The Minister of Finance, Kemi Adeosun, recently announced plans by the Buhari administration to launch a new housing finance initiative.

Under the proposed scheme, the Federal Government is planning a mortgage system that will catalyse the development of the mortgage market in Nigeria with the provision of single digit interest rate mortgages and longer repayment periods such as 20 years.

“We are committed to fundamentally addressing historical challenges to housing. This requires innovative financial solutions that will stimulate housing development, related industries, create jobs across the nation and satisfy yearning for security through home ownership,” the minister had said.

Following this development, analysts are of the view that Lagos would attract a large chunk of real estate market considering the huge infrastructure development embarked upon by the state governor, Akinwunmi Ambode.

Dr Kehinde Akinjobi, a financial expert, said “the parameter for real estate development is the provision of an enabling environment, especially, infrastructure such as road, power and access to mortgage, with all these already embarked upon by the Lagos State government.”

According to him, the significant springing up of satellite towns and estates within the last 15 years has made an impact, both in Abuja and Lagos.

“The Federal government has over the years rolled out significantly many housing schemes within the city. Areas like Gwagwalada, Jabi, Karu, Kaura, Utako, Nyanya, Gwarimpa, Kuje, Lugbe are all fundamentally satellite towns with different government and private schemes, which have merged or almost merging with the real metropolitan town.

“In Lagos, security gap was a major mitigating factor until the recent turn around. There is laudable infrastructure improvement by the present charismatic governor who has created room for various real estate to thrive.

“In the metropolitan Lagos, the average density is about 20,000 persons per square meter. The United Nations forecast was that with the current trend of the population growth, Lagos will be the third largest mega city in the world after Tokyo in Japan and Bombay in India by 2015,” he said.

Isaac Olayiwola, in the real estate business said: “The systematic and drastic infrastructural improvement from this administration that is presently expanding towards her four geographical zones, the Lekki/Epe axis (known as Lekki zones), the Lagos/Ogun/Ibadan expressway, where you have Mowe, Ofada, Papalanto estate schemes, the Lagos/Abeokuta expressway and towards Lagos/Badagry expressway. All these locations are currently experiencing a heavy reshuffle and improvement to meet up the challenging explosion,” he said.

Ezeoke, a Lagos-based property consultant, in his analysis, noted that Lagos population growth is at eight per cent and Nigeria population growth is at 4/5 per cent per annum.

“Obviously there’s an urgent need of more residential and commercial properties to meet up the towering increase. There is a growing middle class that needs housing to stay and for investment. Also, there are large informal trading sector existing in Nigeria. These people need more shops and stalls in major cities.

“Parking spaces are also a major problem, and this is where investors can get involved, parking fare goes as high as N200 in Lagos at the moment. Short-lets apartment are beginning to get attention, especially because of the towering hotel prices. People are beginning to demand for studio apartments, one room and two-room-apartments for short visits. Virtual offices and event centres are also on demand. A weekend event in any existing event centre within Island goes between N1 million to N2 million for a day event,” he observed, pointed out that entry homes and middle class are most sought after at the moment primarily because it is within the purchasing power.

He believed that there are more needs to service the middle class and emerging middle class.

Projects within Lekki axis are still most sought after, especially scheme projects. Surprisingly, Mainland properties are almost at par with Lekki projects primarily because of semblance of traffic control, population growth and housing supply. In all and based on the above observations, consensus is that Lagos may witness growth in the real estate sector in the coming year, above other city centres.