Real estate is a sure destination for investors who are interested in making long or short term investment opportunities in Nigeria’s real estate sector. Real estate in Nigeria accounts for 12% of Nigeria’s annual GDP and experts say that the sector can create job opportunities with government and private sector joint participation. There are increasing investment opportunities in Nigeria’s real estate sector for investors, as these markets suffer from an undersupply of affordable housing and commercial real estate solutions.
At the recently concluded real Estate Unite held at Eko Hotel, CEO Landmark Paul Onwuanibe said ‘every square meter of real estate creates a minimum of three jobs” a clear indication that there are unexploited opportunities in the built sector. However, every opportunity comes with a gap that has to be filled.
Ayuli Jemide, a senior partner at Detail solicitors explains that challenges in access to land, mortgage and skill shortage represent a huge investment opportunity in Nigeria. If you are an investor reading this, consider these areas as investment choices;
Affordable housing’ is a term used to describe dwelling units whose total housing costs are deemed “affordable” to those that have a ‘median’ income.The African Development Bank says that 77.7% of Nigerians occupy the bottom Mass Market consisting of people in the no-income zone, the low income and the lower medium income category. As an investor seeking to invest in Nigeria’s real estate sector, mass producing houses to get quantity discounts will definitely be a profitable venture.
Construction & fabrication
Construction and real estate related activities has the potential to create millions of direct and indirect jobs in Nigeria. With the housing deficit greater than 20 million,this is a huge investment opportunity. This is why the investment opportunities in Nigeria’s real estate sector remains attractive despite economic challenges.
Land titling is one of the investment opportunities in Nigeria’s real estate sector. As at 2014 only 3% of Nigeria’s land mass has been registered.As land titling is manually done,it is the next investment destination to make everything go digital. This will involve developing collaborations between the IT industry and professionals in the real estate sector to build applications to handle digital land registration processes. For example in Kenya, land search and rent payments are currently done online in partnership with the Ministry of Land, Housing & Urban Development.
Investment in mortgage sector can contribute to the GDP growth of the sector from 1% to at least 5% in the short run, 30% in the medium term and about 65% in the long term but the government needs to support the enactment of foreclosure laws to give investors and mortgage lenders confidence to lend money to developers. This, will create healthy competition and bring down mortgage rates in the sector. According to the 2016 report by the Centre for Affordable Housing finance in Africa, Nigeria’s mortgage rates hover around 19% – 31% on a 20 year term, making it the second highest in Africa after Malawi with 34% and 15 years term.Mortgage penetration in the country is low because less than 5% houses have formal title registration.
The Minister of Power,Housing and Works Babatunde Fashola has called for the local manufacturing of building materials.Materials that can be produced locally include, glasses, steel,cement, nails, scaffold pipes, plumbing materials, electrical switch boards, chemical additives for cement mixtures, and other materials.This presents an opportunity for investment since demand for affordable housing matched with provision of basic materials for building can be locally sourced.
Commercial Real Estate
Commercial real estate is a lucrative investment destination for an investor. However, the yield from CRE, is often higher per square foot and usually on an initial investment basis. Also, income generated from a piece of commercial real estate is directly related to its usable square footage.
Vacancy rates, demand for properties, income level of the population and interest rates are some of the factors to be considered when making an investment decision.