Mr. Kunle Awolaja, former West African Chapter Chairman of the African Real Estate Society (AFRES), speaking on challenges, required reforms, outlook and opportunities in the real estate industry in 2023 asserted that the real estate market was not so moved by post COVID-19 pandemic. Since 2020, there have been massive development as investors dive into the real estate business as one of the most sustainable means of investment. Real estate investment is the best method of accumulating wealth through long-term investments.
In the next 20 years, analysts predict the value of global investable real estate to grow by an annual average of 5.2 percent exceeding $85 trillion. The underlying reason for owning real estate remains positive notwithstanding macroeconomic shocks and political forebodings. The highest growth of the industry, according to statistics, was in the second quarter of 2021 where it attained 3.85 percent growth. In the third quarter of 2021, regardless of the harsh economy and high cost of building materials, there was an expansion of the sector by 10 percent. Even with these facts, experts look forward to greater attainments for the sector in 2023.
Expensive residences and naira depreciation affects the industry.
Nigeria, recognized as Giant of Africa has since the past two decades secured its place as the country with the highest real estate investment in Africa owing to its increasing population of over 200 million people. Regardless of these achievements, there are various economic and political issues affecting Nigeria and most African countries which have negatively impacted its real estate sector. One of these critical issues is expensive residences which due to the growing rise in the cost of most home projects in Nigeria poses a great challenge to the real estate market of the country.
Besides the overpriced rates of most Nigerian cities, there is an issue with Environmental, Social and Governance (ESG) – a regulated standard used for evaluation of the environmental and climate effects of housing units. Most apartments in Nigeria suffer pollution, prominence of waste in public areas, absence of trash bins for appropriate waste disposal and others. Naira depreciation has also been of major concern for every sector of the Nigerian economy, real estate inclusive. The depreciation makes real estate investors purchase construction materials at higher prices.
Some Nigerian investors lack necessary educational credentials.
Growing rural-to-urban migration is another major issue challenging the real estate industry. The large number of people from rural areas migrating as renters to urban areas has significantly affected property regulations in Nigeria. Due to this development, many real estate managers and agents use the opportunity of this influx to increase house rental costs. There was also a complain of Ineffective Property Protection Laws as there are no effective implementation of Estate Laws in the country, some times leading to deprivation of legally purchased lands by investors.
These laws are prevalently overruled in developed areas of the country by a group of land grabbers known as Omo-Onile. The fellow of the Nigerian Institution of Estate Surveyors and Valuers further stated that poor quality of buildings have led to many cases of collapsed buildings in many parts of the country. This is an indication that the building materials purchased by some contractors for construction are substandard. Many Nigerian contractors even lack the required educational credentials and professional experience.
Potential investors would be driven away by challenges in the sector.
In his statements, Awolaja foresees reforms in aspects of registration and issuance of permits to professionals in the real estate field across the nation; receiving and investigation of petitions and complaints lodged against registered real estate experts; nationwide registration of real estate transactions; data assembling of transactions in real estate; documentation of tenancy transactions beyond five years and establishment of real estate polices in accordance with global best practices. He added that a lack of attention to issues affecting the real estate sector could be a stumbling block to potential investors.
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