Infrastructure & Transport
Housing and Real Estate Opportunities
Seeking Creative Solutions Within The Housing Market The housing and real estate sector performance has remained lacklustre for several years. Although there is a slight uptick this year, both the public and private sector require innovative solutions and creative finance to resolve a significant housing deficit within the country.
NIGERIA
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Housing, through property taxes, is a significant contributor to local government finance and thereby to the provision of essential services, such as water, sanitation, transportation and education. The sector also has the potential to generate employment, increase productivity and alleviate poverty. It is able to achieve this because investment in housing affects all facets of life through its multiplier effect on economic development by forward linkages to the financial markets and backward linkages to land, building materials, tools, furniture and labour. After nearly 60 years of independence, several efforts to address the housing situation by successive governments in Nigeria have yielded limited success over the years. Today, the nation is estimated to have a total housing deficit of 17-23 million units, though the current demand is estimated at 37 million houses. In Nigeria, the rapid urbanisation rate has effectively set back adequate and affordable housing. The total urban population in Nigeria is expected to rise to 60% by 2025, around 120 million people. The inadequate public urban and land delivery policies, despite significant efforts, allow the net growth of slums to continue to outpace the improvements being made. Nigeria has an extremely low home ownership rate, which is greatly affected by constraints related to the high cost of securing and registering secure land title, inadequate access to finance, slow administrative procedures, and the high cost of land. The country’s mortgage finance industry is still in its infancy, targeting primarily highincome earners and largely excluding middle and lowincome earners. For the majority of Nigerians, mortgage finance is not an option due to the lack of a robust land tenure and financial system, and because loan repayment costs remain prohibitively high. A National Housing Policy was adopted in December 2011 to ensure that all “Nigerians own or have access to decent, safe and sanitary housing in a healthy environment with infrastructural services at an affordable cost, with secure tenure.” The Nigeria Mortgage Refinance Company (NMRC) has refinanced mortgage loans totalling N18 billion as of January 2019, which has helped to boost
liquidity in the Nigerian housing market, thus enabling mortgage lenders to provide more housing loans and encouraging long-term mortgage loan creation. In May 2019, the Central Bank of Nigeria held its benchmark interest rate at 13.5% in a bid to stimulate economic growth. The key rate has been held at 14% from July 2016 to February 2019 to support the naira and curb inflation. Formal housing production is at approximately 100,000 units per year and this is highly inadequate because at least one million units are needed yearly to bridge the 17 to 20 million housing deficit by government’s target date of 2033. The private sector is critical in making housing available and affordable in Nigeria, as the government cannot do it alone providing ample opportunity for investors and the Nigerian diaspora to contribute to Nigeria’s housing development. After three years of house price falls, Nigeria’s property market is now stabilising, mainly driven by improving economic conditions. House prices were almost unchanged in the past two years, amidst steady demand. The housing market will continue to stabilise this year, with house prices and residential rents expected to either remain stable or rise modestly this year. As one of the most expensive cities to live in Africa, the Lagos market has been improving in terms of transparency and ease of doing business, according to the Global Real Estate Transparency Index. In 2018, Nigeria ranked 67th among 100 markets, up 16 notches from 83rd in 2016. While Nigeria’s housing deficit will not be resolved soon, there is some hope on the horizon, albeit from an overlooked source. According to United Nations statistics, there are over two million Nigerians living and working in North America today; of this, one third of them are highly paid academics and professionals. In 2018, the diaspora contributed US$23.63 billion to the Nigerian economy by way of remittances or 6.1% of Nigeria’s GDP. This revelation indicates the need for developers and the government to relate with Nigerians in Diaspora so that the nation can leverage on their resources and ideas in the country’s bid to further the course of affordable housing in Nigeria.
