The real estate industry in Nigeria is, no, doubt, a dynamic and constantly growing sector of the country’s economy. In the last decade, it has been integral in providing shelter, creating jobs, attracting investments and putting Nigeria on the map. Despite all these positives, the Nigerian real estate industry constantly faces a range of challenges that impede its growth and efficiency.
This blog sheds light on core issues affecting real estate in Nigeria and possible solutions. It also serves as a guide to ensure you make the right decisions on your real estate journey.
Here are the top 10 issues affecting real estate in Nigeria and their possible solutions:
Bureaucracy
High on the list of issues affecting real estate in Nigeria is the bureaucracy that comes with land registration in Nigeria. Over the years, Nigeria has been ranked as one of the worst places, when it comes to registering property. For instance, according to the World Bank’s Doing Business 2013 report, Nigeria was ranked 182nd out of 185 countries.
In recent times, the ranking has slightly gotten better as the days it takes to register property have reduced. Notwithstanding, there’s more work to be done to ensure that land registration is as swift as possible.
Poor Quality of Buildings
Cases of collapsed buildings across the country from time to time indicate the use of subpar construction materials. This also suggests that some building contractors in Nigeria lack the necessary educational credentials and professional experience.
This problem has become a major concern for Nigerians, as it takes them extra effort to trust the quality of buildings. If allowed to persist, the issue of poor quality of buildings may tarnish the image of the country’s real estate sector.
Expensive Residences
The ongoing rise in the price of most Nigerian homes is a major issue affecting real estate in Nigeria. Most Nigerian cities are overpriced and this may discourage potential investors. For instance, Lagos, Abuja and Rivers are the most affected cities, but they are also important commercial hubs.
Furthermore, the excessively high price tag has enlarged the social divide between different income earners. To give more context; there are some areas where a middle-income earner, let alone a low-income earner, cannot afford.
ESG
‘ESG’ is an acronym for Environmental, Social and Governance. It is a fixed standard used to evaluate the environmental and climate effects of housing units. In Nigeria, most housing units are characterized by poor waste management, pollution, poor transportation systems, etc. This is not only prevalent in rural areas but also the big cities.
Furthermore, according to the Global Housing Standard, real estate professionals should be concerned about greenhouse gas emissions. Unfortunately, some real estate practitioners in Nigeria neglect this standard, resulting in widespread environmental and climate change in many areas. In the Environment Performance Index, 2022, Nigeria was ranked 162nd out of 180. This shows how vulnerable the environmental aspect of the country is.
Ineffective Property Protection Laws
Generally, estate laws are not properly implemented in Nigeria, which has led to instances like investors being denied access to their property. The main culprits behind this occurrence are a group of land robbers called “omo-onile” commonly found in developed areas like Lagos. These well-known real estate con artists are frequently seen extorting people violently or dishonestly on construction sites.
The property protection law has been rendered ineffective at different times with people's lands being forcefully taken and buildings demolished. Consequently, a significant number of real estate investors are discouraged from purchasing property in Nigeria.
Increased Rural-Urban Migration
The increase in rural-urban migration is one of the major issues affecting real estate in Nigeria. The country’s property management has been significantly affected by the increased migration of renters from rural to urban areas. This unrestrained mobility has led to overpopulation in the urban areas which in turn leads to high rent prices.
Devaluation of The Naira
The recent devaluation of the Naira is also among the top issues affecting real estate in Nigeria. This is because the Nigerian construction industry is largely dependent on foreign importation of raw materials and construction equipment. As a result of the devalued Naira, the cost of purchasing these materials is on the high side.
The effects of the devalued Naira would have been cushioned if construction materials were produced locally. However, this is not the case and the real estate industry suffers the consequences.
Limited Source of Funding
Nigeria has all the major ingredients for real estate – growth in consumption, a growing middle-class population, rapid urbanization, etc. However, proper financing remains a problem for both property developers and prospective homeowners. So, whether a person considers investment property financing or securing real estate loans, there is every likelihood that they will experience insufficient capital.
Taxation
Real estate investors in Nigeria are subjected to heavy taxation. The taxes and levies paid by them include income tax, development levy, property tax, land use tax, etc. There are also cases where real estate investors are expected to pay renovation tax when renovating their properties.
Regulatory Challenges
The regulatory aspect of the real estate market in Nigeria is often seen as complex and stressful. Property registration processes, inefficient land, ambiguous property rights and the absence of a unified regulatory framework are contributing factors.
Potential Solutions to the Issues Affecting Real Estate in Nigeria
Here are some possible solutions to the issues affecting real estate in Nigeria:
Reduced Bureaucracy
The Nigerian government should make the process of registration and documentation of property less bureaucratic. Also, the approval for building plans and acquisition of the Certificate of occupancy should be made easier for credible property owners.
Land Reforms
The 1978 Land Use Act should be amended to suit the present realities of the real estate market in Nigeria. Furthermore, all governmental land agencies and officials should be scrutinized for corruption and watched closely. This is to ensure that the land registration processes are more straightforward and transparent.
Social Amenities
The provision of social amenities like good road networks, electricity, proper drainage systems, etc. will go a long way in making housing development better. It will also contribute to the decongestion of populated cities.
Adequate Funding
An effective financing mechanism and policies will significantly enable more people to have easy access to low-interest funds for property acquisition.
Local Production of Raw Materials
Research institutes should be encouraged to exploit local raw materials so that alternative building materials can be produced. This reduces the country’s overdependence on exports and improves our economy.
Review of Housing Policies
There should be a thorough review of rural and urban housing policies by the appropriate agencies. Also, the development of rural areas will reduce the prevalent rural-urban migration in the country.
According to the Federal Ministry of Lands, Housing and Urban Development, if a housing crisis will be averted by 2025, a minimum of one million housing units per annum is necessary. It is no news that there is a housing crisis already; however, the above solutions can significantly change things in the real estate industry.
Land Republic is Positive About a Better Real Estate Industry
Land Republic is committed to excellence, quality and ease for customers. The company is particular about making sure real estate investors are not victims of the prevalent real estate issues in Nigeria, and strongly that the real estate industry will see better days.
For more guidance on real estate matters, reach out today via 2348122222283 and support@landrepublic.co.
