Hayatuddini: In Spite of Challenges, Nigeria’s Real Estate Still Guarantees Returns



Imran Hayatuddini is the Chief Executive Officer of HGR Property Development Company. A home-grown property development firm. He shares his views on Nigeria’s burgeoning property market with Chineme Okafor. Excerpts:

Can you evaluate Nigeria’s property market, vis-à-vis its status and potential?

I will boldly say the property market is the future of the Nigerian economy. I say this because if you look closely it is capable of stimulating the other sectors of the economy. When you merge the property market and mortgage finance sector with the country’s huge population, the demand for good homes and offices, and the economic capacity of the people, you’ll understand the potential that is within the industry.

Nigeria’s middle class is growing by 7.9 per cent per annum and these are the people with purchasing power to pay for rent, purchase houses and just invest.

Today, the industry still boasts of 10 per cent annual growth, a market value of N6.5 trillion in 2015 asides an anticipated $13.6 billion investment in 2016.

How relative is this assessment?

We have urban centres that are rapidly growing with relative population. Let’s look at a few figures. Lagos grows at roughly 3.2 per cent per annum, Abuja grows by 4.3 per cent per annum, and Kano grows at 3.3 per cent per annum. All these imply that demand for houses would continue to rise.

The developer however notes that for the potentials of the sector to be fully harnessed, the bureaucratic bottlenecks, access to basic infrastructure and high land costs in the country must be adequately addressed.

How deep an impact do these have on the sector’s economics?

Property development is arguably the most lucrative of all investment opportunities in Nigeria’s real estate sector. We have different sub-sectors. There is mixed use development, which involves blending a combination of commercial, social, institutional, or industrial uses.

There are also the residential housing estates, and commercial property rental which industry trends show that the demand for them is rising amongst middle-income and young professionals in Nigeria.

These factors along with economic growth and an emerging middle class offer opportunities for investment in the housing sector, but we cannot overemphasize the facts that there are enormous challenges that need to be addressed and which, frankly speaking, are slowing down the sector’s progress.

What sort of unique services do you offer in the sector?

Property listings – the one thing lacking in most Nigerian businesses is customer service, we put a lot of focus into understanding the client’s needs and actually work around the client’s request rather than just force properties down their throats.

We make sure we properly vet all the properties we offer clients to make sure it’s only quality that we have in our books. We are also one of the registered listing agents for the Churchgate WTC – the premier residential tower at the World Trade Center (WTC) Abuja which will be the most enviable address in the FCT.

We also do turn-key renovations, developments, management and consultancy. All that we do, we apply smartness, functionality and innovation to keep up with and even surpass industry trends.

With Nigeria’s idiosyncrasies in mind, what describes a luxury property?

For us at HGR, the definition of luxury properties goes well beyond simply ‘big’ or ‘expensive’. Luxury is defined by personal preferences. It represents your lifestyle, your individuality, your personal taste and your choice.

When it comes to choice, innovation and quality, our creative design and marketing teams represents the best. Also looking at the marketing and selling of a luxury home, it’s an art and there are actually variables to consider, these are things our staff are trained to consider in every transaction. Like I said, personal preference and lifestyle is a major part of any luxurious item and your marketing has to be tailored to people’s lifestyles.

You will discover that imposing structures developed for the high-end market are springing up in various parts of the country, from Eko Atlantic City in Lagos to The Churchgate WTC in Abuja, but while the rise of luxury apartments is advantageous to any city’s status, it is also very important that we don’t lose sight of the fact that the government has to provide housing solutions for the ever growing middle class.

This can be done through high-rise buildings that will also befit the city’s status. This is where we are trying to bridge the gap – still giving luxury but making it more affordable.

So, what makes luxury properties expensive?

High land costs is the primary reason luxury properties tend to be so expensive. Getting a prime plot to develop means you are paying for the cost of that land, it is difficult to operate as developers but we have come up with a unique structure to still cater to everyone’s needs.

Are these all about the challenges of operating in Nigeria?

Well, as a developing country, Nigeria’s real estate sector is evolving at a tremendous pace. Governments at all levels are more aware of the role of real estate development on the growth of their respective cities, however, challenges facing the sector have hampered it from realising its true potentials.

The process of allocation and registration of land is a massive speed bump to real estate development. It is very difficult to get an application granted to property developers.

Furthermore, the unstable exchange rate is a cause for concern to developers. Some foreign developers peg the cost of construction and the value for selling developments on land in US dollars while they charge their clients the naira equivalent.

These developers would encounter no hassles if the purchase price of the developments paid in naira can be converted to the anticipated equivalent in US dollars. But the unstable price of crude oil and the continuous fall in the value of the naira often results in a loss for the developer.

Also, there is a limited source of funding for developers in Nigeria. Since real estate development is capital intensive, it is inevitable that developers would need external support to finance their projects. But the high interest rate of commercial banks is a turn-off to most developers. The long list of developers on the waiting list for Federal Mortgage Bank loans and other federal government loans is discouraging.

There is little awareness on alternative sources of funding and procedure for obtaining foreign loans for real estate development. Though the recent Nigerian Mortgage Refinance Company established to bridge the funding of residential mortgages gives stakeholders in the sector a glimmer of hope, its effect is yet to be felt.

Would you evaluate the country’s mortgage system?

Nigeria’s mortgage system leaves much to be desired truthfully. The problems are glaring. Would you just talk about the high interest rate or the inability of the FMBN to disburse approved loans? Our mortgage system is porous and it is not aimed at solving our housing needs.

But in spite of the challenges facing real estate development in Nigeria, the sector still has huge employment opportunities, investment potentials and guarantees returns on investments like I said earlier.

In the face of dwindling allocation and limited resources, the Nigerian government has successfully collaborated with private companies to develop housing projects and public infrastructures. The government’s target of about $68.1 billion fresh FDI from eight newly licensed free zones creates a new business opportunity for international businesses to invest in Africa’s fastest growing market.

In my mind, due in part to a large housing deficit, demand for residences in Nigeria looks set to remain strong, putting the real estate sector on course for a period of sustained growth.

Lagos alone, the country’s largest urban area and one of the fastest-growing cities in the world, has a shortage of adequate housing. This is a perfect storm to ride on.

At the same time, Nigeria’s total housing deficit is enormous. Government data as recent as 2013 indicates that an estimated 15 to 20 million units would be needed. You can see that in some ways, Nigeria looks like a real-estate investor’s dream.