The Chief Operating Officer/ Director of Advisory, Northcourt, Mr.Ayo Ibaru, has said the real estate market will be a good destination for investors in Nigeria in 2020, because of the higher returns it promises in the face of declining treasury bills and equity market yields.
Speaking at a forum organised by the Finance Correspondents Association of Nigeria (FICAN), with the theme: “Investment Opportunities in 2020,” Ibaru, said the real estate sector could fetch a return on investment that would be as high as seven to 30 per cent per, which is much more attractive than the five per cent yields on treasury bills.
He said commercial banks are now willing to finance real estate projects as the residential market stabilises, adding that people are more willing to spend money on building construction.
“There will be stability in the residential projects as more outlets will come on stream. People are more open to investing in Nigeria’s retail segment. But there will be caution on office projects,” he said.
The real estate advisor noted that, currently vacancy rates in residential market are falling in Lagos, because developers now find out what people want and can afford.
“Co-living is now the trend as residential projects are dominated by a single bedroom and two bedroom apartments, which is what people are demanding for three years now. This is where the trend is going,” Ibaru said, adding that, “investment in land can earn up to 30 per cent return in a year along the Epe-Aja axis because of the anticipated boom the Dangote Refinery project will bring to those areas.”
According to him, the real estate sector provides a better option for investors that are looking for long-term windows to invest in, because real estate has greater chance of appreciation.
He added that land for instance, is not static, which explains why it kept appreciating even during recession.
He also stated that the 38km Lagos fourth mainland long bridge estimated to cost N844 billion, may cost more because of exchange rate risk if the project was delayed further.
The bridge estimated to be completed in 10 years, is expected to connect Lagos Island through Lekki, Langbasa and Baiyeku towns and runs through Igbogbo River Basin to Itamaga in Ikorodu.
He noted that the 4th Mainland Bridge would be on two levels: Vehicular traffic on the upper level while pedestrian, social, commercial and cultural interactions on its lower level.
He identified cost of constructing residential houses, lack of social and affordable amenities among the challenges facing the real estate sector.
Ibaru, said the new Finance Act would increase the cost of services in the real estate sector and advised every developer who wanted to build and make money to conduct proper research before taking such step.
“That 2.5 percent increase in VAT, though small, will amount to something substantial when you do transactions that run into tens and hundreds of millions of naira,” Ibaru said.
He advised government to observe the rule of law, protect contracts, maintain policy consistency and put in place mechanism to resolve contract disputes within 30 days in order to make Nigeria investment friendly.