Poor documentation and lack of access to finance are major challenges facing real estate investors in Africa’s biggest economy, experts have said.
The experts, who spoke at BusinessDay’s maiden Property Investment Show in Lagos on Friday, said fixing the challenges would require the conscious efforts of all stakeholders, and increase investors’ willingness to make long-term commitments, drive innovation and boost the real estate market.
Obinna Onunkwo, deputy CEO at Purple Capital Partners Limited, an investment company exposed to Nigeria’s real estate sector, said the lack of titles for landed properties had led to losses for investors.
“Investors holding landed properties without title are losing value,” Onunkwo said. “The value of real estate increases once a land has a title.”
According to him, banks will only finance real estate projects whose documents have government verifications.
Olaposi Lawore, managing director of HEREl, a real estate investment company, headquartered in Lagos, described poor documentation as a major obstacle to increasing the value of real estate investments in Nigeria and providing more alternative sources of investments.
“To tap into the capital market or the financial sector generally, documentation has to be in place,” he said.
On the challenges faced by developers, he said: “The documentation process and the cost of getting it done is nothing to write home about.”
Lawore urged investors to also consider the quality of a structure.
“Beyond being highly optimistic about the structure, look out for fundamental flaws because the last thing you want is to put your money where you won’t extract value in the long run,” he said.
Lawore advised investors to understand the economics and technicality surrounding investment in real estate.
He advised investors looking to invest in real estate not to get carried away by juicy offers, but to do proper investigation and spotlight the difference between the functionality and thought processes behind the offers.
“Our recent survey shows that 70 percent of the investment in Nigeria’s real estate comes from Nigerians in the diaspora while 30 percent is accrued from Nigerians at home,” Ugoada Orji, managing director of Romax Properties Limited, said.
According to her, Nigerians abroad are bringing in fresh capital to replicate the same infrastructure they enjoy in developed countries.
“The demographic for investments in Nigeria’s real estate sector is changing every sector,” Orji said.
For Modupe Anjous, CEO of Rydal Mews, there is a growing discordance between the facilities provided by Nigerian banks and mortgage loans which makes it difficult for an average Nigerian employee to invest.
“What we are currently seeing are investments from Nigerians abroad,” she said.
Nigeria’s real estate sector recorded a 2.26 percent growth in the last quarter of 2021, which is 0.3 percent lower than what it recorded in the previous quarter, according to the GDP report recently released by the National Bureau of Statistics.
Source : Business Day