“Nearly 75% of Nigerians living in major cities are tenants, and that says a lot about the need for houses,” begins Daniel Adeyemi, Senior Reporter at TechCabal, who is moderating a Live session on property technology—proptech—in Nigeria. “It’s a growing concern, especially as Nigeria is growing at the rate of 2.5% per annum. The question on everyone’s mind is: where will these people live, and can they afford it?”
In 2017, the United Nations projected that Nigeria’s population will double by 2050; that’s over 400 million people living in Africa’s 14th-largest country by land mass.
The problem isn’t that Nigeria doesn’t have the land mass to accommodate these people; it is the second-largest West African country with 923,768 km2 (356,669 sq mi) surface area. The problem is that 51.96% of Nigeria’s population—the seventh-largest population globally—is situated in densely-populated urban areas while the rest are scattered across rural communities. At the current growth rate of about 2.8%–3% a year, Nigeria’s urban population is expected to double in the next 2 decades.
Urbanisation, especially one as rapid as Nigeria’s, comes with challenges, most notably the insufficiency of basic infrastructures. Some studies suggest that rapid urbanisation has caused most cities in Nigeria to undergo urban decay because of a lack of or breakdown in basic services, potable water supply, electricity, efficient city transport services, affordable housing, and waste disposal systems.
All these challenges have made house-hunting in urban areas a living hell, with searchers reporting problems like extortive rent prices, high agency inspection fees, duplicity of sales, and misrepresentation. In fact, between December 2020 and April 2021, Nairametrics estimates that rent across urban areas like Lagos and its environs increased by 30%.
With Nigeria’s proptech industry raising $2 million in investments in 2021 alone, TechCabal sought to answer these questions in a Live session. On May 6, 3 startup founders—Naomi Olaghere, co-founder and VP/Operations, RentSmallSmall; Kanyinsade Ademuson, founder, CEO and Principal Architect of Seventh Space; and Dapo Eludire, COO of PropertyPro.ng—sat with TechCabal Senior Reporter Daniel Adeyemi to discuss the prospects of proptech in Nigeria.
In small small instalments
Naomi Olaghere kicks off the session by explaining what her startup, RentSmallSmall—a Lagos-based on-demand service offering instalment rent payment options—is doing. “It’s a mindset thing,” Olaghere says. “People often think they have to have all their money together before they can buy something or even rent a house, but RentSmallSmall is changing that. We’ve been in existence for 3 years now, and we’re letting people know that they can pay their rent like monthly, quarterly, monthly, or annually.”
“But how does that benefit the landlord,” Adeyemi asks. In Nigeria, annual rent is a practice vigorously upheld by most landlords with some requiring 2 years’ advance from new tenants.
“At the beginning, it was a herculean task to get landlords to agree to collect monthly rent,” Olaghere explains. “It’s still an uphill battle, but we’ve been able to show them the benefits of RentSmallSmall. For example, we can assure landlords that defaulting tenants will be out within a week because of our licensing agreements with the tenants. We’re also very concerned with long-term preservation of assets, and that helps us build trust with landlords.”
Design for your users
At Seventh Space, Kanyinsade Ademuson and his team believe in developing houses for the average upwardly-mobile Nigerian.
“Last year, I was in the market for an apartment for 6 months, and I have to tell you, I’ve seen houses,” Daniel Adeyemi exclaims. “Some ‘affordable’ houses with 2 feet kitchens, and some houses overpriced because of POP ceilings. What kind of solutions are there for affordable and habitable housing?”
Ademuson believes the answer is simple: “Stop developing houses that your target market can’t afford.” “If you look at the property trends today, builders are developing for people who genuinely can’t afford them. However, I think that one of the major solutions we can provide is actually getting designs that are centred around average Nigerians who are genuinely poor.”
The way to do that, Ademuson says, is by taking advantage of underutilised properties and increasing the speed of production. “There are a lot of lands that are owned but unused. Part of the solution is to create policies that ensure the usage of underutilised lands. We also have to consider our environment, and build for the environment we are in. We need to look at different technologies or building technology methods, using different materials and materials that we can research and create here, within Nigeria, and which are suitable for our environment.”
Finally, Ademuson says, the next step is to produce quickly and in large quantities. “We need to figure out a way to produce more, and this means factory-assembled production or linear production that caters to the needs of people while driving the prices of houses down.”
No space for data or trust
For Dapo Eludire whose startup, PropertyPro.ng, is one of Nigeria’s leading real-estate search platforms, the solution lies in finding and housing data.
“We don’t have centralised data,” Eludire laments. “The data we have is collated by individuals, not by the government so you can’t depend on it. We don’t know the market trends or its movements, and so we are forced to move blindly.”
Building trust is the next step, as Eludire believes. “Liquidity in the real estate sector is not enough, so everyone is careful of whom they buy from. A lot of scrutiny goes into deals, and this elongates timelines. But building trust will allow deals to flow accordingly so everyone can manage their time well.”
Collaboration breeds growth
Proptech deals across Africa are gradually growing, projected to increase by 6.4% between 2019 and 2024. All 3 founders agree that a large contributor to the growth is collaboration.
“Proptech has sub-sectors,” Olaghere explains. “There’s the financial part, the construction segment, the user segment etc. And a lot of proptech companies have begun to understand the importance of collaborating with stakeholders in the different sectors. This is what has helped with growth and development.”
Ademuson believes that most of the growth has been on the service or software end at the expense of the hardware end which has been left out. “We’re lagging on the production end of things, and we need to figure out how to build better and faster for our end users.”
In search of better growth, Eludire believes that the next step in proptech development is for the private financing sector to provide more liquidity for users.
“It’s always an expensive venture whenever you’re buying or renting a property. People use over 40% of their annual earnings for rent alone. We have to create and enable more liquidity in Nigeria, just like what Naomi and RentSmallSmall is doing. Because of solutions like that, more Nigerians are able to afford housing.”
Eludire also calls on the government to enforce licensing of trained real estate agents. “Everybody is a real estate agent in Nigeria, and most are untrained. There are no rules, no guidelines or etiquette that they learn; they’re all just there for the commission. We don’t even know how many agents we have because everyone is in it, and that’s why agents misbehave, extort renters, and misrepresent property owners.”
Nigeria has no federal law mandating the registration of real estate agents, but it does it have state laws or policies regulating their activities like the Lagos State Property Protection Law of 2016. However, none of these laws mandates registration for agents, so there is no recourse for tracking the activities of wayward agents.
Solving this problem, as Eludire explains, will help ease renters’ experiences in the sector.
In closing, Olaghere reiterates the importance of collaboration between the government, the proptech sector, and more importantly, the end users.
Source : Tech Cable