Mr Sunday Olorunsheyi the Co-Founder of Pertinence Group is a successful international business leader, developing businesses in different sectors of the economy. In this interview with DAYO AYEYEMI, he speaks on the potential of real estate investment and how to leverage the sector to create jobs for millions of unemployed Nigerians as well as the need to digitise land registry across states in order to unlock dead assets in real estate, citing the North American example.
How will you describe real estate investment in Nigeria?
There is no doubt that real estate is one of the oldest investments globally. It has proven to be an investment that can be transferred from generation to generation; so it’s trans-generational. When people think of creating wealth and choosing the vehicle for such, one of the vehicles you always find in the portfolio of every wealthy person is real estate. They don’t joke with it because it is not just a tool for wealth creation or prosperity, it is a tool that can help you build posterity such that after you have gone, generations after can benefit from it. So it is always a smart decision for every investor to look in the direction of real estate. In different countries, there are different approaches that people have been able to adopt for real estate investment; but I think we might need to focus on the context of Nigeria. Over the years, people have taken real estate as a form of investment in terms of creating wealth trans-generationally.
From our own experience over the years, we are always helping people at the lower cadre to access opportunities in the real estate investment’s space. For example, when we started investing in real estate in our organisation, the primary focus was looking at places where people called forest or places that looked far from the urban centre. We entered the real estate sector with the understanding that what you called a forest yesterday will become a city tomorrow. The city of today was yesterday’s forest. We have some places where we bought a plot of land as low as N50,000 but if you see those places now, counting eight to nine years, they are gradually developing, becoming habitable and people sell a plot of land in some of these locations as high as N1 million to N2 million. Imagine if someone that could not afford middle or higher level real estate invested N50,000 or N200,000 in those days. That is how wealth is being grown and this is how to grow real estate investment.
How can government and stakeholders leverage on real estate to create jobs for millions of unemployed Nigerians?
From an average real estate – a home, you will be shocked to build just one house and see the number of people that jobs can be created for. I mean just to build a small two-bedroom apartment. If for example the public and the private sectors pay attention to real estate as a tool for job creation, you will be shocked how the percentage of unemployment can be reduced drastically. Let’s look at people on private schemes like our company, we do real estate business but we have created a platform that could help unemployed youths be able to make money from such a platform.
They get engaged with people by helping people that are interested in investing in real estate, by standing as a link between the company and the people that are interested in real estate. So for a young man that left the university three to four years and has not been employed and could not take care of his basic needs, if that young man comes on a platform like what we have in our organisation, what he just simply needs to do is to find a way to convert their network into networth.
We tell that young man that if you pick your phone today, you have not less than 250 contacts on your phone. Of those 250 contacts, it is possible that you have up to 25 people that might be qualified to invest in real estate, no matter how small it is. All you need to do is to canvas them, talk to them about the opportunities in real estate. As they invest, you earn a percentage of whatever investment they make. You know that through this, we have been able to empower over 5,000 youths in Nigeria. So imagine if we have many other companies doing the same thing and are able to solve that problem, because that young man that has earned income, that is able to put food on his table, will take care of family members. We have given them cars, houses and helped them to travel abroad, all-expense paid trip. These are rewards of hard work and productivity. In our team today, we have over 25,000 people that work with us as field marketers and agents. All they do is to refer people and when they refer these people, they earn from whatever the people paid to the company. Out of these 25,000 people, we have over 5,000 of them that are active. It is of these numbers that 100 of them are about to travel abroad, getting cars and even some of them got houses in last business year that just ended.
If you move away from that, we want to go into construction segment of real estate. If government develops policies that make it easy for investors to push their funds toward real estate, the construction sector will grow by margin that will be far above other sectors. This is because when you are doing construction right from where you start with your land acquisition, you start needing people that are not employed to come in that value chain. After you have acquired your land, we are talking about documentations, you need the surveyor to survey the land; you need town planner to ensure that if you are building a city for example, it is properly planned; you need architect that will design for you; and you need building engineer to build. You also need the quantity surveyor that we help you take the cost estimates and many other people across the value chain. At the end of the day, you need an estate surveyor and valuer that will help you value the property. There are so many rooms along the value-chain of real estate. It is all start with ensuring that the environment is good enough and encouraging for people that want to invest in real estate to come in.
What do mean by good environment?
I have an experience in real estate not just in Nigeria but North America and Europe. And I have been able to understudy to see how the real estate sector runs in some of these developed climes. This makes me conclude that we need to do so much more to make the environment friendly enough for investors and serious people in real estate.
For example, I started a research recently into the number of people that owned property in Nigeria, that have valid title of their property and the result of that research almost made me cry. Even in places that people referred to as enclaves of the rich in the society, in some of those locations, you still have less than 20 per cent of people without title. It is that bad. In Magodo for example, I am telling you that less than 30 per cent of people living there has valid title for their property. What happens to people in Agege, Sango-Ota and many other locations? It is not like that in other developed climes.
What is obtainable in Europe or North America?
When it comes to real estate, it is always a Public Private Partnership (PPP) thing. The government is there to regulate. Government formulates policies that make that sector inviting to investors. That is why you see people coming outside of their countries to put money in real estate. This is so because when you want to buy a house as a young person, even a young graduate that has just left the university, all you need is that over the year, you have been taken the advantage of the credit system in that country and ensure that they gave you credit card, maybe starting with $1,000 and $2,000 and you have been faithful in paying as at when due. Ensure you have good credit record. Now that you get out of the university and start working, you can just walk to a bank and tell them that you are interesting in buying a home. To start with, they make it easier for first-time home buyer. So if you are a first-time home buyer, in some of these countries, you don’t need more than five to 10 percent of the value of that house. So you walk up to the bank and said I am interested in buying this two-bedroom unit. All the bank needs doing is to confirm the cost of the unit. If it is going to cost $500,000, as a young person that just left the university and working, all you need is to pay maybe $25,000, which is five per cent of the $500,000 as down payment. With that, the bank is robust enough to pay for that property for you and spread the mortgage over 20 to 30 years. That way, regardless of your socio-economic status, you can play in the real estate sector. But this is not easily accessible in a place like Nigeria. Our credit system is a far-cry from what is obtainable over there and these are things that could be driven by policies. Once you have the right policies in place, people will play by the rules.
So at the foundation level, Nigeria is almost missing it. This makes it difficult for developers to build because when the foundation is not strong enough, you are building at a risk.
How is it easy to obtain title over there?
Talking about title, governments in Europe and North America also make it easy because the processes are cleared and everything is digitised. Right now, I don’t know the number of states in Nigeria that is able to digitise the processes of perfecting title. I know Lagos State is trying to put up something hopefully very soon. And the challenge of people not having title is like you are killing the wealth of your people. For example, real estate is good but liquidity wise, you can put up a house for sale and might not leave the market for six months. Even if they walk up to the bank, no bank is ready to loan them money because of lack of title. So imagine the wealth tied up in real estate that remains untapped because of lack of title for the houses. The more people are building without title, the more the value of the wealth in the real estate sector cannot be ascertained. For a bank or financial institution to attend to you, the first thing it wants to see is title. It wants to see if government has certified that you are the genuine owner of the property. So this is one of the challenges affecting real estate investment.
What is your advice to government?
Government should help to create a relatively stable business climate that will help people plan and know that whatever projection you have, you can work with it and achieve your business’ goals.