In this interview with EDIDIONG IKPOTO, the Chief Executive Officer, Global Properties and Facilities International, Muhammed Balogun, speaks on some of the challenges bedeviling the real estate industry
The Lagos Business School Alumni Association just hosted a seminar tagged “Real estate for economic development.” Why is this important?
There are two major factors. One is that we have remained flat in the last 24 quarters in terms of our contribution to the country’s Gross Domestic Product. Other countries in our category are doing double digits, 16 per cent, 18 per cent, but we are doing 5.3 per cent or thereabout. The second is that most times we have not been able to drive how real estate should be done.
Have we been able to explore the potentials of the industry in Nigeria?
No. Not at all. There are a lot of opportunities. We have to create new areas using Vegas, Dubai, as an instance. So there are huge potentials, but we have challenges in the industry. Some are government driven, others are private sector driven.
The underlying fact is that the two have to work together for the industry to be maximised. Most times the players in the industry are challenged and are struggling. If you go to Ibadan today, you find people who are typically developing in Lagos but are now moving to Ibadan to develop, and we are making the same mistakes that were made in Lagos in Ibadan.
Would you say over-regulation is one of the challenge posed by the government?
Well, I would not call it over-regulation. We don’t even have regulations. I always challenge people in the industry. If you are developing your property in an area, you build an estate, government taxes you. But the question we have not asked ourselves when you are going to that area is that, was there a conversation with government on what government infrastructural plan is for that area? If you want to do development, government will say this place you want to develop, the infrastructure we planned for it cannot carry your development. So you can’t.
Then if you have to develop you also have to take into consideration the ‘Omo Oniles.’ That’s one section in essence. Develop low income houses, social housing for the people in that area. If you go and look at Golf Estate in Port Harcourt. He was given a swamp. The former governor of the state just pointed to a swamp and said go and see whatever you can do.
That place has become a city now. There are seven estates there, apart from his own; and he did the road. He didn’t even wait for the government to do the road. I got involved with the project. So, I know the full story. The local guys who worked on that project are now working with him outside the country.
Is the lack of regulations the reason for incessant building collapse in the industry?
That’s one of them. Like I said, if somebody is developing, there are always two sides. There’s what we call fiduciary responsibilities of a developer. Somebody gives you money to develop, you must ensure you are doing the proper thing. The guy who builds a structure that collapses could be because he wants to cut corners. Why is government not holding them accountable?
Why are you building bad structures? Have we asked that question? Why must government be the Guinea pig? You that is investing or developing a property, why can’t you do it correctly? Why must you wait for government to come and say do it right? Go and check every building that collapsed, the developers cut corners. It is not natural disaster.
Is it possible that they are cutting corners because of Nigeria’s economic situation?
It is cheating, fraud, corruption on the private sector side, it is not the economy. So, if you want to build a 20-bedroom apartment, you should ask yourself, who is going to take it? How much can they afford? What kind of building do I need to build? A lot of people do not think so. They just see land and go and build.
So, that’s why they cut corners because they know they have to wait 18 months, 20 months before they find somebody to take. But if you build for somebody who is ready to take your property, then you’ll build well because people are ready to pay. Some times you find adverts saying buy a house and pay N20,000. Some will say you can pay in 32 months. Is that possible?
If this is not possible, how will the low income earner own his own home?
What I’m saying is that, if you are developing, the fundamentals of developing is that – who are you developing for? Don’t develop and start advertising for buyers and looking for people who do not have. If you are developing a block of flats, don’t wake up to go and develop because there is land, and then you start looking for people. Ask first, what do these people want.
You know in Nigeria we say we have 20 million housing deficit, but do you know how many unoccupied properties are available in Nigeria? Have you correlated the two? Why are they unoccupied and we are still looking for houses? Because people are not building for needs, for requirement, they are just building because they just feel like building, and when they build, it takes a long time to get returns.
The second thing about development is that you find a lot of people who have free money. If you are investing with debt, you do it properly, because you must pay the money back, but if you are not, you just go and plunge money into it.
For the low income earner, there are different categories of housing. There is social housing. There is low income housing. There is nothing like affordable housing. It should be called affordable living.
What makes you say there is nothing like affordable housing?
This is scientific. The major component of development is land. The second component is the construction materials. You find out that most times, development for low income, for price sensitive category of the market is developed far away. Those people, where do they work? They live in Sangotedo and work in Victoria Island. That’s why I said affordable living. In the olden days. If you work in any of the companies in Apapa, you can walk home. You don’t even need bicycle. That’s the way it was developed before. If you develop like that, cost of living will reduce because at the end of the day, If you earn N200,000 a month, If your disposable income is N70,000, of the N200,000 housing is not there. If you want to buy a house, is there any house you can pay 70k every month to get? How long will you pay?
So that’s the challenge, 80 per cent of people that require housing are in that category of people who earn N200,00. When I see some of the adverts, people are asked to pay N1.2m. How will they pay 1.2 million for a house every month? That’s the dimension and it is because most of these people are building without sense, they are not looking for what people require.
Who are you building for? If I am going to build low cost housing, the first question I’ll ask is where do they live? Where do they work currently? In Mexico there’s a place where they built 600,000 houses and nobody is there, why? Because it was built away from where people are and they wanted to do affordable housing, built by government, nobody is living there because people are not there.
Most times, the private sector, they will just find money, they see land and develop, without asking the people there, how are we going to get water in this area, how are we going to do roads in this area? We are thinking of building residential, should we wait, or should we walk away? What the Federal Government is doing today for tax can be done, so instead of paying for tax, let’s convert the tax. Lagos State is doing that in the Lekki area. Instead of paying tax, the developers convert it and use the money to do the roads. That’s what we should do.
We had a session in Eko Hotel, the lady that came from Cairo said they are doing a similar thing, and it is in partnership with the government. We just tell the government this is our plan, and the government says okay, this is the area we want to develop now, and these are the things we need in this area because we want to move people there. If we don’t have that conversation, we will continue to have crisis and the industry will remain the same.
