JOSEPHINE OGUNDEJI writes on the uncertainties in the real estate sector occasioned by the forthcoming general elections and the recurring trend of politicians selling off their property to fund campaigns
In a developing nation like Nigeria, national elections have a very huge impact on the performance of all sectors of the economy, including the real estate market. In the sector, for example, the actions and inactions of the current regime have created some uncertainty and anxiety in the minds of property developers and buyers.
Some of the economic indices that impact the sector include the skyrocketing interest rate that makes mortgages inaccessible for many; double-digit inflation, especially in the building materials market, which makes real property unaffordable for many, and others.
Consequently, the economic and housing policies of the incoming administration, especially at the federal level, will be key drivers of growth in the real estate sector for a minimum of four years.
There are already predictions by experts that the general elections may worsen the challenges in the construction and building industry. Experts had noted that the policies of the incoming administration would play a huge role in that regard.
Increased property sale
One of the recurring issues in the real estate market in the run-up to the elections is the way some politically exposed persons and their allies are selling off their assets to fund the campaigns.
This is not totally surprising given the volume of money required to fund campaigns. It is in the realisation of this that the Electoral Act, 2022 in section 88 pegged expenses for the presidential poll at a maximum of N5bn; governorship, N1bn; senatorial, N100m; House of Representatives, N70m; and state House of Assembly, N30m. No individual or entity is allowed to donate more than N50m to a candidate.
At the local government level, spending for the local government chairmanship seat is pegged at N30m, while that of the councillor is pegged at N5m.
Election campaign is no doubt an expensive venture, particularly, the presidential election, whereby candidates are expected in their own interest to tour the 36 states and the Federal Capital Territory. That does not come cheap, given that they are more likely to charter private jets and pay for logistics. At other levels, campaigns gulp a lot of money.
However, even at the maximum limit set by the law, it is still a lot of money in a country that has about 133 million poor people and an abysmally low per capita income of about $2,000. This explains why some candidates sell their assets to fund campaigns.
In some instances, especially out of desperation, such property can be sold below their capital value.
Speaking to this trend of politicians selling their assets to fund campaigns, the immediate past President, Nigerian Institute of Building, Kunle Awobodu, in an interview with Sunday PUNCH, stated that it was one way politicians and those contesting elections generate funds.
He said, “Election in this part of the world, especially in recent years, is an expensive venture. So, if you want to contest, you need to consider your pocket, because it is an exercise that gulps money. If you start without having sufficient funds, you may not be able to complete the race; hence, all the money invested amounts to waste.
“Owing to the need for sufficient funds, people resort to selling their property with the hope that once the election is won, the money can be recouped. The danger is that there could be a glut in the market, particularly when you have a huge number of property in the market to be sold.
“For instance, a piece of land that is supposed to be sold for N100m becomes N80m because many property are available for sale in the market. Hence, competition forces down the price. This has become a recurring issue.”
Regardless, Awobodu said it had the advantage of increasing activities in the sector.
“In the long run, it boosts the real estate sector as there will be a rise in the buying and selling of property. However, note that people don’t like to sell their property, particularly when they did not acquire the property for the purpose of disposing of them for such purposes, which consequently leaves them with no choice due to the surrounding circumstances,” he added.
The Chief Executive Officer, Africa International Housing Show, Festus Adebayo, said, “One of the most common things that can happen is indecision from buyers, because what we see around election time is uncertainty. The uncertainty is about what the results of the 2023 elections will be.
“The extent of the impact of the election on the real estate sector will be determined by who wins. Note that the fear will be removed as soon as the presidential election is over. The news that some politicians are selling their real estate assets is true because of the huge funds required to fund campaigns in Nigeria.
“Curbing the sale of personal property can’t be stopped except for those who are using real estate for money laundering. That is why the Economic and Financial Crimes Commission must come in to investigate the sources of the money used to acquire the assets.”
While highlighting the uncertainty that the forthcoming elections had created, the Chief Executive Officer, Hilltrust Limited, Damilola Ajomale, stated that the ripple effect of the uncertainty was a barrier that had consequently deterred people from going into joint ventures.
He said, “A lot of people are not going into joint ventures now because of policies that can affect the joint venture partnerships, like the relationship between the investors and property owners.
“In addition, once there is a change of government, this consequently leads to novel policies, which may be for or against property developers. Hence, a lot of developers remain calm till after the elections because when power changes hands, anything can change. It is also important to have in mind that real estate investment is a huge investment and just a little change can spoil a lot of things, leading to huge investments going down the drain.”
In an interview with Sunday PUNCH, a former Publicity Secretary, Association of Professional Bodies of Nigeria, Sam Akanbi, noted that during the period of politicking, there was usually an upscale level of property sale.
He said, “Many people want to sell to gather money to be able to fund their elections and that is why we call this period a buyers’ market. There are many sellers of assets but few buyers, so they have options, which is why you see distressed sales.
“Some of them (politicians) buy property in anticipation of selling them when the election comes. They know the problem of inflation, the money you keep in the bank today will have less value than money invested in real estate or forex. They know the value of property will always appreciate. We don’t have natural disasters in Nigeria; so, it will always appreciate. It is a time that truly politicians sell their property to raise money.”
According to him, some of them use cronies because they know registered surveyors won’t help them.
“Although I know no one will want to give you information about it, there is no politician in Nigeria today that will tell you he is selling his property openly, none of them. They use proxies because in the first instance, they don’t use their names to buy,” he added.
As a result of the elections, it is expected that Nigeria’s economy will go through a number of transitions. However, time will tell whether or not the real estate market will improve or not.
The Managing Partner, Ubosi Eleh & Co, Chudi Ubosi, said reports that politicians were selling their property at 50 per cent of their value to raise money for electioneering were mostly exaggerated.
He stated, “If indeed the politicians sell, most are done quietly. Rarely does it get into the market through professionals. It is always between friends, associates and others.
“Nigeria as of today still remains a very traditional and conservative environment. In fact, less than 20 years ago, it was rare to see an advertisement for the sale of property in the media as we see today. That sector is gradually evolving. Many times, property sales are frowned upon and seen as an indication that the vendor is in distress of some kind. However, it is something no one likes to admit no matter how bad, true or false. Hence, many property rarely come into the market through that route to professionals.”
Investing in polls
An estate agent, Jokotade Williams, said property sales, especially by the rich, were noticeable in every state. He said, “One of the major reasons why some politicians acquire real estate is for the purpose of selling off to fund election campaigns. I have had to help sell property of three politicians in Ibadan, Oyo State, recently.
“This is how it works; when the election is near, because people need to raise money for campaigns among other things, what these politicians do is to amass property before the election period. These politicians buy property in unpopular locations, particularly places that need repairs, like road repairs. You will see that as soon as this election is over, some politicians will go to places like Opic in Ogun State, Lekki-Epe among others, to buy property.”
According to him, once they buy property at ridiculous prices, by the next election when they want to contest, the value of the assets would have appreciated, and they will begin to sell them at high prices to fund their campaigns.
“Those in the Diaspora always buy these assets because they want to own property in Nigeria. However, these politicians do not come to us directly. Once I cite property available for sale, I ask around who the owner is, and at the point of sale, when the middleman takes me to the owner, it may turn out to be a well-known politician.”
In an interview with our correspondent, a well known politician from the ruling political party in the South-South part of the country, disclosed that he was on the ballot of the party and did not have enough funds.
“My name is currently on the ballot, however, due to insufficient funds, I am planning to sell off my estate in Abuja to the highest bidder as I have already got buyers,” he said.
There were reports in 2015 that electioneering was partly responsible for the crash in property values, as politicians reduced the cost of their assets just to raise money for campaigns.
A real estate consultant in Abuja, Ade Adenigbo, while speaking on how politicians were offering their property for sale to raise money for election, agreed that events in the property market had shown that apart from the economic crisis caused by slumping oil prices, more property became increasingly available in the market due to the elections.
Adenigbo had said, “Usually, about six months to elections, more property are up for sale by politicians so as to raise funds for campaigns. I can confirm to you that there is a surge in the availability of property that is offered for sale in the market now and the location of such property suggests that some of them belong to politicians.
“Out of 100 property for sale in the highbrow areas, more than half may belong to politicians, and maybe the rest to private individuals, developers, businessmen, expatriates, and so on, and most of them are finding it difficult to get buyers because of the cash crunch.”