Babajide Durojaiye, CEO/MD, Legrande Property Development Company, in this interview, takes time to explain the rent-to-own phenomenon, which his company, in partnership with the Lagos State government, has adopted in their current housing development project and how it can help to tackle the burgeoning housing deficit in the country. Excerpts:
In your current housing development project, Alexandra Courts Coastal City; you are adopting the rent-to-own policy. Can you shed some lights on it so that Nigerians can understand better?
Rent-to-own is not a common practice in Nigeria, but we are adopting it because we know it is the solution to Nigeria’s housing problem/deficit. Here is how it works. You know that as of today, we are talking about a 200million population figure and we know that the minimum family is about six. If you divide that by six, you are talking about 30million units in Nigeria. If Lagos alone out of that figure can provide one million units, it would have solved a lot of problems. The reason why it is very attractive is that there are a lot of tools in Nigeria that we are not exploring. We have the Federal Mortgage Bank of Nigeria (FMBN) that the government has put into place, but we are not using it.
But we also have it on record that the FMBN is underfunded?
That’s not really the truth. As I am talking to you, they have billions with them. But they are not being used because the average Nigerian has lost confidence in them. Nigerians don’t believe that FMBN can help out. That is one thing that we have been able to do with them. In this project right now, they have supported us with at least 300 units. It is just for us to bring the off-takers and they will finance them. Rent-to-own is only saying that you don’t need to carry N100million to go and buy a house. It is a waste of resources and a mismatch of finance. That amount can be used for 20 different purposes. That way, we can as well empower people and reduce the unemployment rate. Even the GDP and tax to the government will also increase. That way too, you will also discover that criminality will also reduce. For instance, these houses are now selling for N46million each, I don’t need more than N12million to own this house. The FMBN will provide the balance for you. Another thing with the FMBN is that they are giving out at single digits, seven per cent maximum and you have time to pay. It’s a very big opportunity for people. If you have N60million today, you can invest in different portfolios and it will yield so much for you. We are not utilizing the kinds of resources we have here in this country. If FMBN can finance about N70million to N80million for you, what then is your stress.
How can you relate that to the pension fund contribution?
People are just contributing pension funds, waiting for the time they will retire. Part of the N12million that you are supposed to provide from the N46million, pension fund is going to give you N5million out of it.
What are the other prerequisites to accessing the funds?
Once we the developers can give you a letter of offer for the building, they will pay the money while you are still contributing to the pension. But where rent-to-own is more important is that it gives you enough time and a relaxed mood as you have money to finance many other things in the home. Another advantage is that it is making a tenant a homeowner. Many of us spend 20 years paying rent. At the end of the day, the landlord will quit them. All the money you have spent for 20 years has no value. But with rent-to-own, you are creating value out of the rent you are paying. That means the money you have paid on this house is still your money. We sold Courtland Villa for N60million in 2021, it is N200million today. If you had bought it for N60million and paid N15million and FMBN finances N45million for you and within the past two years you are able to pay up to N20million, do you know that you will be owning up to 40 per cent of the current value of that house. That is how we can create wealth and make people not to be losers. Many old people don’t have something to fall back on after retirement. Secondly, the naira is depreciating. There is no amount of money you put inside the bank that will be worth anything. What it can buy yesterday, you need to add money to it to buy the same thing tomorrow. So, why can’t you lock it into a real estate where the value will appreciate?
What is the impact of the naira freefall on real estate?
It is killing many businesses now. In just two months, cement has increased by N1,000. If it’s increasing by that amount, what value are you
Which of your projects would you say you are most proud of?
We deliver state-of-the-art high quality projects. However, I would say that the Courtland Luxury Villa, Lekki-Jakande, is one of the best projects that I am very proud of. The sporting facility there is one of its kinds. It’s about 120 units and completed in 24 months. We have others in GRA-Ikeja, Sangotedo, Maryland, but the biggest of it all is this one in Ibeju-Lekki, the Alexandra Courts, which would be constituting 5,000 housing units in the range of flats, semi-detached, terraces and detached buildings. It will be accommodating both the high-end and mid income classes.
Is the Alexandra Courts also going to be of the same standard with Courtland Luxury Villa?
Actually, what brought about this project was that after the Courtland Villa was completed, there were complaints against the state governor that he was building for the high-ends alone and not for the people that voted him in. That put a lot of pressure on him that he had to invite us on the way forward. We then advised him to help them lock value on some of their schemes. They brought us and showed us about three of the schemes in some bushes. We chose this one because we know we have the capacity to unlock value for a beautiful estate. We then advised them to build a kind of mini city where all the infrastructures are in place. A good drainage, good road network, hospitals, schools, water supply, central sewage system, intercom and CCTV within each of the communities. We have a dual carriage way on each of the six roads. That was why they decided to partner with us on this project.
What is the total landmass for Alexandra Courts Coastal City?
It is on a landmass of about 400 hectares. But because of capacity and the funds that would be required, we decided to work within the shortest possible time, we decided to divide the project into two phases. So, the first phase of the project is about 215 hectares from which Lagos State is having 50 hectares.
Why did you choose to get the land directly from Lagos State government rather than from traditional land owners or Omo- Oniles?
Our experience with the Omo- Oniles has not been palatable. Our first project, the Mende Villa, was a very bad experience for us. We bought that land three times. We met genuine people, you know you can’t know all their families. We met them, paid, did a video of the meetings with them, started work on site where we spent close to N300,000,000 (three hundred millions), and somebody just came with an injunction that they were the owners of the land. Going through their documents, you discover they were bought from the same people about 30 years ago. But the Lagos State government is trying to correct that now. Before, once a property has been sold to a second person, it is difficult for you to know in Alausa because they will not do that due diligence for you. We were in court for 18 months.