Experts in the housing sector have decried the slow pace of housing sector development in year 2023, blaming it on macroeconomic, political and social environments. The experts have however expressed optimism of a better performance in 2024 with the appointment of Arc. Ahmed Musa Dangiwa, who is a professional, as the Minister of Housing.
The Experts explained that inflation, high interest rate and skyrocketing foreign exchange rates, dwindled household income, and poor fiscal policies hindered development. More disturbing was the impact of the general elections, which halted local and foreign investors, while fuel subsidy removal and cash squeeze further limited investment in the industry.
Consequently, new buildings were few, access to land was difficult, a good number of buildings collapsed due to poor construction, flooding rendered people homeless, while property worth billions of naira were demolished for several reasons including being illegal or unsafe for human habitation.
With an estimated 28 million housing deficit currently, Nigeria would require about N21 trillion to bridge the gap, as the country has only 25 per cent homeownership level for its population of over 200 million, which is far behind its peers including South Africa, whose level is 70 per cent for a population of 56 million.
Figures from the National Bureau of Statistics (NBS) indicate that Nigeria’s headline inflation rate surged to 27.33 per cent in October from 21.82 per cent in January 2023, a development that in turn impacted heavily on prices of building materials, housing and rents.
Prices of building materials like reinforcement, cement, sands, paints and sanitary wares rose by over 50 per cent, while the cost of buying new homes and rent went up by over 100 per cent in some locations. Many housing construction sites across the country were also abandoned due to the cost of construction that spiked.
The nation’s Gross Domestic Product (GDP) grew by 2.54 per cent (year-on-year) in real terms in the third quarter of 2023, higher than the 2.25per cent recorded in the third quarter of 2022 and higher than the second quarter 2023 growth of 2.51 per cent.
The performance of the GDP in the third quarter of 2023 was driven mainly by the services sector, which recorded a growth of 3.99per cent and contributed 52.70 per cent to the aggregate GDP.
The real estate services contributed 4.46 per cent to the nominal GDP in the first quarter of 2023 relative to 4.92 per cent recorded in the first quarter of 2022 and 5.62 per cent in the fourth quarter of 2022. The sector contributed 5.58 per cent to the GDP, while the construction sector contributed 3.36 per cent in the third quarter of 2023.
Industry players were disappointed with the performance of the sector, after the previous year faced high prices, low inventory and supply chain bottlenecks.
President, Real Estate Developers Association of Nigeria (REDAN), Dr. Aliyu Wamakko, said economic policies by the new government, affected professional practice and real estate businesses. He said that the negative impact of the economic policies was too phenomenal.
Wamakko said: “When there is a change in government policy, it is the private sector that suffers because the policy may not tally with the activities of the private sector. There was removal of fuel subsidies, cash squeeze during the election and removal of the fuel subsidy after the election, which affected the real estate industry. The cash situation incapacitated many Nigerians from buying homes.”
The REDAN president observed that indices such as inadequate finance for projects, interest rate, inflation and other economic volatility made the sector to underperform this year.
However, he believes that with the appointment of a professional as the Minister for Housing and Urban Development, there is high expectation in the industry.
“Despite this, we are asking the government to create an enabling environment for the private sector to thrive. There should be more participation of the private sector in the area of housing construction in the country. That will benefit the country and the sector will grow faster,” he said.
He noted that the industry has potential to grow the GDP as records show that it contributed about 7.4 per cent of the GDP, adding that operators only need opportunities to thrive.
Wamakko disclosed that REDAN has initiated moves to ensure professionals in the industry implement the National Building Code, which emphasises the use of professionals at every stage of construction to end pitfalls such as building collapse and hold professionals accountable in any eventuality.
“If there are no cutting corners in the building production process, there won’t be a record of any ugly incidents in the housing sector,” he said.
President, Nigerian Institute of Town Planners (NITP), Nathaniel Atebije, also noted that the performance of the sector was poor and below par.
He said although there may be no dependable statistics to assess the percentage performance of the industry, a cursory observation would indicate not more than 5 per cent, adding that it has not been impressive.
“The major challenges still remained access to titles and tenure, delays in procuring building plan approvals, inflated cost of development charges, and unaffordable cost of building materials. Government should recruit professionals, minimise involvement of foreign professionals, and engage reputable firms in the real estate sector.
“The brain drain and capital flight from Nigeria are counter-productive to the real estate industry. Both government and private investors should focus on engaging indigenous professionals,” Atebije said.
He said the government should intervene in real estate by establishing a fund like the establishment of Tertiary Education Trust Fund (TETFund) that is improving infrastructure in educational institutions. This, he said, will create a pool for public and private developers and investors in real estate.
“This will complement the mortgage institutions, develop local production of building materials, reduce taxes on building materials and ensure investments in the capacities of indigenous professionals. There should be improved access to unencumbered and developable land; such land should be properly designated and located in approved urban master plans and detailed site development plans made by professional planners,” he said.
The NITP president said there seems to be little hope of improvement because the factors affecting the delivery of real estate projects remain unchanged.
“Incomes of people are dwindling, families are expanding numerically through natural causes, urbanisation is still rapid, while cost of production of real estate is growing every day. However, with the doggedness of investors, there could be some improvements but to expect any meaningful or dramatic change will be daydreaming,” he said.
The President, Nigerian Institute of Building (NIOB), Alderton Ewa, said initially the government wanted to improve the sector but the poor economy, increasing cost of goods and services impeded achievement of such goals.
He said the ambition to improve the production of affordable housing was thwarted as most of the stakeholders embarking on such projects abandoned construction sites because of escalating cost of building materials and high exchange rate.
The President, Building Collapse Prevention Guild (BCPG), Mr. Sulaimon Yusuf, is optimistic of the future of real estate. “The housing sector is gradually improving and there is hope. On the part of the BCGP, we will have to redouble our efforts and continue with awareness programmes/advocacy to the local councils, states’ houses of assembly and local councils.
“Private developers are now getting more informed on the need to observe the rules in housing construction, which is going to shape the way they operate in the New Year. The collaboration in the housing sector among key professionals is also getting bigger; everyone has seen the need to work together and not in silo to have a better environment,” Yusuf added.
Source: The Guardian
