The real estate landscape in Nigeria, particularly in Lagos, is experiencing seismic shifts as the Naira continues its downward spiral against the Dollar.
Recent findings indicate that the sharp depreciation of the Naira is wreaking havoc on the operations of real estate developers, pushing housing costs to unprecedented heights.
According to industry insiders, the relentless devaluation of the Naira has forced developers to recalibrate their pricing strategies, with some benchmarking sales and rental prices in US Dollars. However, this measure seems futile in the face of the recent surge in exchange rates, leading to exorbitant prices in Naira and a steep decline in patronage.
With over 80% of construction inputs being imported, the industry is highly susceptible to exchange rate fluctuations. As a result, the cost of building materials has skyrocketed, further exacerbating the affordability crisis in the housing market.
Mr. Debo Adejana, CEO of Realty Point, lamented the challenges posed by the exchange rate instability, stating that installment payments are no longer feasible due to the rising Dollar rate. This sentiment was echoed by Mr. Adekunle Abdul, MD of Metro Group of Companies, who highlighted the increasing reliance on diaspora investors, with more than 50% of clients now coming from abroad.
The impact of the Naira’s depreciation is palpable on ongoing housing projects, with delays and cost escalations becoming the norm. Engr. Adekunle Raphael-Monehin of Tobykemsworth Investment Limited cited a staggering example, revealing that the cost of a flat in one of their Lagos projects has surged from N6.5 million to N16.5 million due to the exchange rate fluctuations.
As the real estate sector grapples with the fallout from Naira depreciation, stakeholders are calling for urgent government intervention. Financial analysts warn of dire consequences if the trend of dollarization persists, urging policymakers to enact measures to promote the use of the local currency and stabilize the exchange rate.
In the face of these challenges, Clifford Egbomeade, an Economy Analyst, advocates for strategic policies to boost confidence in the domestic economy and mitigate the adverse effects of dollarization. With mounting pressure on the Naira and inflationary pressures looming large, decisive action is needed to safeguard the stability of Nigeria’s real estate sector and overall economic well-being.
Source: Africa Housing News