The real estate industry is expected to experience growth as a result of the new government’s policy changes and increased investor confidence, according to industry experts.
The experts, who spoke on a panel session at the DETAIL Real Estate Business Series in Lagos, said some major reforms were expected under Nigeria’s new administration, including tax credit initiatives, lower interest lending, unification of the foreign exchange rates, and economic growth through higher oil production.
They claimed new reforms and macroeconomic factors such as interest and inflation rates would have a significant impact on the real estate sector.
The panel discussion was organised by DETAIL, Nigeria’s first commercial solicitor firm to specialise exclusively in non-courtroom practice.
The theme of the session was ‘Unlocking Opportunities: Real Estate Financing for Success’.
The session featured MD/CEO, Urban Shelter Ltd, Saadiya Aliyu Aminu; Executive & Head, Real Estate Finance at Stanbic IBTC, Tola Akinhanmi; CEO, Veritasi Homes Limited, Adetola Nola; and MD/CEO, Cardinal Stone Trustees Limited, Ereifemi Akeredolu and it was moderated by Associate Partner at DETAIL, Olawunmi Alade.
Nigeria’s real estate sector grew at 5.31 per cent in the first quarter of 2023 (Q1 2023), making it the country’s fifth largest contributor to GDP growth in the quarter.
The experts said the sector had the capacity for further growth, noting that there would likely be a boost in demand for the residential asset class following approval by the National Pension Commission for the use of Retirement Savings Account as equity contribution for mortgages.
But to drive this growth, they said regulatory reforms such as direct financial interventions were required to enhance players in the sector, similar to the support given to the agriculture and power sectors by the Central Bank of Nigeria.
There is also the need to simplify and remove bureaucratic bottlenecks in processes for owning and transferring ownership of the real estate in Nigeria and improving land management systems. This will require amendment of laws and regulations guiding real estate, such as the Land Use Act.
On financing, the discussants observed that there was a risk of mismatch between the duration for real estate projects and the duration of financing.
They, therefore, advised that there should be a healthy mix of debt and equity financing options, as against relying on a single financing option for projects.
Amid the stifling cost of funding real estate projects, the experts said that bank loans were better used as bridge financing.