In recent times there has been a consciousness of the role of real estate developers and real estate development by Government at all levels in relation to the growth of their respective territories. And despite the economic meltdown the real estate sector is still evolving at a tremendous pace.This article examines the challenges of real estate developers in Nigeria.
There is no doubt that other budding sectors of Nigeria have provided a veritable platform for the landslide emergence of the real estate sector in Nigeria. Real estate leverages on its illustrious brothers such as tourism, telecommunications and agriculture to thrive.
It is only wise that employers build their own estate to accommodate their employees rather than pay them housing allowance throughout the period of their employment. Consequently, real estate companies and professional real estate developers are on the rise. However, challenges facing the sector have hampered it from realizing its true potentials.
One of the existing bottle necks that hinders real estate developers in the country is the bureaucratic process of allocation and registration of charges on land. The people at the land registry are culpable of foot-dragging which occasionally causes unwarranted delays. A developer most times watch on as his application passes from one office to the other for as long as possible and by the time the needed approval gets to him, he is cash-strapped.
This in itself is a turn-off for most real estate developers cause it invariably disrupts their business plan.
There is also that evil spirit called corruption that has adverse effect on real estate development in Nigeria. Corruption which is a malignant growth that has eaten deep into every sector of the economy has not spared the real estate sector from his wrath.
There are instances where developers who have not satisfied the preconditions for allocation of land are granted allocation while those who are qualified are denied.
The increasing rate of collapsed buildings in the country can also be attributed to non-compliance to regulatory and environmental laws. Some staff of regulatory bodies prefer to take bribe rather than ensure that developers obtain the requisite permits and conform to statutory construction standard.
Not forgetting the naira slump against the dollar which ordinarily should be a source of concern to any real estate developer. The reason for this is simple;some foreign developers peg the cost of construction and the value for selling developments on land in United States dollars (“US dollars”) while they charge their clients the naira equivalent. These developers would encounter no hassles if the purchase price of the developments paid in naira can be converted to the anticipated equivalent in US dollars. But the unstable price of crude oil and the continuous fall in the naira often results in a loss for the developer.
Also, there is a limited finance for developers in Nigeria. There is less funding for real estate development in the country for developers in Nigeria. Real estate is capital intensive. A developer who wants to go all out to do his business all alone may not last in the business. It won’t be long before he tires out.
There is always a need for external support in form of loans to fund real estate projects. However the huge interest rate of commercial banks is discouraging for most developers. The long list of developers on the waiting list for Federal Mortgage Bank loans and other Federal Government loans is mind-boggling. There is little awareness on alternative source of funding and procedure for obtaining foreign loans for real estate development. Though the recent Nigerian Mortgage Refinance Company established to bridge the funding of residential mortgages gives stakeholders in the sector a glimmer of hope, its effect is yet to be felt.
The duplication of roles between state and federal regulatory bodies is a stumbling block in the smooth running of the real estate development. For instance in the Federal Capital Territory, a developer within the territory may apply to the Federal Capital Territory Fire Service (“FCT Fire Service”) for a Fire Service Design Permit and still be accosted by the Federal Fire Service for the same permit. In the same vein, a developer may obtain an Environmental Impact Assessment Report (“EIA Report”) from Abuja Environment Protection Board (“AEPB”) yet the National Environmental and Regulations Enforcement Agency (“NESREA”) may still approach the developer on the same subject matter.
There are also some parts of the country whose landscape have been characterized by immense unrest, insurgency and consequently the lands in such parts of the country will rather welcome bloodshed than any real estate development. The North-east zone of the country is a big no-no for any real estate developer that loves his life. In fact what kind of real estate business would anyone want to do in a place like Maiduguri or even Damaturu? Who would be your clients? Ghosts or Boko Haram members? The Niger-Delta region of the country is also not left out of the insecurity issues that leads to instability in business.
Similarly, in some states, there are no clear procedures for the legal incidents associated with real estate development. For instance, in the Federal Capital Territory, there is no procedure for registration of easements on an allocated land. This may create problems for a purchaser who may not know the nature of encumbrances on a piece of land before acquiring it. Again, in some states, there is no procedure for exercise of government’s power of eminent domain over a portion of land allocated to a developer.
Luckily, the government, its agencies, the financial sector, local and foreign investors and even developers are taking deliberate steps to mitigate the effect of these challenges on the sector.
The menace of the Boko Haram sect is fast becoming a thing of the past and hopefully sooner than later the bottlenecks would only serve as tales on how much we have grown from what we use to be.