Dennis Isong: What is the Future of Real Estate in Nigeria?

Within the last decade, a significant number of buildings have sprung up in Nigeria, especially in Lagos, Abuja, Port Harcourt, and Ogun State. Property investments have heightened with the increase in economic development around the country, and thanks to the increasing population, there are still property gaps yet to be filled. However, certain concerns are beleaguering real estate investments in Nigeria. These problems range from untamed inflation to political uncertainties.

Nigeria is a middle-income country with over 200 million citizens. Not only is the country the most populous black nation, but it also has the biggest economy with an estimated gross domestic product (GDP) figure at $514.076 billion. Real Estate investment is one of the easiest means its citizens get to partake in this wide economy.

The population has increased the need for improved properties. Personal preferences which are inclined to technological advances are yet to be met. Due to changes in traditional living conditions, youths look onto developers for residential buildings that meet their likings, citizens prefer apartments with modern adaptation to modern security frameworks. Locations near university sites are the markets with an insistent need for safe housing units. Students prefer safe and secured housing options near their institutions or at least a major business district. This is, however, yet to be actualised.

There are also gaps left unbridged in the office and retail property markets. Demands for luxurious office buildings have motivated developers toward developing state-of-the-art structures in business districts. The challenge of securing rights to properties in busy and astir locations is certainly a restraint. However, there are other strategic business locations with no presence of property investments.

The Influence of Bureaucracy and Technological Deprivation

Aside from the challenges of government approval, technology is yet to be fully utilized in the real estate industry. Unlike similar industries internationally which are powered by technology during purchase, management, and leasing, the Nigerian real estate market is outweighed by drawbacks hampering an effective use of technology. One such drawback is the poor supply of electricity. The few regions in the country where power supply is fairly available have the active presence of real estate investments. Given the global inclusion of technology in the property sector, the growth of the real estate industry in Nigeria hinges on overcoming barriers to technological strides. And once these challenges are overwhelmed, then will the future of real estate in Nigeria become more promising to accommodate many.

Foreigners Participation in Nigeria’s Real Estate Industry

The real estate industry in Nigeria might be flourishing due to the increased need for properties, however, the future doesn’t look so bright considering the restrained participation of foreigners in the industry.

Citizens have the right to invest in a country, and so are foreigners, however, there are restrictions to the business participation of foreign individuals and firms in Nigeria, and investors have to wade across stiff rules to meet eligibility. One of such rules is the Acquisition of Lands by Alien Laws, ALAL.

The law regulates the possession of landed property by foreign entities classified as ‘aliens.’  These ‘aliens’ are persons who are not native of Nigeria or corporate entities whose stakes are not majorly owned by Nigerians. Foreigners under this law have rights to landed properties but not without the approval of the governor of such state where the property lies. This consent, which must be in written form, precedes a statuary fee charged by the state.

By this law, a foreigner is only permitted to own and develop upon the land for a maximum term of 25 years. There’s however a clause allowing governors to adjust the terms. Summarily, as a foreigner, the procedure towards having an ownership right to real estate in Nigeria involves foremostly obtaining the lease documents, as the governor only grants rights to lands for a duration under his discretion rather than an outright sale. After payments, the consent of the governor should be sought after through the state government’s land management department. The burden of going through all documentation greatly hinders foreigners’ participation in the country’s real estate industry.

The Influence of Inflation and Political Uncertainty in Nigeria’s Real Estate Industry

The rapid increase in prices of goods and services is known as inflation. In Nigeria, the struggles brought about by the inflating economy are very apparent. Individuals, government, and corporate bodies groan daily of their inability to meet costs. As of May 2021, the Nigerian Bureau of Statistics estimates Nigeria’s inflation rate at 17.93%. Prices of properties are not immune to these changes; they obey market conditions but to the benefit of investors. Given that, in Nigeria, the value of the real estate increases regularly, investing in them today generates wealth for the future.

Another influence on real estate investment in the country is the political environment but its negative influence in the industry is minimal compared to other facets of the economy. Recently, there have been agitations for regional independence. If the motive of these agitations peradventure comes into fruition and the country has a need to divide, foreigners are entitled to see out the term of their property agreement. If the right to an acquired property is trampled upon, redress can be sought at a competent international court.

Like most countries of the world, Nigeria has been faced with challenges ranging from insecurity and economic downturn to political agitations. The effect very much is noticeable in the real estate industry. There have been occasional ups and downs, and as with businesses, gains have been reaped during these periods. With technological advances expected in the industry hopefully in the near future, various subsectors of it would be harnessed, which will in turn increase the margin of gains from the industry.

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