Akintoye Adeoye is the Deputy President of the Real Estate Developers Association of Nigeria. In this interview, he says a robust mortgage system will drive home ownership
Has there been an improvement in property development since the country exited recession?
There has been a bit of improvement but not much. The business environment cannot be said to be good now but it is fair, particularly for products selling below N25m with very good payment plan. Although some investors have yet to feel the impact of a rebound in the economy, it is getting better; there is improvement but within a certain property class, those that can be termed affordable by certain class of people.
How much longer will it take for the industry to bounce back?
Basically, what the sector really needs is mortgage, because the way we buy property in Nigeria as cash-and-carry is not the way to go and the economy can no longer sustain it. We cannot experience much improvement in the real estate industry until the mortgage sector is developed and people can get mortgages at single digit interest rate. But if we still continue to buy property like every other product, with cash, then recovery is not in sight at all for the industry.
Generally, what is the current state of real estate development in the country?
Generally, the sector is recovering, people are moving back to sites and developers are coming out with new products, particularly two and three bedrooms, which are selling very well in most areas like the Lekki axis, especially those with good payment plans.
So, generally, the impact of the general recovery of the economy is gradually having effect on the sector.
What products are currently popular among real estate investors?
The trend now for buyers, especially medium income earners,is for well-designed two and three-bedroom functional apartments. And for those who are up there, so to say, the upper-middle class, they are looking at four to five-bedroom compact duplexes but not exceeding N50m.
A lot has been said about affordable housing but developers still tilt towards high-end products. Is there anything REDAN is doing about this?
What we have discovered over time is that affordability is a function of how the product is being financed. Even if you sell a property for N5m, how many people can afford to buy it?
So, the direction for affordability now is affordable financing of products. If products are financed in such a way that they become affordable for the buyers then, we talk about affordability; but when we tie affordability to category of certain or particular prices, for example, if we say products of N5m to N15m are affordable homes, yes, but how many people can bring out such amount of money from their incomes to buy these products?
But when we sell properties of N5m, N10m or N15m and there is a mortgage system in place for whoever wants to key in to do so, then it becomes affordable for people in that segment or class of the society. Then, we can call it affordable housing.
But in the absence of a working mortgage system, what developers are doing on their own is an initiative that we call payment plan. This initiative allows people to pay for properties of their choice for a period of time. Some prepare payment plans of 48 months; some have gone ahead to prepare payment plans of 60 months, which is about five years; and some have come up with incremental development where they tell buyers to pay within a period the houses will be ready and handed over to them.
For instance, if it will take three years for the house to be ready, if you pay 20 per cent, the developer will finish the foundation level and another 20 per cent can take the house to the lintel level. This may not be very good for houses that are not bungalows, but what developers are doing now is to create a quasi-payment plan for the off takers of the houses they develop.
Sometimes, they even allow people to take possession of the houses at a particular stage. For example, if you are paying within 60 months, and you are able to pay up to 50 months, you can move into the property and continue to pay, which is like rent-to-own as it were, but not a typical rent-to-own as we know it.
Some developers have even come up with offers that allow subscribers to pay between 20 and 30 per cent deposit, move into the houses and spread the balance over four to six-year period.
Some people are looking to be homeowners, but do not have the money, as a developer, what is your advice for them?
I will advise them to join cooperative societies or put a cooperative system in place. As a cooperative society, people can put together what they have. There are many products from the Central Bank of Nigeria and the Federal Mortgage Bank of Nigeria to support cooperative societies to own homes, and I think there are other windows even in the international market that support cooperative home ownership.
So, where a group of people is working together; for instance, people of the same community or the same sector, they can come together as a cooperative society to make home ownership easier.
What is REDAN doing about some developers that defraud people?
REDAN is in full collaboration with Economic and Financial Crimes Commission as well as the Independent Corrupt Practices and Other Related Offences Commission. These agencies of the government have actually trained some of the executive members of REDAN on fraud and how to identify and report it. What we usually do is to encourage subscribers to contact the association if they notice any case of fraudulent activities by any developer registered with the association.
They should contact REDAN and if the developer is registered with the association, it will start with the internal disciplinary system put in place; but if crime is established, we will hand over such a developer to the appropriate quarters. Punch