By Echeburu Oby
Nigeria’s real estate sector is developing at a great pace. Governments at all levels are cognizant of the role of real estate development of Gross Domestic Product (GDP).
Notwithstanding, that there is a limited source of funding for developers in Nigeria. Since real estate development is capital intensive, it is unavoidable that developers would need external support in financing their project. But looking at the huge interest rate of most commercial banks which stands as a big turn-off for most developers.
Government agencies and private companies now have procedures in assisting their staffs in owning personal properties through cooperative societies. It is only sensible for employers to build their own estate to accommodate their employees rather than pay them housing allowance throughout the period of their employment. Subsequently, real estate companies and professional in the real estate sector are on the rise daily. However, trials facing the sector have hindered it from realizing its true capabilities.
The administrative process of allocation and cataloging of charges on land is a weakness to real estate growth.
Most times, a developer’s approval applications would pass from one office to another which takes several weeks to months and some years and by the time the needed approval is gotten, the developer may have lost his source of funding or may have incurred huge interest on the loan obtained for that particular project. That may interrupt the developer’s business plan and result in excessive cost of construction and high price for the properties.
However, bribery and corruption have an undesirable effect on the sector. There have been instances where some developers who have not satisfied the requirements for allocation of land were granted allocation while those who were qualified been denied.
In a bid to do away with system of government, bribery and corruption that has been associated with land development, some states have established some particular agencies for the entire land process.
Lack of compliance to the governing and environmental laws is one of the major causes of the numerous reports of slums in the country.
Another issue that affects Nigerian’s real estate development is thedevaluation of the Naira. The continuous fall in naira is also a key challenge that the real estate economy is facing, because the Nigerian construction industry relays mostly on the importation of materials used for construction. With the incessant fall of naira, the price of purchasing these materials increases and as such the market suffers.
Few developers have advised that materials should be produced locally in the country so that they would sold at cheaper rates because the exchange rate for foreign products are not friendly, with this, properties will be more affordable. The government should emphasize on the production of our locally made products.
The real estate sector also experiences the challenge of paying various tax and levies. It shouldn’t be, because the real estate sector plays a critical role in the economic development of a country and these taxes would affect the sectors growth. It is important for the government to reduce the prices of these taxes on the developers so that foreign investors can invest into the countries real estate sector.