Governments have been urged to pay more attention to addressing the regulatory and legal issues in the real estate sector to promote economic growth and development.
Besides, the government was also urged to create an enabling environment for the private sector to operate in the sector.
This advice, the principal partner, Ubosi Eleh and Co. (a firm of estate surveyors and valuers), Mr Emeka Eleh, said would encourage the private sector to meet the supply side of housing, while government should concentrate more on stimulating demand through striving for a robust economic growth and deepening mortgage penetration in the economy.
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Eleh advised during a webinar on “2024 Budget and Real Estate Sector: Implications” in Lagos.
Real estate values
Eleh expressed optimism that a diligent implementation of the budget would have a positive impact on real estate values.
“Already we are seeing values nudging up across the country especially in big cities like Lagos and Abuja. This is expected to continue because the expected economic growth will put more investable funds in the hands of people.”
Justifying his position, he explained that real estate remained a better hedge against inflation and foreign exchange risks.
«It also remains the asset class of choice not just here but globally. It is a simpler and much more understood investment option.
«There are also fewer investment options locally. Finally, at a time when movement of funds locally and internationally is becoming more and more difficult, real estate tends to be a better «absorbent» of such funds,» Eleh said.
2024 Budget
Eleh, a past President of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), recalled that 2024 Budget (Appropriate Bill) termed “Budget of Renewed Hope “was signed into law by the President on 1st January 2024 with key priorities on: Defence and internal security, job creation, macro-economic stability, improved investment environment, human capital development, poverty reduction and social security.
He pointed out that the allocation of N99.9 billion to the Federal Ministry of Housing and Urban Development (FMHUD) ‘is like a drop in the ocean’ considering huge housing needs in the country.
Analysing provisions of the budget, he said, ” Looking at the budget in totality however gives room for some hope: Expected expenditure of N9.99 billion on capital projects; the sum for capital projects will be about N11 trillion when you add the portion from statutory transfers; proposed massive infrastructural works to the tune of N1.32 trillion cutting across several ministries like works, transport, aviation and water resources.
“Between the Supplementary Budget and the 2024 budget (both are running concurrently till March), the works ministry will rehabilitate and construct about 2,254 roads and bridges across the country.
“Road construction alone in the 2024 budget is allocated N548.56 billion while the total budget for the Federal Ministry of Works is about N657.2 billion.
«Taking together and fully implementing the huge expenditure on capital projects may be able to create a fair measure of economic activities across the country.»
However, he identified a huge funding challenge arising from government revenue projection for the year, which, he said was well below the budgeted expenditure, leaving a deficit of about N9.18 trillion.
Challenges
He listed challenges confronting the sector to include huge housing deficit of between 15 to 23 million units; huge infrastructural deficit estimated at $3trillion; a high-interest rate of about 25 percent, high inflation rate of 28.9 percent, devaluation of the Naira, high costs arising from the removal of fuel subsidy; very poor mortgage penetration; high poverty rate; reliance on imported building materials, and reliance on traditional building methods.
Others are land tenure constraints due to non-review of the Land Use Act (LUA) high land transfer charges, cost and time; poor capitalization of Federal Mortgage Bank, Federal Housing Authority and other government agencies in the real estate sector; dwindling technical competence amongst the artisans; legal and regulatory issues; Tenancy Laws and Power of Possession Laws.
He also mentioned a very poor enabling environment for the private sector, pointing out that despite all promises, the last administration could complete only about 5,000 housing units in eight years.
Considering the huge funding constraints, Eleh concluded that government alone cannot solve Nigerians’ housing and infrastructural problems.
“Government should do more to address the regulatory constraints affecting the sector and create a conducive environment for the private sector to operate.”
According to Eleh, more emphasis should be on jumpstarting the local manufacturing of vital building materials, adding that revitalization of the Nigeria Building and Road Research Institute should be a key project.
He called for the promotion of training schools or centres for local technicians or the return of the technical colleges.
He also suggested the deepening of mortgage penetration, saying: «One way to do this is to grant mortgages to civil servants and have the private sector do the construction -a more efficient process.
«The private sector can deal with the supply end of the market while the government should stimulate the demand end through giving its staff mortgages.»
The experts want the federal government to work with the states to review the Tenancy Laws and Power of Repossession Laws.
The law review, he said would encourage investments in the sector.
«Government should work for the review of the LUA to amend the provisions that amount to constraints like the consent provisions and the process of obtaining Certificate of Occupancy, and work for a robust land reform process that will provide Nigerians with title to their land,» he said.
Drivers
Talking about drivers to look out for, Eleh stated that consistent effort to attain the projected 3.88 percent growth rate would require implementation of appropriate fiscal and monetary policies to check inflation, lower interest rates, improve the exchange rate of the Naira, and improve the sovereign rating to make it easier for FDIs to come in.
Besides, he said that diligent implementation of the budget, especially the execution of the budgeted infrastructure works and generation of robust economic growth, would reduce the poverty rate and put more people within the bracket that can qualify for mortgages.
He noted that governments planned to fund infrastructure development through private capital, adding that the ability to curb the high level of insecurity across the country will in turn aid the projected economic growth.
“Global oil price stability and our ability to maintain oil production at or above the projected 1.78m barrels a day,” he said.
Reality
Eleh explained that considering the myriad of problems and huge housing deficit in the country, the 2024 budget won’t lead to the construction of enough houses, noting that real estate sector “is not one of the priority projects of the budget cycle.”
“Even if all available allocations for the sector are invested in housing construction alone, it still will just amount to a drop in the ocean due to our huge housing challenge/deficit,” he said.
