Although the real estate sector is a gold mine that plays an integral role in the Nigerian economy and also an investment that provides the greatest source of wealth and savings for many Nigerian families, it has its challenges and issues that are hindering its growth.
Just as in every investment, challenges are inevitable and unavoidable, the real estate sector is not an exception.
The Guardian newspaper states that even though some significant reforms have been made in the real estate sector, it’s still suffering severe challenges that require consistent and collective efforts to overcome.
Below is a list of the critical challenges in Real Estate…
1. Overpriced Houses
Majority of the houses in Nigeria are overpriced. Houses in major urban cities of Lagos, Abuja, and Port Harcourt are put up at outrageous prices.
Most especially Lagos state, which is also one of the reasons why most of these luxurious estates are unoccupied while some areas are crowded, some have very few populations. The less crowded areas are so expensive that even the middle-income earner cannot afford to live there, people now resort to these less expensive areas at the end making it overcrowded and congested thus leaving the overpriced properties for years without tenants or buyers.
This, in the process, causes a challenge in the real estate sector.
2. Land Registration Processes
The structural process of registering properties in Nigeria is one of the main challenges of the real estate sector.
Real estate agents, developers, and lawyers can relate to this challenge. The Land registration process in Nigeria is frustrating.
It can last as long as 6 months to 2 years with elongated procedures costing up to about 20.8% of the value of the property.
More often than not, you may have to spend more than the cash budgeted for your application to move from one office to the next. This automatically disrupts business plans, and highly discourage investors. It also affects development and construction thereby resulting in overpriced houses that the average Nigerian citizen can’t afford, making this yet another challenge in the real estate sector.
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3. Devaluation of the Naira
The continuous fall in naira is also a major challenge the real estate economy is facing.
This is because the Nigerian construction industry depends mostly on the importation of raw materials and equipment used for construction. With unstable naira, the cost of purchasing these raw materials increases and so the market bears the brunt.
It has been suggested severally, that materials should be produced locally so that properties would be more affordable. But how many people will be ready to buy these locally made materials?
4. Omo – onile
Even though the Lagos state government has tried to clamp down the activities of the omo-onile also known as land grabbers, through the properties protection law and by issuing a 21- year jail term to any one of them caught, they are still a major challenge to the real estate sector as they still cause havoc because their operations and fraudulent activity has not been fully curbed.
They appear in different forms whenever construction work is ongoing demanding and extorting money from buyers and developers, and refusal to pay these fees usually lead to violence, destruction of property, compulsory stop of work, e.t.c.
These people have driven away landowners and overtaken lands that do not belong to them, they specialize in selling lands to more than one person especially yet to be developed lands increasing land controversies and conflicts in Nigeria.
All of these scares potential investors away and slows the progress of society.
To solve this problem, the government should put their feet down and set uniform laws in place, in every part of Nigeria to totally eradicate the terrible activities of omo-onile in Nigeria.
6. Lack of Competent Builders/ Contractors
Many builders and contractors used are inexperienced, they mostly use bad materials to make extra money for themselves.
The cases of collapsed buildings in Nigeria in recent times is often as a result of developers that failed to adhere to building construction standards.
Adequate supervision of workmen can reduce these cases.
7. Taxation
The real estate sector also experiences the challenge of paying multiple tax and levies. This shouldn’t be so as real estate plays a crucial role in the economic development of the country and these heavy taxes can affect its growth.
For instance, investors are required to pay income tax, building plan approval levy, property tax, development levy, e.t.c
The government should try to reduce these tax rates on the real estate sector to facilitate it’s growth as it is capable of contributing meaningfully to the economy.
Finally, All of these issues listed are major hindrances to the most transformative sector of the economy, if these issues above are not addressed, it would be difficult for investors both foreign or indigenous to invest.
Taking deliberate steps to curb the effect of these challenges can deal with these issues.