‘72% of Lagos residents are tenants spending 50% of their monthly income on rents’
ROLAND IGBINOBA is the President/CEO, Pison Housing Company, and the Executive Vice Chairman, Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD) which published recently a report on The State of Lagos Housing Market. In this interview with CHUKA UROKO, he speaks on the landmark report and the inspiration for its publication. He also highlights the housing demand-supply imbalance in Lagos and the challenge this poses for the residents. Excerpts
Pison Housing Company is one of Nigeria’s leading real estate research and consultancy firms with high profile clients. It seems there is a partnership between it and Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD). Tell us about this partnership
We at Pison Housing, a real estate research and consultancy firm, have recognized the need to simplify the way people search for information on Nigeria’s real estate market. We create research-led solution for investors, provide current market based information and promote transparency within the real estate and allied sectors. Information can be accessed through our web portal; Real Estate Information Center (REIC) and our report series— The State of Lagos Housing Market.
Pison Housing Company also helps individuals and corporations design financing structures, instruments and strategies that assure excellent yields while aggressively reducing risk. In 2015, Pison Housing was awarded Best Housing Finance Advisor by the CFI.co. The CFI judging panel was struck by the amount of effort consistently put in by Pison Housing to map, segment, analyse and classify the Nigerian residential and commercial real estate markets. The company has also been engaged in research by the World Bank and the International Finance Corporation.
The partnership with Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD) is such that Pison helps the foundation to publish its report. The foundation is strictly set up for social capital, advocacy and policy work in the real estate and urban development space. I had to go the route of foundation since it is very expensive and unsustainable to do research on a profit basis. And since we had to provide market information on the complex Lagos housing market, we needed a way out to make that happen.
Recently, RIRFHUD published a landmark report on The State of Lagos Housing Market Report; what inspired this report?
A lot of informality has gone into the property market and there is no singular, up-to-date and comprehensive report guiding investors, lenders, developers, government and other stakeholders on the direction in which the real estate and construction market is headed. Market participants need to understand critical success factors in today’s market such as consumer behaviour, changing market conditions, micro-economics, trends and recent developments in residential housing.
Such a need prompted us to take a step by launching The State of Lagos Housing Market Report which provides facts on Lagos Housing Demand and Supply, and the House Price Index. It also examines the affordable housing projects, government and private sector involvement in housing delivery and offers intelligence on the luxury, middle and low income markets. We have adopted a thorough approach to gathering vital information, combing through data from general to specific, state to town level and discovered more actionable insight that investors can leverage on to make the best planning decisions.
Lagos is a complex, densely populated city. What, in your opinion, is the greatest housing challenge the residents face?
Lagos currently has the most vibrant property market in Nigeria but, sadly, home ownership is still at less than 20 percent. With a daily intake of 3,000 immigrants, the housing supply has failed to keep up with rapid urbanization and population expansion, especially in the low income market. The housing demand estimate is roughly 4.4 million units while the estimated current supply of housing in the state is 1,417,588 units; this leaves a gap between housing demand and supply at roughly 3 million units. Output is relatively low although there has been increased participation in housing projects from both the government and private sector.
The extent of the housing shortage in Lagos is enormous and the deficit is both quantitative and qualitative. 72 percent of Lagos residents are tenants paying rent as high 50 percent of their monthly incomes while most of the existing accommodations are provided by private landlords. On the qualitative side, most low income earners live in congested settlements usually characterized by buildings with structural defects, bad roads, poor drainages and pollution posing health hazards for habitants.
What impact do you see the Housing Market Report making in the Lagos real estate market?
Conventionally, housing development for the lower income sections has been the responsibility of the government. However, in the past few years, private sector players have, increasingly, begun to realise the untapped opportunities at this segment of the market. Real estate developers have started to explore the depth of demand and now have long-term plans geared towards providing homes for lower income groups.
This report proffers insight on the available opportunities in the low income market, prevailing market conditions both on the demand and supply sides, consumer preferences and would aid smooth market entry for prospective investors, increase the number of existing low income market players and also informs them of alternative building methods as a solution to the affordable housing shortage.
The report also provides policy recommendations for government to adopt. Furthermore, the report also looked at the luxury end of the market and discovered very interesting paradigms. For example, people are rapidly moving to the 3 and 4 bedroom luxury houses rather than the detached Ikoyi and Banana Island houses.
Taking you outside Lagos to the larger Nigerian society, what do you think are the challenges facing Nigeria and Nigerians as regards housing needs?
In Nigeria, the minimum income wage for an employee is N18,000 per month. Calculated in terms of mortgage structuring, 33.3 percent of N18, 000 will be N5,994 and a monthly payment of this sum over a 30-year period will amount to N2.15 million which is averagely lower than the cost of a housing unit in the country.
It is important to note that a mortgage period of 30 years or a housing unit of N2.15 million are hardly available, and this amount excludes interest rate on the mortgage facility. Consequently, even the middle income earners struggle to have access to affordable housing.
Nigeria is faced with a multi-dimensional housing problem stemming from poor planning. Many initiatives have been launched in the past which did not translate to visible results. The country is rife with abandoned low cost housing projects, inadequate funding, regulatory bottlenecks, lack of focus on residential housing development and unsupportive finance mechanisms.
The housing deficit stands at over 17 million units today. In most developed countries, affordable housing at different income levels is achieved through assistance from government, including through planning incentives, tax credit, land provision, infrastructural support and required building approval concessions. The Nigerian government has made efforts to adopt policies, systems and schemes for the development of the housing industry, but these have not been very successful.
We believe there are more to the housing problems in Nigeria, but where do we go from here; let us have your final thoughts on housing in the country
In Nigeria today, what we need to do is to ensure practical implementation of the robust policies that we already have in possession. There is also a need for a team of housing specialists and finance experts with proven competence in developing workable affordable housing plan for developing countries. With a population of over 170 million people, a smart team of policy makers will boost the housing and housing finance sector. A good practice will be involving the implementation team in policy discussions to ensure the feasibility of policy outcomes. The term affordable housing also needs to be properly defined in terms of final monetary value to the end consumer and progress on housing projects need to be measurable.
Evidence documented in the report shows that Lagos State has prospects for bolstering housing finance. What needs to be done is to enhance institutional interventions in delivering sustainable housing solutions. In 2005, over 17.5 percent of England’s 20.5 million residential dwellings were social housing; while in France, about 46 percent of their housing in 2006 was some form of social housing.
Lagos’s housing shortage can be reduced through practical policy implementation, technical expertise and a strong political will. A housing finance and business model on affordable housing has been successfully adopted in emerging economies of Mexico, Brazil, Malaysia, Egypt, Morocco, Thailand and Singapore. A critical examination of these models will help extract applicable concepts in our local environment. Some of the sustainable recommendations that Lagos should focus on have been discussed in the recommendation section of this new edition of ‘The State of Lagos Housing Market Report 2016’.
CHUKA UROKO