At N3.5m per housing unit real estate sector holds $385bn opportunity value for investors
That real estate remains the most dependable preferred asset class for investment does not consist only in it being durable and relatively risk-averse, but also because it offers immense opportunities and guarantees high return on investment.
In Nigeria, opportunities in real estate market are compelling and they are such that with the country’s estimated 17 million housing units deficit, it is estimated that at N3.5 million per housing unit, which is unimaginable given market realities, the value of opportunities in this market open to investors is estimated at $385 billion.
Analysts say this estimate is conservative enough, explaining that even in the country’s rural communities, it is hard to get low cost housing with N3.5 million price tag, meaning that the value of the opportunities could be many times higher than estimated.
Additionally, using the mortgage-to-GDP yardstick, compared to the BRICS which include Brazil, Russia, India, China, and South Africa, Nigeria has a mortgage funding gap of $58 billion, representing another bouquet of opportunities for real estate and savvy investors.
These revelations came to the fore after the rebasing of the country’s economy which shows that as against 33 sectors believed to be accounting for its gross domestic product (GDP) valued at $270 billion, the country, indeed, has a GDP value of $510 billion produced by 46 sectors.
Real estate sector which accounts for about 7 percent of this new GDP size, has been discovered to be bigger than previously thought with its current size seen to be 30—40 percent larger than it was previously estimated. The sector is today the sixth largest sector after crop production and distribution, crude petroleum and natural gas, information and communication, telecommunication.
Speaking on ‘Rebasing Nigerian Economy and the Impact on Real Estate Market’ at Mandatory Continuing Professional Development (MPCD) Forum organized by the Lagos State chapter of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) recently, Doyin Salami, an economist and teacher at the Lagos Business School, noted that rebasing the economy has shown that real estate is the fastest growing sector and its growth is faster than average GDP growth.
“Real estate grew 8.7 percent in 2013 compared with GDP growth of 7.4 percent; its average growth was 6.9 percent between 2011 and 2013 while GDP average growth was 6.4 percent”, he explained, pointing out that the economy has seen structural shift from being industry-driven to service-driven.
Gbenga Olaniyan, an estate surveyor and valuer, and chairman/CEO Gbenga Olaniyan & Associates/Estate Links Limited, who also spoke at the forum, highlighted the opportunities and challenges in the real estate sector.
According to him, successful projects could yield over 30 percent return on investment on exit, noting that increasing wealth and sophistication of African consumers are creating demand for modern retail formats while western styled shopping has created a huge gap between demand and supply in Nigeria.
Olaniyan noted further that with the re-emerging middle class there is a huge housing deficit which occurs mainly in the space of properties under N35 million, adding that annual demand for residential housing is about 700,000 units which is a far cry from current production level of about 100,000 units.
He pointed however, that there are challenges which he listed as corruption, high interest rates, title issues, poor infrastructure, poor image of Nigeria, currency risk among others.
CHUKA UROKO