Benefits, returns, risks in investing in high end markets

The decision to invest in real estate usually comes as a difficult task and becomes all the more difficult when the decision is about where to invest and why. Like any other investment asset class, investing in real estate has its benefits, returns and also risks.

Mainly because of the risks and its long gestation period, a good number of potential investors are scared from investing in real estate and their case is not helped by their ignorance of locations that are investment destinations and also at what time investment should happen.
Real estate industry experts advise that prospective investors should not do it on their own but seek advice and direction from professionals and industry operators who have knowledge, experience and expertise to guide them through.
Former managing director of Fine and Country West Africa International, John Slang advised at an investment forum in Lagos that prospective investors should work with credible and qualified real estate professionals to help with the process.
He also listed a developer with track record of successfully executed projects, finance managers and mortgage providers, accountants, lawyers and insurance brokers as other good guides for investors.
Slang who spoke on ‘Where to Find the Best Value in Lagos Real Estate’, highlighted the strengths and opportunities in investing in upscale locations in a city like Lagos, pointing out however, that such locations also have their weaknesses and threats to investment.
Ikoyi, for instance, is an investment destination and its strength lies in its excellent location, ease of obtaining approvals for development based on precedent, high rents and return on investments (ROI) based on high demand, its internationally recognized and accepted location which increases value perception, and the area has the highest office rents in Nigeria.
However, high cost of land and approvals, restriction of building to high rise apartment to maximize land use, the need for an attractive design and layout of the project based on competing developments within the axis, and lack of storage rooms and individual green areas are some of the weaknesses of the area.
Though there are opportunities which include ease of rental as a large pool of prospective homebuyers (both locally and Nigerians in Diaspora) would rather buy outright a finished product that meets their immediate needs in Ikoyi, there are threats of construction challenges leading to delay of delivery.
An investor wishing to invest in Victoria Island, another high end destination in Lagos, will enjoy the benefits of excellent location, ease of obtaining approvals for development based on precedent, high rents and return on investments (ROI) based on demand, and a wide mix of support service companies.
Opportunities in this location include lack of good quality residential and commercial space which commands high demand, and there are many corporate entities and individuals wishing to own properties close to their offices.
But it has its weaknesses in terms of poor parking, traffic congestion, lack of supporting infrastructure, high cost of land and approvals, building would be restricted to high rise apartment, and availability of land for residential development is extremely low.
Investment here is threatened by the development of the Eko Atlantic in the long term 7-12 years. This is considered a major threat to the continued prosperity of this location.
In her brief remarks at the event, Udo Okonjo, Fine and Country’s Chairman/CEO, informed that the investors series was part of their functions as a real estate marketing and advisory firm, adding that a lot of people, for lack of information, fail to ‘grab’ opportunities within their neighbourhood.
She added that the series, which provides answers to who, where, when, what and why (5Ws) on investment, is a forum through which her firm provides information on investment, stressing that investment is for everybody irrespective of age or gender and that the time to invest is now.

CHUKA UROKO