Expert highlights business environment risks slowing FDI in real estate
Despite the huge investment opportunities which the Nigerian economy presents for both local and foreign direct investment (FDI), investment inflow into the economy is slow due to business environment risks which work against quick investment decisions, experts have said.
On account of her strong economic fundamentals as the largest economy in Sub-Saharan Africa with an annual GDP growth of between 6 percent and 7 percent, Nigeria remains an irresistible attraction to foreign investors who see her as a green field with investment possibilities and opportunities.
With an enticing demographics—a large and growing population, an emerging middle class with strong growing spending power, and a housing deficit which United Nations estimates to be 17 million units Nigeria also parades strong investment indices that have continued to wet foreign investment appetite in her real estate sector.
The recent rebasing of the country’s Gross Domestic Product (GDP) which shows an economy more diversified with a GDP value of $510 billion has further exposed more opportunities in real estate and infrastructure investment, thereby increasing investor-interest in the country.
Investment analysts see all these as strong pull for foreign investors, insisting that many of these investors are warming up for entry into the country to tap into the immense opportunities.
Femi Akintunde, the CEO of Alpha Mead Facilities Management Company Limited, agrees, pointing out however, that the country has not seen as much FDI as it would have for reasons that include investment decision variables that need to be considered and carefully analyzed to ensure that all the risks are within manageable limit.
Akintunde whose company is the leading light in Nigeria’s facilities management industry in Nigeria with strong emphasis and leaning on global best practices, explained that the slow FDI inflow into Nigerian real estate sector is because the sector is highly capital intensive, requiring intensive decision process.
“Sometimes investment this process takes as long as 12 to 18 months because, as foreign investors, they need to evaluate all the risks carefully and by the time that is done, the next question to ask is ‘where is the receptor market to take the investment?’ The factors affecting real estate in this environment are still disjointed; they are not coordinated well enough to give that comfort to an international investor to suddenly move the money and say this is where I am landing it”, he said.
According to him, there are many issues to consider and these include issues of demand and supply, stressing that the issue of supply which centres around land is as complicated as it is risky as title and ownership issues are always knotty knots difficult to untie.
To Akindolire Oludaramola, infrastructure is yet another major issue, noting that developers spend a sizeable percentage of their project cost on infrastructure. “Foreclosure laws are not just there”, he added, explaining that the justice system is not adequately prepared nor strong enough to give comfort and assurance to a foreign investor that when he has challenges, the rule of law is there to protect him.