Housing: Widening demand-supply gap amid rising number of developers

Over the past decade or more, housing provision and delivery in Nigeria has been a negative index in the measurement of the country’s socio-economic growth and development despite efforts at government, institutional and individual levels to increase existing housing stock.

Successive governments at both federal and state levels have made varying degrees of efforts at delivering housing to the people. The Federal government’s low cost housing programme under Shehu Shagari between 1979 and 1983 was one such effort. The Lateef Jakande low cost housing estates development in Lagos within the same period was another effort. Federal Government’s 1991 National Housing Policy (as amended) was yet another effort aimed at providing housing for Nigerians.

Rising population and rapid urbanization combined to push housing need to a level where government’s efforts became grossly inadequate hence the massive influx of private sector developers into the housing industry to respond to the growing demand, especially in the urban centres.

With a population conservatively put at 170 million, Nigeria is said to be one of the fastest urbanizing countries in Africa with an estimated urbanization of 48.7 percent. According to the United Nations agency for human settlement (UN-Habitat), the country has over 17 million housing units deficit. Unconfirmed report also has it that the country’s housing stock is in the region of 11 million units while homeownership level is a little above 10 percent.
At various times and varying degrees, developers are ‘busy’ everywhere delivering housing but the yawning gap between demand and supply, which defines the housing industry in the country, persists.

Analysts say that, given the Nigerian business environment, adjudged the most difficult in Sub-Saharan Africa, there is only so much developers at either institutional or individual levels can do because there are challenges which limit not only their capacity but also their ambition to do more.
A close look at the structure of the country’s housing deficit shows it leans heavily towards low income housing and the reasons for this are quite obvious. “Though there seems really to be developers everywhere, over 90 percent of them concentrate on the middle and upper class buyers who can afford their prices”, says Femi Akintunde, CEO, AMFacilities.

Nobody wants to build for the low income market where demand is high but not effective. A recent survey by the African Development Bank (AFDB) classifies people in this class of society as those whose income is below N75,000 per month and these, according to Jide Anifowose, an estate developer, are those looking for housing to build or buy at below N3 million. Those of them in the city are not bankable and their risk level is too high for the private sector to cater for their needs.
Anifowose, who develops housing for the upper middle class, says he has no apology for not building for low income earners, explaining, “I am not government, nor am I a philanthropist; if I must build low cost housing, I must get land free of charge; again if I apply for approval, it must be given to me free of charge, and as soon as I apply, I am given”.

High poverty level in the country is therefore, a major limitation to housing supply because even where there is capacity to deliver, which in itself is also a challenge, the uptake is low. The mortgage system which should have made this possible is still a fledgling in this country even in this century.
“What would have made housing affordable is a mortgage instrument. Up till now, the country does not have up to 50,000 mortgages for the entire country of about 170 million people. This is not healthy for any country that wants to grow its residential housing sector, says Obi Nwogugu, head, African Capital Alliance Property Investment Company (CAPIC).

Nwogugu notes that “housing in other jurisdictions is an important part of the economy and drives the GDP up to 10-15 percent if the country gets its mortgage model right. The model here refers to creating a path to being able to buy a house. If you create this path which comes in form of a long term lending instrument, you will find that there will be demand leading to a pool which will expand exponentially”.

Besides infrastructure which Hakeem Oguniran, managing director, UACN Property Development Company (UPDC) Plc, says constitutes about 30 percent of housing construction cost, land cost is another challenge to housing delivery.

Land is very expensive in the cities especially with the cost of registration and documentation which, in some cities like Lagos, is about 10-15 percent of the value of the land. In the hinterland where it is relatively ‘cheap’, there are no basic infrastructure such as roads, water and electricity.
“It is pretty difficult delivering housing in this country because you are your own government”, says Oguniran, explaining that, “as a developer, you provide both the primary and secondary infrastructure which, at the end of the day, puts you under pressure in arriving at a price that will be reasonable to the buyer and at the same time give you something for your effort”.

Funding is another big problem for the developer which is why the capacity for supply has been restricted. Funding for the developer is not coming at a good rate and it is not even there.
This is a critical issue now when exchange rate has hit the roof-top at N300 to a dollar for a developer who is dealing with input materials that are almost 90 percent imported. “To compound the problem, even when he gets funding from the lending institutions, it is short term loan, meaning that he has to transfer the cost to the buyer who is struggling with his income”, says Akintunde.

Another constraint to housing delivery is the issue of skill gap and it has been observed that some of these developers do not even understand housing investment. Some newspaper adverts clearly show that some of them are mere jokers, yet people are investing their money in their schemes.
At artisan level, all the technical colleges and schools that produced various skill sets have been converted to secondary schools. Nobody wants to go and learn technical skills anymore and this is why the only good artisans we have come from the neighbouring countries like Togo and Benin Republic.

Challenges to housing delivery in Nigeria are enormous and, in more ways than one, these challenges have held down the growth and development of the housing industry in the country for too long.

These challenges, according to industry analysts, are not insurmountable, but require government’s commitment to enabling the environment for the private sector operators. Developing the mortgage sector is a major step worth taking and this is where all the fantasies that define the establishment of the Nigerian Mortgage Refinance Company (NMRC) have to give way to reality and serious business.

The industry has seen a number of innovative building technologies and alternative building methods such as those promoted by Lafarge Africa Plc, Alpha Mead Development Company, Nigerite Nigeria Limited, etc which have the capacity to mass-produce housing and, through economy of scale, reduce cost of production and unit price of housing. And here lies the hope of bridging the yawning gap.

CHUKA UROKO