Investors taking opportunities where fundamentals support demand
Though the Nigerian economy is still tottering, investor-confidence is not wavering as expected and this explains why a good number of them are taking stakes in the property market, especially where there are opportunities and the fundamentals supports demand.
Recently, Shelter Afrique signed a $2 billion MoU with the Real Estate Developers Association (REDAN) and the Federal Mortgage Bank of Nigeria (FMBN) to develop affordable housing. These are houses that will be within low range of affordability and command demand in the market.
Also, the ministry of finance and the central bank (CBN) are embarking on N1 trillion housing programme that will start with N500 billion. The federal ministry of works and housing is also planning a N170 billion housing for low and mid-income earners. All these planned investments are outcomes of a thorough market study and discovery of demand.
Government’s new plan to recapitalize the FMBN to the tune of N500 billion is aimed to encourage investment in low cost and affordable housing. “All these show that things are happening in the housing sector in spite of the recession”, notes Ayodele Olowookere, CEO, Ompluabi Mortgage Bank.
“What we have seen is that the market fundamentals support low to medium income housing. People have studied the market and seen where the opportunities are and this is why Shelter Afrique is committing whole $2 billion into the market. It means the fundamentals are good”, he adds.
Close market watchers attribute this to the existence of first time home buyers, including professionals, young families, returning professionals etc. Udo Okonjo, CEO, Fine and Country, explains that some of them are not necessarily first home buyers, but people who are investing in order to get rental income in what could be called buy-to-let investment.
In many countries, a lot of professionals create wealth through buying real estate which they rent out to tenants. But Okonjo fears that the buy-to-let market in this country is not flourishing yet because there is no viable and proper mortgage system that can offer single digit interest rate. At double digit s interest rate, taking a mortgage does not make sense.
“The winning proposition is for the developer to work with younger buyers and their cash flow. He has to structure his development to match that cash flow. This proposition is already catching on because there are a few developers that are already doing it”, she reveals.
“It is very competitive but there are opportunities there. Efficiency is key. The developer has to be mindful of how he seeks building materials, how he develops and sources capital. The development has to be standard, otherwise there will be problems”, she warns.
Olowookere, however, sees the mortgage system living up to its billing in the next couple of years based on existing co-operation and collaboration among operators. “We have a very strong mortgage banking association of Nigeria (MBAN) where there is a lot of co-operation among the members.
“I think that level of cooperation gives the members the opportunity to look at the bigger picture together, and by so doing, attract serious long term investors to the sector”, he hopes.
CHUKA UROKO