Interview: Paul Onwuanibe
What opportunities are likely to arise within the post-recession housing sector?
PAUL ONWUANIBE: There is currently a significant undersupply of housing and an extremely low rate of home ownership. The second-hand sales market is also very weak, due to the lack of an adequate mortgage system. This has resulted in a situation where a very small percentage of the population can afford to own a house or buy homes as assets. With a viable mortgage system, a new group of people will drive second-hand sales in particular. This will activate a value chain which will boost the entire real estate economy, involving agents, bankers, consultants, advisers and other professions.
However, this requires that the government take far-reaching steps, such as providing a mortgage bank with the funds needed to allow it to give working-class Nigerians the ability to buy homes with proof of stable income and a reasonable upfront payment. Until we have acceptable mortgage rates, the Nigerian mortgage economy cannot be fully unlocked.
How are the commercial, office and mixed-use segments expected to develop?
ONWUANIBE: Mixed-use development is a major opportunity in Nigeria at present. We are expecting to see a significant increase in mixed-use communities that act as nodes to bring people together. This will help create destinations and give rise to hospitality, tourism and vibrancy in general. We are already beginning to see that this “destination” style of development is very attractive, for multiple reasons. It is efficient and economical, it introduces leisure and lifestyle themes into the sector, and it is attractive to younger people. As people seek to combine leisure and entertainment with their work and housing environments, these kinds of real estate development projects become much more effective. In terms of the demand for mixed-use projects across the country, Lagos is the most developed zone. It also has the biggest problems with security, transport and infrastructure, but this actually helps promote mixed-use developments, as people don’t want to go too far to play, eat and shop. Outside of Lagos, this tendency is also growing in Abuja and Port Harcourt.
What risks and incentives determine the flow of international investment into the market?
ONWUANIBE: Major risks for foreign investors include the lack of security of land titles and a lack of transparency and efficiency at the bureaucratic end, where there is a lot of red tape. It is crucial that government agencies be more straightforward about the processes and procedures required for certification and permits. A large number of the most pressing issues facing the market, such as inadequate inland waterways and an ineffective land use system, could be solved at the stroke of a pen by a motivated administration. One final challenge is finance. A stable currency is needed, especially as returns on investments are going to be in naira.
In terms of incentives, the demographic dividend remains the most important. Real estate is key for almost every sector that is driven by the growing population, from health and education to commerce. Another important draw is that, as ours is an emerging economy, there is scope for first movers to set industry trends, influence customer practice and innovate generally. Lastly, there are many opportunities in the hospitality, tourism and leisure sectors, because of both growing domestic and regional demand, and favourable weather conditions. Increased interconnectivity across the country would also be a major driver of investment and further development of the real estate market. Given its size, Nigeria has to work on expanding viable alternatives to the road system for goods and passenger transport, including an improved rail system and network of waterways.
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