Opportunities Vs Challenges:
Unveiling The REAL Estate
Landscape In Nigeria
Just Imagine the tremendous growth and transformation the Nigerian
real estate market has witnessed in just half a decade! This growth has
opened new doors of opportunities and challenges for investors like you.
Below are the wonderful opportunities in the Nigerian real estate market
that will help you build passive income and wealth.
See also 5 mistakes beginner investors must avoid to succeed in Nigeria
1- Land banking – Land banking simply means saving your money on
land. It is a fundamental principle that offers better saving options
when compared with saving money in a savings account or the
stock market. In land banking, the money is used to acquire land
which is a tangible and fixed asset. Lands are less likely to be
damaged by inflation or the crash of the stock market.
In land banking, a developer will buy large portions of land, divide
it into smaller plots, and sell it to investors. Investors can now key
in and buy plots of this land for residential or commercial purposes.
2 – Buy2Sell – Some real estate companies have an investment
opportunity known as buy2sell. Buy2sell simply means buying the land
and selling it back to the real estate company after it has appreciated for
some time maybe between 3 to 12 months. For example, you can buy
two plots of land or deposit any amount that the company will accept.
After the deposit, you will then be given a post-dated check you can
withdraw after a specified period. Some real estate companies offer from
10% to 50% in profit after you key into buy2sell.
3 – REITS – REITs simply means real estate investment trusts. In Nigerians,
you can trade Reits via the Nigerian stock exchange. You can buy REITS
just the way you buy stocks and bonds. You can buy and sell REITS
through stock brokers.
Although REITS was introduced to the Nigerian market some 15 years
ago and is one of the oldest in the African continent, it is yet to fully gain
traction in the country.
Factors That Created More Opportunities In The Real
Estate Market In Nigeria
Population Explosion – Nigeria is the most populous black nation in the
world. Nigeria is also one of the fastest-growing populations in the world.
A large portion of this population is actively migrating to the urban areas.
With this population explosion comes urbanization which consequently
expands the middle class.
The expansion of the middle class has skyrocketed the demand for both
residential and commercial properties. The middle class now looks for
houses with modern amenities. Since most Nigerians in urban areas now
look for a higher standard of living, investors now have the opportunity
to develop attractive and luxurious residences to meet the demands of
the middle class. In this way, real estate is now an attractive option for
investors.
Infrastructural Development – In recent years, the government of
Nigeria has doubled down on building infrastructure in partnership with
the private sector. A vivid example is the building of the Dangote refinery
in the Ibeji Lekki axis of Lagos state Nigeria. The Ibeji Lekki area now has
a deep sea port and a free trade zone. All these are both government and
private sector-driven Infrastructural development. These developments
have attracted both local and foreign investors into developing new areas
for real estate.
This infrastructural development has opened up opportunities for real
estate growth as new areas of land around these infrastructures are now
being developed for both commercial and residential purposes.
Another aspect of infrastructural growth in Nigeria is the development
of retail stores inside shopping malls. This has helped lots of brands to
explore the Nigerian Market. Shopping malls are now being increasingly
accepted across the country and as a result global brands such as
Versace, Armani Jeans, Swarovski, and Jack Jones can penetrate the
Nigerian market.
The Introduction Of Real Estate Investment Trusts In Nigeria – Real estate
investment trust (REITs) is a viable investment option for both institutions
and individuals. Reits have provided an opportunity for investors to pull
funds together in other to fund large-scale real estate projects. This is an
opportunity for an investor with small funds to key into. In this way, you
can earn passive income with the available funds you have.
The Availability of Real Estate Data – Analyzing market trends and
property values is now easy peasy. Compared with what was obtainable
within the last few years, this is surely an improvement. This
improvement is a result of the large amounts of data now available. With
these available data, lucrative opportunities can now be identified.
Property management strategies can now be optimized for better
customer satisfaction.
The Development of Blockchain and Smart Contracts – The introduction
of blockchain technology into real estate has helped to increase
transparency and security. The process of buying and selling properties
is now efficient and streamlined. Trust is key in real estate transactions.
A trustworthy environment has been built as agreements can now be
automated and enforced. This minimizes fraud among buyers and sellers.
Artificial Intelligence – It is no news that AI has taken over almost
everything. Today AI provides prompt customer support services. This
makes answering inquiries from customers easier thus improving the
overall customer experience. Al can now provide accurate property
assessments helping buyers to make informed decisions. To enable
optimal performance of real estate assets, AI-driven management
systems can now enable predictive maintenance of properties.
Challenges Related To Investing In Real Estate Industry In
Nigeria
Difficulty In Managing Properties – Despite the advancement of AI
which helps to make the management of properties easier, most
properties are still managed by individuals. The hassle of maintaining
properties regularly still exists. Tenants can be frustrating especially if
stubborn tenants rent your properties.
Unstable Economic And, Political System – In Nigeria, the term “Dollar
don rise” is very common. It tells much about how weak the Nigerian
Naira is concerning the dollar and how this impacts the Nigerian
Economy. Mean a building material you bought today for let`s say 5000
Naira will increase to 7,00 or 8,000 within the next few weeks or months.
A lingering political unrest can result in a reduction of demand and a
decline in the value of properties.
Failed Property Protection Laws – In general, real estate laws are not
fully implemented in Nigeria. Someone can buy land and thereafter the
land can be re-sold to others thereby depriving the original owner of his
legally purchased property. In Lagos for example, there is a group of land
thieves known as Omo-onile. They are popular property scammers and
land grabbers. They are notorious for collecting illegal royalties fees they
tag as development fees.
Despite a law in Lagos state that guarantees offenders 21 years in
prison, Omo-onile continues to thrive in some areas of Lagos State.
People’s lands are being forcefully taken or their buildings demolished.
This leads to investors losing their funds. A significant number of real
estate investors are being deterred from investing in the country as a
result of this.
See also 5 mistakes beginner investors must avoid to succeed in Nigeria