The real estate sector in Nigeria has recorded tremendous growth over the years and has become a lucrative venture for development firms, and investors alike. However, as Nigeria’s real estate sector continues to evolve, several challenges facing the sector have also hampered it from realizing its true potential.
These challenges range from the constant increase in rent, housing deficit, under-regulation and so much more. All these have made the Nigerian property market a mix of opportunities and challenges that can only be navigated by investors who are optimistic about converting it into a viable long-term profit.
In an exclusive interview with Dailypost, Noah Ibrahim, CEO of Novarick Homes shares insights on the future of the rental market for both landlords and tenants in Nigeria
How have property developers addressed the availability of residential houses in Nigeria so far?
The housing deficit has been a problem for the housing sector for so many years now. Addressing the housing deficit has been a chronic challenge due to a number of reasons, however, property developers are doing a lot in their capacity to ensure housing is available to the populace at a reasonable price.
Access to funds has been a major challenge for developers and many have found off-plan projects, where buyers pay for houses before they are built, as a viable means to finance construction projects. This process slows down the delivery of homes as the developer must find buyers that are willing to pay for the property even before construction can begin. Though it has its shortcomings, it has proved useful, as over 50,000 housing units are developed annually in Nigeria using this means.
For housing to be made available, the aspect of funding needs to be addressed, that is access to loans by commercial banks, and much more; sadly all these are not currently available to most developers. Nonetheless, I would say developers are doing their own bit to make housing available and taking extra measures to ensure they are also affordable.
Do you think houses can really be affordable to the masses, I mean the low-income earners who are the real sufferers of the deficit?
There are lots of factors that contribute to the affordability of a property. These range from the cost of processing the necessary documentation to get approvals to construct, the cost of land, construction materials, labour, power, and several other factors.
Houses can be affordable. But it will require a lot of effort and collaboration to make it possible. The Government will need to put policies in place that support the construction of houses, like Public-private partnerships, where they provide land and the developer builds, rent to own schemes, easy access to mortgage at fair rates and more. While the term affordability is subjective, you will agree that paying a million naira annually for 10 years is a lot more affordable to many than having to cough our 10 million naira to outrightly purchase a property. Our mortgage system will definitely need to be worked on beyond the current exorbitant offerings, so that people can not only access it, but can get a fair rate.
Despite the growth in the number of property developers, both the housing deficit and the vacancy rate is still high, what is responsible for this?
The vacancy rate is on the rise because most people can not afford the properties being constructed or afford to pay high rental fees they command. The two primary factors responsible for these are affordability and demand.
The housing deficit exists because developers are targeting the elites that can afford to pay the full cost of their offlan projects outrightly, as they need these funds to construct. These niche groups have a preference for luxury homes, so to meet their expectations for luxury, developers tend to build more duplexes and mansions and less apartments which ultimately translates to less homes per available land.
When these homes eventually go on rent the bulk of the masses can’t afford them, thus the high vacancy rates. While there are other reasons, I find this the most probable for the high housing deficit and vacancy rate.
So how exactly are property developers addressing the housing deficit and vacancy rate especially in the southwest
While my previous statement holds true, most developers still recognize the potential in affordable housing, so many are looking towards the suburbs where land is still relatively cheap to build mass affordable houses. At Novarick Homes, we are exploring 3D printing technology as a viable option to deliver affordable homes; this technology can optimize the construction process to reduce the cost of construction by over 40 percent, reduce construction waste by over 50 percent and the time it takes to build a unit by over 70 percent.
There are other ways to construct affordable houses. I’ve seen well constructed container houses, and they are quickly becoming popular in the south west. Another alternative is prefabricated materials which may be slightly more expensive but can deliver units at a very fast pace compared to traditional building methods.
Innovative property developers are constantly seeking out new methods and trying to infuse novel innovations into real estate to deliver affordable at fractional time.
With the continuous increase in property prices, where exactly is the real advantage; buying, leasing, or renting
There are advantages in every sector that do not depend on price, just like the two sides to a coin, there will always be investors capable of purchasing properties at any price mark. I always advice people looking to invest in real estate to start small; if you can’t afford to buy a 3-bedroom, go for a two-bedroom or 1-bedroom and it goes on like that. I know people who own properties in Lagos and still rent, one of their properties would be put up for rent, while they still occupy another.
Buying, leasing, or renting all have their own advantages, if you buy to live in your property, that property can be assumed as a liability, however, if you buy to rent, it becomes an asset that you can use as collateral to get more funds to buy more properties. Leasing on the other hand generally applies to commercial projects, this would be ideal because of the high cost of buying the property, it is unavoidable. They all have their advantages depending on what part of the investment circle you look at.
What should potential landlords and tenants expect from the property industry in coming years?
There is so much to expect from the property market. The Federal government, Lagos state government, and the ministers have been speaking on monthly rentals. Monthly rental is the next best thing in the real estate market, it would open the doors for Nigerians and financial institutions to accept mortgages. Once property owners commence monthly rentals, money for the normal yearly rent would be enough to use as a down payment for your mortgage.
With monthly rents, tenants do not have to come up with raising money to pay rent yearly or every two years. However, there is a downside to this, in a country where the economy is to stable, people are getting laid off more often, the cost of living is high so is the rate of inflation, and there is no job security; monthly rent might put people in a very tough position because, once you lose your job, you can’t afford your rent and you do not have a place to stay which in turn leaves more people on the street.
For tenants, there would probably be more flexible policies on tenancy. A lot of the tenancy policies which exist now favor the tenants as opposed to the landlords, but when you bring up monthly rent there would be a shift. The biggest challenge for a landlord is not being able to get the tenants to pay rental fees. So, by the time you start monthly rentals, there is a high chance that the tenant’s equality would change which might be more favorable to the landlords. We are expecting other policies on land ownership and tenancy from the government. We hope something can be done to help the increasing acquisition of property and given tittle
What role can the Government play in moderating the soaring cost of houses and rent?
The government has the biggest role to play in real estate. From providing good infrastructures like access roads etc, encouraging local production of construction materials to reduce the cost, creating easy access to funding for developers and affordable mortgages for home buyers, the list is endless.
The housing sector is currently underserved and is a key reason as to why the housing deficit keeps increasing.. The government itself with all its parastatals in the construction and real estate sector can not single handedly build all the houses the country needs. For this reason, the private sector is needed to contribute in both expertise and capacity, and since they often lack the financial capacity, a reasonable financing system needs to be set aside for them.
Aside from the bank’s absurd interest rates they also require collateral that the developers sometimes can’t produce. For example, if a developer wants to take a loan of a hundred million, the bank needs collateral worth one hundred and twenty million naira before you can access that fund, and they still give you the funds at close to 30 percent interest. By the time the developer pays a 30 percent interest on the money what then is the profit margin on the loan?
All of this would further increase the price of the building. Another thing the government can do is to give individuals a monopoly to import materials for construction or explore similar strategies to assist developers.
Can Technology drive any real change in this sector?
Technology can do so much, infact, technology can solve more than sixty percent of the problems seen in the real estate sector. Let’s look at lands; this particular aspect of real estate sometimes has problems with what is known as “omonile” or not knowing the right full owner of a property is. All these issues can easily be solved with blockchain technology, anywhere you are in the world you know who owns what. Another area is in the ease of documentation and allocation of title documents. These should all be digital by now, with no bureaucracy and delay. Technology in the aspect of 3D printing will make the construction process a lot faster, cheaper and easier. These are just a few areas that technology can solve. In terms of renting, we have observed innovative proptech companies that have websites to communicate availability of rental, Shorlets and co-sharing opportunities as well as monthly rental apartment options.
What are your future plans? How do you see the sector changing in the foreseeable future?
Mortgage, affordability, eco friendly, and also accessibility; are the areas where I see the change in the industry. As for my future plans, its using Novarick Homes to to build and provide more affordable and eco-friendly homes to make as many families as possible homeowners in Lagos, Nigeria, and across Africa as a continent.
FAQs
How Nigerian property developers are turning landlords into tenants? ›
Keji stated that; “A great deal of property developers came to the realization a few years ago that they could easily turn landlords into tenants by charging up to 400% premium on electricity bills and close to 100% profit margins on service charges.
Why is rent so high in Nigeria? ›While rising rents are largely a byproduct of limited supply and high demand across the rental market, high inflation due to the poor economy, unfriendly policy and inadequate employment have stifled productivity, as well as eroding the earning power and income of most Nigerians.
What is the percentage of rent increase in Nigeria? ›He narrated how his landlord woke up one morning and served all tenants in the six units of two-bedroom apartments in Ipaja, Lagos a notice to inform them that the house rents have been increased to N450,000 from N300,000 within one year. That is 33 per cent increase in one year (May 2021 and June 2022).
Is real estate a good investment in Nigeria? ›Real estate investment in Nigeria offers a long-term appreciation. The value of properties in Nigeria has been known to increase significantly over time. Investing in real estate provides investors with an opportunity to benefit from the capital appreciation of their properties.
Are developers also landlords? ›A landlord profits by possessing real estate. A developer profits by creating real estate. This distinction, as it turns out, makes all the difference.
How do I get more properties in the tenants? ›To unlock more items for your properties, aim to complete quests, purchase new properties, and fulfill requests. For each task you complete, you will receive XP, which can be used to unlock random Item Boxes. You can keep track of your accumulated XP in the Progression tab on your in-game phone.
Which state has the most expensive rent in Nigeria? ›Banana Island in Ikoyi, Lagos State, Nigeria is Africa's most expensive neighbourhood. Renting an apartment here costs $24,000 to $160,000 per year. Banana Island is home to Nigerian Billionaires such as Aliko Dangote, Mike Adenuga and Celebrities such as Davido, P-Square. Banana what?
Can a landlord increase rent every year in Nigeria? ›The Landlord can not unilaterally increase rent, the Landlord will make an offer of increment which is subject to the acceptance of the tenant, the tenant have the right to accept the offer, refused the offer or vary the offer (negotiate the amount), when the tenant refused the offer that will severe the tenancy ...
How much is the average rent in Nigeria? ›| Accommodation (monthly rent) | |
|---|---|
| Three-bedroom apartment in the city centre | NGN 2,300,000 |
| Three-bedroom apartment outside the city centre | NGN 1,100,000 |
| One-bedroom apartment in the city centre | NGN 700,000 |
| One-bedroom apartment outside the city centre | NGN 340,000 |
Abuja. One thing is certain: though there isn't a set number of times that landlords can raise the rent in Lagos State, they can do so at any time they want—and often do so without warning or notice from tenants! In Lagos State, landlords can increase rent once every 6 months.
How many months notice to evict a tenant in Nigeria? ›
The laws on tenancy provide that a tenant who pays rent every month is given a month notice before quitting. Those who pay every three months: are given three months' notice before eviction.
What are the rights of a landlord in Nigeria? ›The Landlord has the right to be compensated. Right not to reimburse a Tenant: Where a Tenant carries out repairs in the property, the Landlord has the right not to reimburse the Tenant. They are mandated to reimburse the Tenant only where the repair is covered in their agreement.
What is the most profitable investment in Nigeria? ›If you're wondering, where to invest your money in Nigeria, treasury bills are among the top investment methods irrespective of the investment amount. The Federal Government provides short-term debt instruments and terms them with treasury bills.
What investment has the highest return in Nigeria? ›Agriculture and Livestock Investments
The agriculture industry is one of the integral parts of Nigeria's economy. This type of investment also tops the best investment opportunities in Nigeria. If you are not interested in direct farming, you can also invest in livestock farming as this will also allow great profits.
- Livestock. ...
- Mining and Mineral Resources. ...
- Education Sector. ...
- Oil and Gas. ...
- Manufacturing Industry. ...
- Logistics. ...
- Fitness Training. ...
- Photography and Videography Services. Among the best investment opportunities in Nigeria are photography and video services.
Yes, rented property can be considered an asset. From an accounting and financial perspective, assets are resources or properties that have economic value and are expected to generate future benefits. Rented property can generate income through rental payments, making it an asset for the owner.
Is being a landlord an entrepreneur? ›Being a landlord means starting your own business, and you need to be aware of this fact before actually taking any steps in this direction. Every single detail should be viewed from an entrepreneurial perspective, so a business plan will be demanded here.
Are developers self employed? ›A freelance developer is a self-employed programmer who contracts with clients on various projects. These professionals write code for programming projects they choose to accept. Freelancers set their requirements for each job, such as the hours they work and payment rates.
How many properties do most landlords own? ›The Average Landlord Has Three Properties
On average, landlords have three properties to their name. The value of those properties isn't necessarily through the roof: 40% of landlords own less than $200,000 worth of property, and an additional 30% fall in the $200,000-$400,000 range.
- Replace Flooring. The first thing you should do is replace the flooring regularly. ...
- Paint. Studies indicate that fresh exterior paint can increase the property value by an average of 5%. ...
- Hardware. ...
- Social spaces. ...
- Garage doors. ...
- Landscape.
How do I win more landlords? ›
- Get more from your existing landlords. Sometimes, you needn't have to look any further than what is already directly in front of you. ...
- Encourage referrals. ...
- Keep tenants happy. ...
- Go old school, build relationships.
The average price of flats for sale in Nigeria is ₦66,300,000. The most expensive flat / apartment costs ₦950,000,000 while the cheapest costs ₦4,500,000. There are 7,140 available flats for sale in Nigeria.
Where is the richest location in Nigeria? ›Banana Island, Lagos State: Banana Island is a man-made island located in Lagos State, and it is regarded as the most affluent area in Nigeria.
Which state is the safest to live in Nigeria? ›TENANCY AT WILL
In simple terms, a tenant at will is that tenant who the landlord gives permission to use a property for a period of time which may not be certain.
A tenant at will is a tenant who has the landlord's permission to stay on the premises beyond the expiration of the formal tenancy. Where also, a tenant occupies the premises with the landlord's consent and makes rent payments pending the grant of a formal tenancy or lease, he is (by implication) a tenant-at-will.
Is subletting legal in Nigeria? ›A tenant is mandated by Law not to make any alterations or additions to the premises without the written consent of the landlord first had and obtained orally or in writing. A tenant is statutorily obligated not to assign or sublet any part of the premises without the written consent of the landlord.
How much is 2 bedroom flat in Nigeria? ›The average price of 2 bedroom flats for sale in Nigeria is ₦57,100,000. The most expensive flat / apartment costs ₦400,000,000 while the cheapest costs ₦6,320,000.
What is considered a lot of money in Nigeria? ›7m to consider yourself rich in Nigeria –Report. For a Nigerian to break into the one percent population of the wealthy, it will now take a net worth of $70,000 (N28. 7 million), according to the latest Knight Frank Wealth Report.
How much is 4 bedroom in Nigeria? ›The average price of 4 bedroom houses for sale in Lagos is ₦90,000,000. The most expensive house costs ₦600,000,000 while the cheapest costs ₦25,000,000. There are 15,644 available 4 bedroom houses for sale in Lagos, Nigeria.
What is Section 13 of the tenancy law in Lagos State? ›
Section 13 subsection (1) of the tenancy law also prescribes the length of notice to be given where there is no agreement between the landlord and the tenant to determine the tenancy, which are; a week's notice for a tenant at will, one month's notice for a monthly tenant, three months' notice for a half- yearly tenant ...
What tenancy law applies to Ikoyi? ›2. Which law applies to Apapa, Ikeja GRA, Ikoyi and Victoria Island? Answer: The Law that applies to these four (4) exempted areas is the Rent Control and Recov- ery of Premises Law of Lagos State 1997.
What is the FCT tenancy law? ›The bill bars landlords from demanding from a fresh tenant, rent in excess of three months. It also bars the tenant from offering to pay rent in excess of three months in case he or she is securing the use of the apartment for the first time.
Can a landlord evict you without a court order in Nigeria? ›Eviction order will be issued by the court against the tenant who has refused to vacate the landlord's premises after the determination of the tenancy case. This is the only way known and approved by law for a landlord to recover his premises from a defaulting tenant.
Can a landlord issue a quit notice in Nigeria? ›The notice to quit is the notice period which a tenant must be given before the landlord can commence the process to evict the tenant. Interestingly, the Lagos Tenancy Law provides that where there is a stipulation as to the notice period in the Tenancy Agreement, then the parties will be bound by that notice period.
What is the standard notice period in Nigeria? ›In relation to Workers, the minimum notice periods to be given to the employees pursuant to section 11 of the Labour Act are: one day, if the length of service is up to three months; one week, if the length of service is up to two years; two weeks, if the length of service is up to five years; and.
What is the new Lagos landlord and tenant law? ›It shall be unlawful for a landlord or his agent to demand or receive from a sitting tenant rent in excess of six (6) months for a monthly tenant and one (1) year for a yearly tenant in respect of any premises without prejudice to the nature of tenancy held at the commencement of the tenancy.
Who pays for tenancy agreement in Nigeria? ›The rent which may be payable in some cases bi-annually (two years in most cases) or annually. The tenancy agreement costs, an agent or a lawyer, whoever you decide to deal with will charge a fee for drafting the tenancy agreement.
What is the agreement between landlord and tenant in Nigeria? ›A tenancy agreement is a common agreement between landlords and tenants. Tenants must adhere to specific guidelines, such as paying rent on time or keeping the property clean while living there in order for them to continue living at their homes.
What is the fastest growing business in Nigeria? ›Exportation business
The exportation business is not just a fast-growing business in Nigeria but also very profitable. Basically, in this business, you just have to export products that are in high demand globally and earn cool cash from it. Read this - Top 5 Forex investment companies in Nigeria.
What is the fastest growing business sector in Nigeria? ›
The financial and insurance sector was the fastest growing sector in the Nigerian economy in 2022 with real growth of 16.4%, an increase compared to 10.1% recorded in the previous year.
What is the low risk investment in Nigeria? ›The FGN Bond is regarded as one of the safest types of investment as it is backed by the full faith and credit of the Federal Government of Nigeria. Their lack of a default risk makes it assured that your interest and principal would be paid when due. Also, state and local taxes do not apply to the investment.
How to generate passive income in Nigeria? ›- Start a dropshipping store.
- Create a print-on-demand store.
- Sell digital products.
- Teach online courses.
- Become a blogger.
- Sell handmade goods.
- Run an affiliate marketing business.
- Sell stock photos online.
- Real estate. One of the most lucrative sectors for investment in Nigeria is real estate. ...
- Haulage business. ...
- High dividend mutual funds. ...
- Treasury bills. ...
- Food business. ...
- Agriculture. ...
- Plastic recycling. ...
- Body care business.
Financial and Insurance Sector 16.36%
In 2022, the financial and insurance sector was the fastest-growing sector in the Nigerian economy with a growth percentage of 16.36%, an increase from 2021 10.1%.
States with the highest foreign capital inflows
In a period of slow economic growth, Lagos State, Nigeria's commercial city, maintained its position as Nigeria's biggest destination for foreign capital inflows, according to the second quarter (q2) capital importation by NBS.
RENT PER MONTH
Rent is really unusually expensive in a country like Nigeria. If you're looking for an apartment in the center of any of the major Nigerian cities, that will cost you a whopping 935.4$.
In Nigeria, tenants are required to pay their rent on annual basis. Some landlords may even ask for two years' rent paid upfront.
In which country rent is highest? ›Rent is the biggest expense in Switzerland, with the nation racking up a hefty national rent index of 50.25. Switzerland was also ranked the most expensive country for restaurant and grocery prices, and slips into second place behind Hong Kong for the most expensive average rent prices.
How much is the highest house rent in Nigeria? ›The most expensive house costs ₦48,000,000 per annum while the cheapest costs ₦500,000 per annum. There are 8,326 available houses for rent in Lagos, Nigeria.
What salary is considered rich in Nigeria? ›
How much money do you need to be part of the 1% of the 1%, the wealthy? According to research, the annual income of a Nigerian needs to be at least N4. 6 Billion to fall under this elite category.
Do landlords pay tax in Nigeria? ›Types of Withholding Tax in Nigeria
Withholding tax on rent: This tax is deducted from the rent paid by tenants to landlords. Withholding tax on dividends: This tax is deducted from dividends paid to shareholders. The tax rate is usually 10% of the total dividends paid.
Nigeria has an average monthly salary of 339,000 Nigerian Naira per month, which is nearly 774.75 US Dollars per month (as per the exchange rates in October 2022). Like any other country, various factors impact the salary structure in Nigeria, including educational qualifications, city, work experience, and more.
How much does an average Nigerian make a month? ›Living Wage Individual in Nigeria averaged 42500.00 NGN/Month from 2015 until 2018, reaching an all time high of 43200.00 NGN/Month in 2018 and a record low of 41800.00 NGN/Month in 2015. Nigeria Living Wage Individual - values, historical data and charts - was last updated on June of 2023.
Where is rent growing the fastest? ›- Santa Barbara, California. ...
- Rochester, New York. ...
- Anderson, Indiana. ...
- Rochester, Minnesota. January 2023: $2,050. ...
- Kalamazoo, Michigan. January 2023: $1,673. ...
- Monroe, Louisiana. January 2023: $1,400. ...
- Greenville, North Carolina. January: $1,500. ...
- Lawton, Oklahoma.
The most expensive rental market in the US remains to be New York. The average monthly rent for a one-bedroom is roughly $3,260. This is about a $500 decrease from 2021, however as demand continues to increase prices are likely to follow.
What country has the cheapest rent? ›ECUADOR (tie) The low cost of living is the number one reason for many expats moving to Ecuador. It can be a tremendous advantage, particularly if you are on a fixed income. Rental prices are half the cost than in the U.S. or Europe, and often include furnishings.
Who owns the richest house in Nigeria? ›Aliko Dangote's luxurious mansion is worth about N5 billion and is among the most expensive houses owned by a businessman in Nigeria.
Which area is the most expensive to live in Nigeria? ›Banana Island, Lagos State: Banana Island is a man-made island located in Lagos State, and it is regarded as the most affluent area in Nigeria.
Who owns the biggest house in Nigeria? ›Mike Adenuga's house - over N8 billion
Nigerian businessman Mike Adenuga, also known as Mike Adenuga Jr., is the owner of the most expensive house in Banana Island Lagos.