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Property market: Developers still see gloom despite exiting economic recession

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By Kingsley Adegboye

IN spite of the cheering news that the country is getting out of  economic recession, the bleak outlook of the housing sector of the nation’s economy will remain a major cause for concern for real estate developers and the survival of their businesses in the country.

This is because developers have been churning out housing units in different parts of the country without corresponding demand for them. This has subsequently led to the astronomical increase in the number of unsold housing units across Nigeria.

Developers have blamed the rise in the cost of building materials and construction generally for this glut in the country’s property market. They painted a gloomy picture about the scenario, pointing out that there are no immediate signs of turnaround in housing sector as the glut is biting harder across all strata of the market.

A housing estate in Lagos

Managing Director and Chief Executive Officer, Propertygate Development and Investment Plc, a Lagos-based real estate development and investment firm, Mr. Adetokunbo Ajayi, told Vanguard Homes & Property in a chat that there is no doubt that the impact of the recession is being felt in the real estate sub-sector of the nation’s economy just as it affects all other sectors of the economy.

Ajayi, however, noted that in as much as he agrees that recession is taking its toll on the property market, with developers finding it extremely difficult to sell completed housing units across the country, developers who are innovative and developing the kind of houses people want, and located in good locations, will sell very well in this period of recession.

According to him, economic recession is an opportunity for innovative developers to prove themselves by initiating ideas in their housing packages to attract buyers if the houses are in good locations with good accessibility.

Lamenting high cost of construction resulting from provision of infrastructure by developers in their estates, Propertygate boss said if governments at all levels can provide infrastructure such as roads, electricity and others, this will reduce cost of construction, and invariably reduce the cost of housing delivery.

He said what causes the prices of houses to go up is the totality of all costs of construction, stressing that if governments can provide infrastructure to sites before developers start actual construction of housing projects, the cost of housing units will be drastically reduced.

Another developer who prefers to be anonymous, said until there is an overall turn around in the economy, the real estate market will exhibit features of worst recession ever experienced in the past decades.

Purchasing power of the populace

While arguing that in any economy, a period of mass disengagement of staff is always followed by a prolonged property crisis, he said those laid off will default in rent payments; the cost of developing houses and property will escalate while at the same time the purchasing power of the populace may crash to the lowest ebb.

Meanwhile, as a measure to make home ownership cheap and affordable to Nigerians, Power, Works and Housing Minister, Mr. Babatunde Fashola, has unfolded federal government’s plans to build 360 houses in three states through public private partnership, PPP, arrangement in the first phase. This includes develop “rent to own” housing scheme for those who cannot afford mortgage and incorporate a new housing model into the National Building Code.

Fashola argued that there is urgent need for the country to increase funds allocated for housing development, lamenting that the N36 billion appropriated for housing sector in the 2016 budget is grossly inadequate. “We look at the N36 billion as the fund with which we will build the concept and if the concept is successful, then we can roll it out more massively because it is not going to solve our housing problems. Affordability lies at the heart of what we are doing”, he said.

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