Nigeria’s real estate sector may suffer yet another setback as the total credit allocated to the sector by banks dipped consecutively for five straight years.
According to the latest data on the banking sector’s credit provision to the private sector released by the National Bureau of Statistics (NBS), banks’ total credit allocation to Nigeria’s real estate sector declined again by N26 billion in the first quarter (Q1) of 2019.
Note that banks’ credit facility to companies in the real estate sector has been on the decline since 2016. As at Q1 2019, a total sum of N593.3 billion was allocated to the sector. This is 4% lower than N615.3 allocated in the first quarter of 2015.
Credit on 5-year low
The real estate sector may be one of the best places to invest in, but low credit provision to the private sector has continued to be a major problem. Data shows that the sector is one of the least-financed by financial institutions. Out of seventeen sectors that received credit facilities from banks in Q1 2019, the real estate sector ranked 10th while the oil and gas sector scooped the highest of entire N15.2 trillion allocated to all the sectors.
Growth despite low credit
Despite declining credit provision to the real estate sector, the sector recorded positive growth in the first quarter of 2019 after over three-year decline.
According to the NBS data, the last time Nigeria’s real estate sector recorded a positive growth was the 4th quarter of 2015 (0.13%). Thereafter, growth in the sector has nosedived for several quarters until the 0.93% growth recorded in Q1 2019.
Real estate growth may be back to the red zone
It should be noted that according to The World Bank projection, about 108 million Nigerians are estimated to be homeless. This is said to be due to the governments’ inability to provide the required number of houses.
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Despite the Federal Government’s constant claim that efforts are being made to revitalise Nigeria’s real estate sector, the lack of interest by lenders does not seem to corroborate the claims.
Also, some real estate experts have expressed worry over the low funding for the real estate sector. According to the Chairman of Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON), Sir Nweke Umezuruike;
“We continue talking about a large pool of funds all over the place, which is just lying idle. Such funds should be put into productive use to fund Mortgage. Until we fully embrace mortgage financing, we cannot solve the housing shortage in the country.
“We give the impression that there is plenty of money standing in certain accounts, notably the pension funds, the housing funds and in insurance companies, and this money is not being applied to housing development, that is quite a problem. “As long as we continue in this way, we cannot have a better housing market.”
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In developed climes, the mortgage sub-sector obviously plays an important role in stimulating the real estate sector. While there have been several mortgage schemes and initiatives in Nigeria, the impact has remained somewhat unfelt.
However, it is pertinent to note that real estate is one of the sectors yet to recover from the recession witnessed in the country. Hence, declining credit facilities may largely dampen growth prospects and drag the sector back to the red zone.