Connect with us
nairametrics

Real Estate and Construction

Experts state how COVID-19 affects Nigerian real estate sector

The impacts of COVID in real estate would not be felt now but later.

Published

on

Lagos says defaulting allottees of housing schemes in Lekki, Ikeja, others to lose houses, real estate, Proposed NHF Law takes a twist, as top Nigerian experts differ on its impact, Richard Olodu, affordable homes 

The Coronavirus (COVID-19) pandemic is having a far-reaching impact on all sectors of the global and Nigerian economy. The spread has grounded economic activities and the Real Estate sector is not isolated from it.

Contrary to the opinions of some critics that the sector would not be affected by the pandemic, which could be the reason governments pay little or no attention to the sector, operators explained that though the industry might not feel the effect now, especially in the second quarter of 2020, the impact would be felt before or by the end of the year.

A real estate practitioner and also the Vice President, Lagos Chamber of Commerce and Industry, (LCCI) Gbenga Ismail, explained that the impact of COVID in real estate would be felt later, because of the tenancy/rent structure of the sector.

Unlike what is obtainable in other climes like United Kingdom (UK) and the United States of America where rents are renewed on a monthly or quarterly basis, Nigeria may not feel the pressure now, as rents are paid in one or two years advance.

READ ALSO: China set to approve $5.3 billion for Ibadan-Kano rail project

GTBank 728 x 90

According to Ismail, who spoke in an interview with Channels TV, most people that have either lost their jobs or whose salaries are slashed are likely to have paid their rents in advance before the virus, and that could still ease the tension for now, at least till the end of the year. He said:

“Right now, what happened is that by the period of the lockdown, you won’t feel anything but by the third or fourth quarter of the year you start feeling it; then, we will see how it has affected Nigeria.

“By then, people won’t be able to pay rents or buy houses as planned. We are not sure of where the monetary issues are going now and not sure if lending will continue into the real estate sector. We are yet to see some of these things going on.

Coronation ads

“Even in inventories, where developers have put houses out for rent, the concern is who is going to rent them? Before COVID-19, we wait 6 months before houses get rented or leased but now it may not be less than 12 months. The immediate impact would soon start to reveal itself.”

Will tenants also request for a moratorium from property owners?

Ismail added that tenants would likely plead for a moratorium because businesses may have been affected and some might have lost their jobs.

“Those who have mortgages and possibly in the risk areas of losing their jobs will definitely have discussions with their lenders if that happens. I think the mortgage firms have to listen and think of how to help them because the COVID situation is a force majeure, which nobody expected. People are being forced to make decisions that they did not plan to make,” he added.

READ ALSO: From pandemic to poverty: Nigeria’s future with COVID-19

Jaiz bank ads

Is the government offering incentives or bailout?
Another real estate practitioner, Ranti Ajao, expressed his displeasure over what he described as government negligence and insensitivity to the sector. According to him, the real estate has been taken for granted by everybody, including the government. He said:

Stanbic IBTC

“Government does not realize what it has to do for the sector. When the government is offering bailout or supports for other sectors, it needs to consider areas where the building materials are coming from, like developers, interest rate, contractors who are going into these areas because they would be affected. If they get affected by any of those variables that have been affected by the lockdown, they won’t be able to deliver.

“If you look at the stakeholders’ situation in the real estate value chain, from acquisition, construction, and all the areas connected, there must be a way for the government to intervene, especially taxes and levies, without necessarily having to put money in someone’s hands, but the things that add into the cost of the building must be looked into.”

READ MORE: What Nigeria stands to gain from new National Broadband Plan

But is there light at the end of the tunnel?
The experts insisted that the real estate sector had always overcome every problem it faced and the COVID-19 pandemic would not be an exception. “When the global financial crisis struck the world in 2008, it was real estate driven but it turned around in 3-4 years and now it is providing wealth for some people. COVID is a health crisis, which is temporary,” Ismail added.

What it means to investors
Asset value will drop and that means this is the time for investors to invest in the sector because it may come out rapidly and prices will increase and effectively return the value it may have lost then.

Nobody should panic. Stay focused, invest in real estate and all will be well. For new entrants, don’t hold cash, keep enough cash that can take you from day to day, and invest in an asset that will give you value tomorrow.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Real Estate and Construction

Lagos directs commercial property owners in Ogudu GRA to produce planning permits

The government said it would not hesitate to apply appropriate sanctions on erring property developers.

Published

on

Lagos state imposes 24-hour curfew, as hoodlums hijack #EndSARS protest, Social clubs, recreational centres to reopen August 14, Lagos International Trade Fair to get permanent site soon, Sanwo-Olu vows , Lagos State discloses road expansion plans in an effort to combat traffic, Lagos State cracking down on Uber, Bolt, Ocar a week after Okada, Keke Napep ban , LASG increases health workers’ allowances, commissions local production of face masks

The Lagos State Government has asked owners of commercial buildings in Ogudu GRA to produce their enabling building permits.

The request follows repeated contraventions of the state’s physical planning laws by some recalcitrant individuals and organizations.

While speaking on the development, the Lagos State Commissioner for Physical Planning and Urban Development, Dr Idris Salako, expressed the State government’s determination to stop the flagrant abuse of its planning laws and engender a culture of compliance among the people.

READ: Lagos to impose building insurance on properties above 2 floors, meets stakeholders

Salako said, “The Ministry of Physical Planning and Urban Development, on Wednesday, served contravention notices and stop-work orders on 38 commercial buildings, including banks, eateries, malls and hotels on Ogudu Road in Ogudu GRA in line with our determination to curb flagrant disobedience of the law.’’

GTBank 728 x 90

“We shall continue to enforce compliance and sensitize the people to do the needful so that we can achieve in earnest our goal of an organized, orderly, livable and sustainable environment for the benefit of all.’’

The Commissioner reiterated that government would not hesitate to apply appropriate sanctions including sealing and pulling down of contravening buildings, where necessary, as well as the imposition of penalties on erring property developers.

READ: Multichoice Nigeria: How investing $2.1 billion in Nigeria’s media and entertainment value chain impacts national economy

Coronation ads

Going further, Salako warned property developers not to confuse penal fees with approval to go ahead with construction of the illegal building, saying that reliance on payment of penal fees alone to continue developing a building would amount to an untoward act which is reprehensible.

He said, “To discourage unapproved building construction, the penalty is usually imposed for non-conformity with building approvals such as illegal change of use, altering a number of units or floors and unapproved renovation among others.’’

READ: Dangote Sugar Refinery: Revenue soars amid rising cost of sales

While maintaining that the penal fee was cautionary and only a condition precedent to making the right submissions to the approving authorities, Salako urged property owners and developers to always make honest submissions when applying for Planning Permits and ensure strict compliance to the dictates of the permit granted by the Lagos State Physical Planning Permit Authority (LASPPPA).

Download the Nairametrics News App

Jaiz bank ads

Stanbic IBTC

Continue Reading

Real Estate and Construction

4 key points in the new Lagos 2020 Land Use Charge

All property owned, occupied by anyone older than 60 years are exempted from paying the Land Use Charge.

Published

on

4 key points in the new Lagos 2020 Land Use Charge, Lagos offers tech founders N250 million seed fund, cuts stringent access , Governor Sanwo-olu launches 14 ferries to tackle gridlock, says Okada ban irreversible, ride-hailing

Lagos State Government has released the new provisions in the new 2020 Land Use Charge (LUC) Law,  which entails the reduction in penalties for defaults, the people exempted from the charge and forfeiture of  N5.8 billion penalties among others.

While presenting the guideline to the public on Wednesday, the Commissioner of Finance, Dr Rabiu Olowo, explained in 2018, there was an increase in the Land Use Charge rate as well as the method of valuation of properties, this shock had a sporadic increase in Land Use Charge payable by property owners.

He said, “In view of the aforementioned, the current administration decided to review the Land Use Charge law by reversing the rate of Land Use Charge to pre-2018 while upholding the 2018 method of valuation.”

Back story: Earlier on Wednesday, Nairametrics reported that the state government revoked the 2018 land use charge. According to Olowo, the government reverted to pre-2018 land use charges.

He said, “The penalties for land use charges for 2017, 2018, and 2019 have also been waived, which translates to a loss of revenue amounting to N5.6billion.

GTBank 728 x 90

READ MORE: Would you have invested in buying a plot of land in Abuja FCT in 1980?

Below are 4 key components of the new law:

People exempted from the law:

All property owned and occupied by pensioners are exempted from paying the LUC. The definition of Pensioner, according to the state, has been expanded to include all retirees from private and public institutions in the state or any person that has attained the age of sixty (60) years and has ceased to be actively engaged in any activity or business for remuneration.

Coronation ads

Non-exempted

  • Profit oriented Cemeteries and Burial Grounds are no longer exempted from payment of Land Use Charge
  • Private Libraries are also no longer exempted from paying Land Use Charge

Reductions of penalties and rates 

  • Days Outstanding Before Now
    45-75 days from 25% to 10%
    75-105 days from 50% to 20%
    105-135 days from 100% to 50%
  • A 48% reduction in the Annual Charge Rates:
    Definition Areas Before Now
    Owner-Occupied Residential Property 0.076% to 0.0394%
    Industrial Premises of Manufacturing Concerns 0.256% to 0.132%
    Residential Property/Private School (Owner & 3rd Party) 0.256% to 0.132%
    Residential Property (Without Owner in residence) 0.76% to 0.394%
    Commercial property (Used by the occupier for Business Purposes) 0.76% to 0.394%
    Vacant Properties and open empty Land 0.076% to 0.0394%
  • Annual charge rate for Agricultural land was reduced from 0.076% to 0.01%. This is an 87% reduction from the old rate.
  • Penalties for Land Use Charge for Year 2017,2018 and 2019 have also been waived. This translates to N5,752,168,411.03 potential revenue waived by the State.
  • In addition to the reintroduction of the 15% early payment discount, an additional COVID 19 incentive of 10% will be granted on the total amount payable. This makes the total discount for early payment 25% if payment is made before the due date
  • The penalty for obstruction of officials and damage to property identification plague has been reduced from N250,000 to N100,000
  • The penalty for inciting a person to refuse to pay LUC has been reduced from N250,000 to N100,000
  • The 2020 LUC Law introduced a 10% and 20% special relief for Vacant properties and Open empty land, respectively.
  • The right of enforcement has been reduced from notification of three (3) default notices to (2) default notices.

Agents of LUC

  • Section 14 of the Law which makes it possible for the Commissioner to appoint any person including an occupier of a chargeable property to be an agent of the owner for the purpose of collecting Land Use Charge.

While we assure Lagosians that our typical response time will not exceed 24hours, we urge anyone who feels dissatisfied or whose complaint results in a dispute to please contact the Lagos State Appeal Tribunal. Let me state that we share in the pain which the pandemic has brought on every household including the government,” he added.

Olowo added that while the state hopes for the return of normalcy to business activities, it is important to let residents know that, the payment of LUC is not intended to inflict any hardship on anyone.

Jaiz bank ads

Meanwhile, property owners are expected to receive their 2020 LUC bills shortly and they are to leverage on the 25% early payment discount.

Stanbic IBTC

Read full guideline here

Continue Reading

Real Estate and Construction

Why the FG should reverse 6% tenancy, lease stamp duty – NLC

Wabba urged the government to reverse the policy, as Nigerians are still battling the COVID-19 fallouts.

Published

on

Ayuba Wabba, Why the FG should reverse 6% tenancy, lease stamp duty - NLC

The introduction of 6% tenancy and lease agreement stamp duty in the country will cause more hardship for the Nigerian workers who form the majority of the tenant population.

This was contained in a statement from the President of the Nigeria Labour Congress (NLC), Mr Ayuba Wabba, and made available to NAN on Saturday.

It was also stated that introducing hikes in taxes and user access fees at a time when governments of other countries are offering palliatives to their citizens, does not portray the image of a government sensitive to the needs of its citizens.

Wabba urged the government to reverse the policy, as Nigerians are still struggling with the socio-economic pressure arising from COVID-19 fallouts.

READ ALSO: FIRS introduces stamp duty on house rent and C of O transactions

GTBank 728 x 90

“We call on the Federal Government and the Federal Inland Revenue Service to rescind this harsh fiscal measure as it is boldly insensitive to the material condition of Nigerians which has been compounded by the Covid-19.

“Nobody would want to be a tenant if they had alternative. This means that tenants which this new policy targets are some of the most vulnerable people in our society” he said.

He noted that accommodation is a fundamental right guaranteed by Nigeria’s constitution, and should not have a higher tax rate of 6% when sales tax is 1.5%.

Coronation ads

Why this matters

Recent weeks have been ridden with several probes and scandals on misappropriation of public funds, and Wabba noted that these issues have further dampened the trust of the citizens in the government.

NLC noted in its statement that given the scandals, it does not make sense to ask Nigerians to make sacrifices when they are daily regaled with putrid stories of how public officials are accused of swallowing money in billions and making a comedy of ‘fainting’ afterward.

READ ALSO: FIRS’ Nami doubtful of meeting Buhari’s revenue target, runs to Lagos for help 

He added that the government should make more efforts towards reducing official graft and corruption, and in line with the principle of public taxation, have a tax policy where the rich subsidizes the poor.

Wabba noted that the principle of public taxation, especially progressive taxation all over the world is that the rich subsidizes for the poor, and that every tax policy that would be enforceable must create a safety net for the poor.

Jaiz bank ads

Backstory

The federal government, through the Federal Inland Revenue Service (FIRS), introduced a new policy stipulating an additional 6% stamp duty fee for every tenancy and lease agreement in the country.

Stanbic IBTC

READ ALSO: NIPOST workers picket Ministry of Finance over stamp duty 

The implementation of this new policy implies that tenants will have to pay more to make up for the stamp duty charge.

“While we expect the reversal of the 6 per cent tenancy and lease stamp duty policy, we remind government that its highest responsibility is to ensure the security and welfare of every Nigerian,” Wabba said.

Continue Reading