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Real Estate and Construction

Nigerian Real Estate and COVID in 19 Slides

Validate investment cases and focus energies on property sectors that are more resistant to shocks.

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Nigeria is rapidly approaching an economic crisis as the COVID-19 global pandemic has put the world on lockdown and sent Brent crude oil prices to a 20-year low. Spurred by lower global demand and reliance on oil exports for 90% of its foreign exchange income, Nigeria’s economy and her fragile currency are being pushed to their breaking point.

In this report, we will focus on the impact this pandemic will have on the real estate market in Nigeria. So far, key themes include mass concessions, re-negotiation and restructuring activity, slowed decision making, stretched out project deliveries due to the lockdown and more. After outlining the potential property sector losers, hospitality and retail most especially, alongside potential winners (industrial and healthcare), we discuss the impact of the COVID-19 pandemic on individual property sectors and the direction of rentals, capital markets and more.

Within this uncertain environment, we recommend that market participants including asset owners, real estate service providers and others stress test their businesses at varying levels of reduced income, use the downtime for market research to validate investment cases and focus energies on property sectors that are more resistant to shocks.

Download the report here.

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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.

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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.

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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.

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

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  • 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.

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

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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.

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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

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“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%.

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 

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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.

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.

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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.

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Real Estate and Construction

Lagos seals 16 properties in Ikoyi, to conduct compliance audit of Osborne Estate 

The Commissioner revealed this during his official visit to that estate with the enforcement team.

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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 revealed that it would soon conduct compliance audit of Osborne Estate Ikoyi, in order to determine the compliance level of property developers to the Lagos State Physical Planning laws. 

This is part of the ongoing effort by the Lagos State Ministry of Physical Planning and Urban Development to enforce strict compliance with the state’s physical planning laws and regulations thereby reducing the incidents of illegal developments and unapproved buildings. 

This disclosure was made by the Lagos State Commissioner for Physical Planning and Urban Development, Dr. Idris Salako, in a tweet post from the official twitter handle of the Lagos State Government on Friday, July 24, 2020. 

Salako who revealed this during his official visit to that estate with the enforcement team, stated that the compliance audit became imperative due to the general disregard of building codes within the Estate. 

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The tweet post states, ‘’The Honourable Commissioner for Physical Planning and Urban Development, Dr. Idris Salako has revealed that the Ministry would soon conduct a compliance audit of Osborne Estate to determine the level of compliance of Property Developers to the Lagos State Physical Planning Laws.’’ 

‘’Salako, who disclosed this during his official visit to the axis with the enforcement team, stated that the compliance audit became imperative in view of the observed general disregard for building codes within the Estate.’’ 

In continuation of its enforcement of the state’s physical planning laws and regulations, the commissioner directed the sealing of building construction sites for the flagrant disregard of the extant laws and regulations governing physical development in the state including those without planning permit and stage certification. 

This directive resulted in the immediate sealing of 10 buildings in Osborne Estate, while another 6 were sealed on Second Avenue Estate within the same environs. 

Nairametrics had reported yesterday, that the Lagos State Ministry of Physical Planning and Urban Development as part of its enforcement of physical planning laws, sealed 43 structures on Airport Road for violating the Physical Planning law of the State.  

Salako explained that the affected properties include 13 banks and 13 hotels were built without planning permit or built without conforming to their approval order. 

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