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Lagos Real Estate Regulations: The peaks and the dips

The regulatory process also appears to be one that will help recover more taxes from real estate transactions and practitioners.

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Real Estate in Lagos

The Lagos state government recently enacted a Law: Lagos State Real Estate Transaction Regulatory Authority Law, which will curb activities of unscrupulous real estate agents and those who pose as estate developers to scam investors.

A lot of citizens have fallen victims to fictitious real estate investment opportunities that are non-existent in reality. Hence, this law will be enforced by the Lagos State Real Estate Transaction Department to avoid repeated occurrences.

READ: CBN says 17 banks to restructure over 32,000 loans

Although, the department has now been upgraded to an agency called Lagos State Real Estate Regulatory Authority (LASRERA). The regulatory agency will coordinate, monitor and regulate the activities of practitioners in the real estate business in Lagos.

The regulatory process also appears to be one that will help recover more taxes from real estate transactions and practitioners. The government should track real estate transactions for tax remittance and inventory purposes. But with a process that improves real estate business efficiency.

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READ: Bill to regulate real estate scales through 2nd reading in Lagos Assembly

Section 11 and 12 of the Code of Conduct states that;

(11) Agency fee(s) shall be as follows –

(b) Sale or Purchase of interests in Land and Buildings where two or more agents are retained by the owner/vendor for the sale, the fee shall be the 15 per cent of the total proceeds of the sale.

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(12) A Licensed Real Estate Practitioner shall not prepare any legal document pertaining to any transaction handled by him but must be prepared by a Legal Practitioner and the fees shall not be more than 12.5 per cent of the total consideration.

READ: 7 out of 10 bank loans given to Lagosians 

This means that each principal in a transaction would bear a certain cost of at least 15% fee to realtors or brokers. The party who must also have an attorney will add an extra cost not more than 12.5%.

These closing costs are not the only cost associated with a real estate sale or a buy transaction. There are several other expenses associated with a real estate business or transaction. Any cost on a real estate transaction affects the asset value and a part of these costs recurs every time a piece of real estate is bought or sold.

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READ: The real estate value that silently affects monetary returns

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There is an agelong deficit in housing inventory besides the over $900B dead capital. An increase in real estate transaction costs put a nail in the coffin of the already dead capital. This means the hope of resuscitating the dead capital is now almost zero.

Without a doubt, there is a need for proper inventory and records of real estate transactions. There must be other efficient ways to achieve an updated inventory, while also ensuring proper taxation where necessary.

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For instance, in enforcing the land use charge in the year 2018, Lagos State embarked on an activity to capture the assessed value of properties in the state. The activity was carried out working with stakeholders in the state such as Estate Surveying and Valuation Companies. This shows that there can be a more efficient way to capture real estate transactions in the state without much increase in the transaction cost.

The 15 per cent fee as stated in Section 11b of the Code of Conduct would also appear as an incentive. To draft in for formal registration, more real estate professionals in the brokerage business. Although, this does not mean tax remittance will come naturally.

Going by the 27.5 per cent least added cost per sales transaction as suggested by the Code of Conduct, to an investor, there has to be a strong justification and value exchange for such fees. A real estate investor will prefer to reduce these fees as much as they can and in any ways possible; although, caution is advised here.

There are lots of creative ways to reduce transaction cost while getting the best value and also preventing falling victims of a scam.

A few ways to keep transaction costs low while still getting quality services are;

  • Be real estate investment literate. Profitable real estate investing is not rocket science neither is it a walk in the park. For a first time or repeat investor, sufficient knowledge through education or experience is key.
  • Set a clear real estate goal. A goal is a picture of the desired outcome with steps on how to get the desired outcome.
  • Integrate teams and collaborate where possible on aspects of your real estate project or purchase regardless of your portfolio size.
  • As a major decision-maker in your real estate purchase, you can leverage on relationships that you have built with experienced professionals where applicable.

1 Comment

1 Comment

  1. Kolade

    December 22, 2020 at 7:37 pm

    The law still doesn’t help real estate practitioners align with the value that law brings. Just like the tenancy law of 2011, the law will also add to the economic pressures currently unbearable in the real estate sector.

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Real Estate

Federal Mortgage Bank disburses additional 8,700 homes, N112 billion in three years

NHF collections increased by 80% or N186 billion to reach a cumulative amount of N418 billion as of September.

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In a bid to boost the delivery of affordable housing for Nigerians, the Federal Mortgage Bank of Nigeria (FMBN) has disclosed that it spent an additional sum of N112 billion and built additional 8,700 new homes between 2017 and 2020.

This information was revealed in a statement issued by the Head, Corporate Communications Group of the Federal Mortgage Bank of Nigeria, Mr. Lawal Isa, on behalf of the Managing Director, Mr. Ahmed Dangiwa.

Highlights of the statement:

 

  • The total sum of N265 billion has been disbursed as housing fund by the Federal Mortgage Bank of Nigeria. This sum indicates an increase of N112 billion or 74%, up from N152.5 billion disbursed by the institution as of 2017.
  • About 8,700 new homes have been built between 2017 and 2020, representing a growth of 43 percent to attain a cumulative of 29,133 funded housing units.
  • Within the period, the National Housing Fund (NHF) collections increased by 80% or N186 billion to reach a cumulative amount of N418 billion as of September.
  • Home renovation micro-loans increased by over 2,000% from about 2,600 loans to about 56,000 loans in the last three years.
  • About 570,000 contributors had been added to attain a contributor base of over 5.1 million NHF subscribers.
  • 34 out of the 36 states of the Federation were compliant regarding workers’ contributions, with five states resuming contributions within the past three years.

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Real Estate

How to own your home in 5 years without a mortgage

The invest-to-homeownership option is ideal when you do not have enough cash to buy a home in one fell swoop of payment.

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Home ownership is usually top on the list of all the reasons why people want to invest in real estate, globally. Real estate is in no doubt an indispensable tool designed for the support and sustenance of human life. It is also a tool created for mankind to express creativity, desires, and ambition. When the Coronavirus pandemic spread across nations, governments were forced to give shelter-in-place orders, causing us all to stay in our homes for months. This shows that homes are indeed a necessity. Yet, it is beyond reach for many people in developing countries who desire to own one.

Mortgage loans are one of the common options for homeownership in many countries because it is believed to create some ease of home ownership. In Nigeria, mortgages have not been effective. In cases where it is accessible, it is expensive.

READ: Uber Introduces Uber Cash In Nigeria

The case for mortgage ineffectiveness is a result of many underlying issues bedeviling our development as a nation. This article seeks to provide you with a creative homeownership option that is legitimate and efficient in achieving your real estate investment goal as an individual seeking to own a home.

The mortgage option requires you to provide equity of 20 – 30 percent of the total value of the home sale price. This also means that the home will be the collateral for the loan as you increase your equity over a period of years. Loss of income or ability to earn an income during the tenure of the mortgage translate in most cases to losing the home to the lender.

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READ: Union Homes REIT reports 34.5% dip in profit

The loss of ability to earn income high enough to repay a mortgage is bad in itself. Losing that home to the lender makes it worse as you would have lost your homeowner status and in some cases, the equity.

Invest-to-homeownership

An alternative to the mortgage option is the invest-to-homeownership. It is a creative real estate investment option. It allows you to invest equity with a real estate business or private home developer. The equity is used to execute projects and turned over until the equity builds up to an agreed amount required to own your home. This option creates leverage that is not available in the traditionally popular options.

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The invest to homeownership option is ideal when you do not have enough cash to buy a home in one fell swoop of payment. It also does not need you to pay interest. Instead, the returns on your equity accumulate towards your home purchase. The real power of compounding in real estate comes into play.

READ: Everything you need to know to become a real estate investor

Five major conditions that make invest-to-homeownership work

1. Your choice of the real estate developer

The developer must have a track record of executed and sold-out residential units. Invest-to-homeownership relies a great deal on the integrity of the developer. The first test of the integrity of a real estate entity is the track record and the quality of claims.

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You should choose based on qualitative pieces of evidence and not emotions or appeal.

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READ: The real estate value that silently affects monetary returns

2. The project locations.

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The developer must have ongoing residential projects in strategic locations of the city. These projects must be real and positioned to sell out. This is because not all locations are profitable for all kinds of real estate business goals.

3. The readiness of the developer to work with you

The developer must be desirous to accept your equity on respectable terms. This is because people management can sometimes be a tall order. If managing a bank loan will be easier, a developer may choose the bank above accepting to use your funds to execute projects thereby growing your homeownership equity.

READ: What BBNaija winner, Laycon can do with N30 million  

4. Your mindset and belief

Many people, hold the belief that owning a home in Lagos, Nigeria is hard. This belief sets you up to miss creative opportunities.

Invest-to-homeownership option is a simple yet effective way to achieve a homeownership goal. A cheaper option that takes money out of your pocket fewer times than the popular mortgage option.

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READ: Landlords offer incentives to counter “work from home” induced vacancy rates

5. Ability to adopt and trust the process.

Your readiness as an intending homeowner and willingness to trust a transparent process when you find a developer who offers you one. The real estate investment terrain in Nigeria is still evolving. With many unpalatable experiences dotting the landscape. These experiences are due to a combination of several issues. Some real estate stakeholders have been able to master some fundamentals of the evolving terrain and can minimize foreseeable issues. Your ability to identify a trustworthy process, helps you harness the opportunity to own your home interest-free.

READ: Best ways to get free money with little or no effort

With the invest-to-homeownership option, the risk of losing your home to a lender in the case of protracted default or loss of income is eliminated. The developer that you choose to work with is obligated to deliver to the terms that will be agreed upon at the point of investment. You should carefully choose a stakeholder who can and will deliver on your homeownership goal in record time.

READ: Bamboo says USD Wire Transfer option is no longer available for deposits

You may be interested or have questions about the possibility of the invest to homeownership option. In addition to letting you know this option is possible and available, we want to answer your questions too. Send ITHO via WhatsApp to 07062028677 or email to [email protected]

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Real Estate

NMRC, DLM issues N10 billion bond to boost affordable mortgage

The net proceeds will be used to refinance eligible mortgage loans originated by the participating mortgage lending banks.

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NMRC, DLM issues N10 billion bond to boost affordable mortgage

The Nigeria Mortgage Refinance Company (NMRC) has completed its N10 billion 7.20% Series 3 Fixed Rate Bond to boost funding for affordable mortgage in the country.

The bond, which was facilitated by DLM Capital Group as the Financial Adviser and Issuing House, has created opportunity to investors and home seekers in Nigeria.

READ: #EndSARS: Access Bank announces N50 billion interest-free facility for businesses

According to the bond brochure, the net proceeds of the exercise will be used to refinance eligible mortgage loans originated by the participating mortgage lending banks, and investors.

The Managing Director/CEO of NMRC, Kehinde Ogundimu, explained that the bond was well received by investors, and was subscribed 3.28 times over the projected amount.

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He said, “This has been described to be the highest subscription for a Nigerian bond so far.

“This series 3 bond issuance goes to further reinforce our commitment to encourage, promote and facilitate home-ownership in Nigeria. This issuance gives an opportunity for people like you and I to take mortgage loans at an affordable rate and buy houses.”

READ: CBN restarts dollar sales to SMEs, students, PTA

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Ogundimu added that one of the biggest challenges in the mortgage industry is affordability, but with the rate at 7.20%, he expects that from the issuance, there will be a substantial decrease in the mortgage rate to the ultimate mortgagors going forward

“Other things like cost of houses is also expected to drop as this interest rate will offer some cost reduction to developers, unlike in the past where they had to borrow money for short periods at over 30% interest rate,” he added.

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What they are saying

Sonnie Ayere, the Group CEO, DLM Capital Group, explained that the success of the bond is an indication that it would go a long way in helping the average Nigerian access mortgages loans.

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He said, “The bond which was aimed at ₦10billion was oversubscribed and we received commitments for ₦32.8billion, this I believe is the highest subscription for a Nigerian bond thus far. This indicates a strong investor appetite for the long-tenured asset and re-emphasises the market’s confidence in the operating model of NMRC.

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READ: DMO offers N150 billion worth of FGN Bonds for subscription

“Also, we are cognizant of the housing situation in Nigeria and the challenges faced by Nigerians in accessing mortgage loans due to its high rates, so helping NMRC to achieve this gives us a sense of fulfilment as it will immensely help ordinary Nigerians access mortgage loans at low rates and ultimately help them buy their own homes.”

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What you should know

NMRC was established to bridge the funding cost of residential mortgages and promote the availability as well as the affordability of good housing to Nigerians by providing increased liquidity in the mortgage market through the mortgage and commercial banks.

READ: Fidelity Bank to raise N50 billion in bonds in Q4 to refinance existing debts

The company is driven by substantial private sector participation consisting of commercial banks, primary mortgage banks, insurance companies, private equity investors and international financial institutions through the Ministry of Finance with the public purpose of developing primary and secondary mortgage markets, and raising long-term funds from both domestic capital market and foreign markets to provide accessible and affordable housing in Nigeria.

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