The Nigerian real estate sector has been arguably insulated from the effects of the COVID-19 pandemic, as operators claim there are still opportunities for investors to make money in 2021.
In its latest Lagos Property market consensus report, the Nigerian Institution of Estate Surveyors and Valuers (NIESV), the Lagos chapter, established that despite the pandemic, investors could make money from the sector depending on where they channelled their funds.
The report revealed that Lagos State is divided into 7 zones – Island 1 (Lagos Island, Old Ikoyi, S/West Ikoyi, Banana Island, Victoria Island); Island 2 (Lekki Phase 1, Ikate, Osapa, Agungi & Chevron); Island 3 (Ajah, Sangotedo, Awoyaya & Lakowe); Island 4 (Ogba, Ogudu, Magodo GRA 1 (Isheri) & Magodo GRA 2 (Shangisha); Mainland 1 (Surulere, Yaba, Ilupeju & Gbagada); Mainland 2 (Amuwo Odofin, Isolo, Festac, Apapa); and Mainland 3 (Ikeja GRA, Maryland, Ikeja & Alausa).
It stated, “Chevron showed the highest yield of 6.87% on investment and is expected to do more in 2021, next was Agungi (6.31%), while Osapa came in third with 6.06%.
“The lowest yield was seen in Ogudu – 3.10%, next being Magodo (Shangisha) – 3.19% and third being Magodo (Isheri) – 3.20%.
“The median yield in Lagos state from this consensus analysis is 4.32% and it is obtainable in Yaba.”
Source: NIESV, Lagos chapter
In separate interviews, some of the operators told Nairametrics that every discerning investor could still make a fortune from the sector, as long as they are properly guided by professionals and not speculators.
Samson Odegbami, Group Managing Director, Richfield Nigeria Limited, a real estate firm, told Nairametrics in an exclusive interview that there were several opportunities for investors in the sector.
He said, “Discerning investors should take part in crowdfunding while they watch their investments grow. They can give their money to real estate firms, who will inject the fund in building estates across commercial hubs, and earn as much as 20% Returns on Investments.”
Investors could also offer their land to a developer for building whereby the developer gives them part of the building, depending on their agreement, and at the same time earn ROI on such investment.
Adedotun Bamigbola, Chairman, NIESV, Lagos chapter, told Nairametrics that potential investors could also buy real estate for the purpose of making returns on them over time. But which locations are lucrative for such investments?
Source: NIESV, Lagos chapter
He said, “Where to buy real estate largely depends on the status and purpose of the investors, some zones will yield more returns to the investors in 2021.
“Island 1 zone recorded the highest land prices, which is expected to be repeated in 2021, followed by Mainland 3. This is a reflection of the deepened level of commercialization in these 2 zones.
“The growing development in nascent Island 2 areas is also reflected in its high price of land averaging N112,021/sq.
“Per house types, Island 1 zone has the highest values (rental & sale) for both 3-bedroom and 4-bedroom houses. The same also goes for office space rental values.”
Plot vs Housing: Which should you buy? 8 Things to consider
Deciding on whether to purchase a plot of land or buy a house can be a tough decision for many.
“Real Estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, and managed with reasonable care, it is about the safest investment in the world.” – Franklin D. Roosevelt.
Deciding on whether to purchase a plot of land or buy a house is an excellent investment opportunity but it can be a tough decision for many, and both options come with their inherent advantages and disadvantages.
There are various issues to be considered which include: safety, security, proximity to family and friends, proximity to amenities and offices, good schools for children, good road networks, hospital services, power and water supply, 24 hours facility management services, and other obligations.
Once you are certain of what your minimum requirements are, it makes it easier to take a decision.
1. Initial capital expenditure
Purchasing land to build typically involves lower initial capital expenditure when compared to purchasing a house. This option is usually attractive to buyers who have limited access to funds but who are desirous of getting a foot into the property market or owning their first home.
However, due diligence is advised to ensure that the land being purchased has the required title documents and is free of encumbrances. Other considerations such as the geotechnical properties of the soil can add to the cost of the foundation and overall development cost. Master planning restrictions can determine if the land being considered is along a drainage path or road expansion zone.
In contrast, the initial capital expenditure for home buyers may be higher due to the development costs involved at inception which includes construction costs, design and building permits requirements.
2. Burden of responsibilities
When buying land to build, the buyer takes up the burden of various responsibilities which include, the cost of the land, design fees for consultants (architecture, structures, mechanical & electrical), planning approval, soil test and EIA reports (if applicable), certified true copy of title documents, various taxes, and other requirements which may vary from one region or country to another.
On the other hand, the burden of all these responsibilities is transferred to the Developer if the buyer decides to purchase a home. This translates to less stress and burden on the buyer.
3. Access to funds
One of the differences between buying land versus a home is how the loans are structured. Mortgages come in a range of options to suit your needs and budget, but there are much fewer options for purchasing land. Many land loans must be fully paid within two to five years.
Interest rates and down payments are also usually higher on land loans than on mortgages. A typical down payment can range from 30-50%. Securing a lower interest rate is a lot tougher, as land only loans are riskier for the lender since there really isn’t any collateral, such as a home. Therefore, lenders are less inclined to offer lower interest rates.
4. Limit of control
Purchasing a home usually constrains buyers to the choice of design, finishes and quality standards delivered by the developer. This can be a source of frustration if quality standards fall below expectation. As a result, the purchaser may need to spend additional finances to correct defects and retrofit the development to satisfy his or her required quality and design standards.
In contrast, land purchase offers the buyer more control over the entire building cycle and final product outcome. Buying land and having your own home built according to your specifications may be a much more viable option if you are particular about selection and quality of the finish, design features, cost control and timely delivery.
As a response to bridge this gap, innovative developers such as Mixta Africa have taken the initiative to deliver homes as shell only or a hybrid finish which give the buyer the flexibility of finishing the property to their required taste.
5. Cost of development
For residential estates, developers can take advantage of economies of scale to lower building costs. The cost savings realized can subsequently be passed on to the buyers, reducing the cost of purchase. Shared costs typically include power, stand-by power system, water supply, sewage, infrastructure, security, and overall maintenance.
In contrast, individuals who purchase land directly are solely responsible for the developmental costs for utilities and infrastructure which can be high.
At Mixta Africa, our serviced estates are delivered equipped with good roads and infrastructure, 24-hours power and security services and recreation facilities.
6. Opportunity for secured communal living
Rapid urbanization being experienced in most countries and Nigeria in particular is predominantly fueled by our large vibrant population. The country’s housing deficit as of December 2018 was estimated at a staggering 20 million units which is about 15% increase from the figures in January 2019. About N21 trillion will be required to finance the deficit. This housing gap has resulted in competition for limited resources, over-crowding in urban areas, and a strong need for a sense of security.
‘Custom-built’ residential estates offer a sense of security for potential homeowners when compared with individual land developments. These shared spaces can provide unique access to shared recreational spaces that include swimming pools, gyms, outdoor recreation and congregation areas, well-landscaped areas, neighbourhood shops, shared IT infrastructure amongst others.
In estates that are well maintained and secured, this sense of community has a positive impact on mental health and wellness which is an important consideration in the current clime.
At the Lakowe Lakes Golf and Country Estate, residents have the unique opportunity of living in a serene environment that boasts of an 18-hole golf course, beautiful lakes, and manicured lawns, with a selection of hospitality hubs.
7. Appreciation over time
Both buying options have the potential to appreciate over time. A property’s physical structure tends to depreciate over time, while the land it sits on typically appreciates in value because it is in limited supply.
The degree of depreciation and/or physical obsolescence varies from one property to another, but if left alone, properties continue to depreciate until they no longer add any value to the land.
It is therefore the responsibility of both the homeowner and Estate Managers to ensure that properties are well maintained over the years by adopting preventive, cyclical, and corrective maintenance strategies.
Mixta Africa is leading the transformation of cities in Africa by creating sustainable communities with high quality urban infrastructure and homes.
8. Risk of non or poor performance by Developer
Buying land means that the purchaser has the flexibility of developing the property at their own pace. In contrast, for those who choose to buy from developers, the decision carries the added risk of non-performance or poor performance by the Developer. As such, buyers are advised to take the time to enquire about the reputation and track record of the developer regarding timely delivery as well as the quality of delivery. This can save a lot of frustration and heartache down the line.
In summary, deciding to buy a home or to buy land for development is one of the most important decisions that we may have to make as individuals or families.
The risks involved are high and can impact positively or negatively on our finances, health, and wellbeing.
Prospective buyers are advised to look beyond the stylistic attributes of prospective home purchases and concentrate on a property’s potential for land appreciation. Focus on those locations that provide opportunities for improvement, which may enhance the value of the land.
The list of considerations highlighted in this article are not exhaustive but can act as initial considerations for decision making.
Careful deliberation, due diligence, research, wide-consultation and advise from suitably qualified industry professionals is advised.
Author: Titi Banjo – Project Development Manager, Mixta Nigeria
NSE fines Mortgage bank, Conoil, others over N1 billion for account filing default
No less than 40 companies have been fine by the NSE for failure to comply with minimum listing standards of the bourse.
The Nigerian Stock Exchange (NSE) has fined Conoil Plc; Deap Capital Management & Trust, a Mortgage banker; R.T. Briscoe Plc; FTN Cocoa Processors Plc; eTransact International; Royal Exchange Plc and 35 others over N1 billion for their failure to file their financial statements with the bourse.
This was found in the NSE’s X-Compliance report that was released on April 1 2021. In the report, the NSE fined Deap Capital the sum of N5.5 million for default in the filing of its 2019 audited account, R.T.Briscoe was also fined about N53.4 million over its failure to turn in its audited report since 2018 to the Exchange.
Conoil Plc was fined N800,000, FTN Cocoa Processors was fined N50.3 million, Juli Plc, Omatek Ventures, Royal Insurance, Union Dicon, and Niger Insurance were slapped with N151.2 million, N537.2 million, N22.3 million, N27.5 million, and N84.2 million fines respectively among others for similar defaults.
What it means
The companies have failed to comply with minimum listing standards of the bourse as some of them have consistently failed to file their audited financial statements since 2017.
For instance, NGC, DN Tyre, Union Homes Savings & Loans, and Aso Savings & Loans have not sent their 2014 – 2019 audited results to the exchange. While Omatek, Evans, Unic Diversified, Juli, Anino, Multi-Trex failed to file their results since 2015. Roads, Staco Insurance, Goldlink, FTN Cocoa, Capital Oil, Guinea Insurance, Resort Savings, Standard Alliance Insurance, International Energy Insurance fall in the category of firms that have not submitted their 2017 and 2018 reports, respectively.
A regulatory report obtained at the weekend flagged the deficient companies with warning codes that indicated various degrees of corporate governance weaknesses, susceptibility to illiquidity, and price manipulation due to inadequate price discovery.
Some of the companies’ stocks were also on the delisting watchlist of the NSE.
What you should know
- The X-Compliance Report is a transparency initiative of the Nigerian Stock Exchange (The Exchange), which is designed to maintain market integrity and protect investors by providing compliance-related information on all listed companies.
- Companies that are listed on The Exchange are required to adhere to high disclosure standards which are prescribed in the Rulebook of The Exchange, 2015 (Issuers’ Rules), and other Rules of The Exchange, from time to time.
- Financial information which is periodic disclosure, as well as ongoing material information disclosure should be released to The Exchange in a timely manner to enable it efficiently perform its function of maintaining an orderly market.
- The X-Compliance Report is updated every Friday at the close of the market.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- PZ Cussons Nigeria Plc appoints Ifueko Okauru as Independent Non-Executive Director.
- Chams Plc announces the appointment of Patricia Duru as new CFO
- NPF Microfinance Bank reports a profit after tax of N614.42 million in FY 2020.
- UACN Property Development Company Plc appoints Ojo Odunayo as new CEO.
- Unilever Nigeria Plc reports a loss of N492 million in Q1 2021.