The Nigerian real estate market in the last one year, especially during the COVID-19 pandemic, has rapidly expanded and is recording exponential growth, steadily increasing foreign direct investment, fast urbanization, and strong corporate demand.
But the growth came with a ‘new normal’ which some operators described as the ‘lessons from the pandemic.’ In this exclusive interview, Olaposi Lawore, the Managing Director of Dynasty Real Estate (DRE), a subsidiary of VFD Group Plc, shared some lessons the industry learnt from the pandemic, the impact of technology and factors behind rent surge among others.
DRE’s primary focus is Real Estate development, while it’s secondary goal is renovations, project management and turnkey projects. It has become identifiable with great projects, setting new standards for renovations, and also managing great projects.
How would you assess the Nigerian Real Estate sector in the phase of the new normal?
Nigeria’s real estate is currently flourishing. The residential property market has thrived significantly post-pandemic. Within the last 12 to 18 months, the advent of covid has led to people working remotely which has also introduced a greater demand for more functional housing which combine live, work and play features. During the covid-19 pandemic, when the lockdown was fully implemented, people started recognising real estate as an asset class that is sustainable, tangible and can benefit from significant capital gain which led to the drastic rise in the demand for real estate.
It appears the year 2020 was a lesson for everyone both in the public and private sector. What are the lessons the sector took from the year?
The first lesson we learnt is the need to integrate technology into our business model. Besides the aesthetics and structural frame of a home, imagine a technology-integrated home with smart systems and the likes? The second lesson we learnt is the need to create smaller compact housing such as studio units, one and two-bedroom apartments. During covid, several people lost their source of livelihood, and this limited their purchasing power. This was a major reason to create affordable functional apartment types that will also cater to the dominant youth populace. The last but not the least thing Covid taught us is the need to create proper mixed-use developments that incorporate residential, relaxation and work features – such a project offers users a multi-functional project where you can live, work, and relax without stepping out.
How have these lessons shaped your style of doing business compared to 2019? Also, include how it tells on your numbers?
Covid-19 made us start to rethink our project deployment model and the type of houses we deliver to the market. So far, we are focused predominantly on apartment housing, using our Dynasty Residence 6 apartment as an example. This development which was creatively crafted in the heart of Lekki is currently sold out and will be fully delivered in two months. This project was initially conceived to be semidetached buildings that would have sold for 70 million naira each but due to the outset of Covid in March 2020, we had to restructure and reconfigure it into apartments. Immediately we recognized this opportunity and tweaked our model; the project was completely sold out in no time. It is easier for middle-income earners to buy a home around the price range of 20 to 40 million in comparison to properties that are twice or three times that value. Also, in an approach to adapt technology into our business model; we are currently building a digital platform that will offer home purchase features, trading, and investment in microunits. This innovation will be launched by Q4 this year.
Some real estate firms described the COVID-19 lockdown as a blessing, as they got more demands and made more sales during the period. What is your take on this?
Saying it is a blessing, I agree, but not totally. It was more of a reawakening – it got us to go back to the drawing board to rethink how we do business. It got many developers and business owners to re-evaluate and retool their business models, processes, workforce and vision. This was the case for us in DRE and these adjustments have led to both an increase in sales and improved efficiency across every cadre of our organizational structure. As a result, we have experienced an overall improvement in our efficiency as an organization.
Reports say that the value of rents, property and land have gone up recently. What could have pushed the value?
The increase in rents, property, amongst other things is predominantly due to inflation and increased demand for properties. When demand increases, the market shifts, and property owners start to increase the value of their property. The Covid era also led to what we call ‘Capital Appreciation’ whereby assets in different strategic places went up in value exponentially because of high demand. In some areas, you would see that property value appreciated by 50 to 60 percent; in some places, there was almost a 100 percent increase. This is mostly due to the demand influx, inflation and other economic indices which typically would affect any aspect of the economy.
How affordable are your offers and what informed their value?
At the tail of last year, our organization decided to structure its project pool in two categories – Prime and Prestige. Prime properties are properties within a reasonable price margin from about 20 to 60 million naira. These are typically apartment types, 1, 2 and 3 bedrooms, in some cases. They have flexible payment plans supported by our partner bank, Abbey Mortgage Bank.
We have significant demand for our luxury section too (Prestige) but we have tried to focus more on mid-tier type projects i.e. Prime projects. This is because when you look at the purchasing power of the average middle-income earner, you realize that it is easier for them to purchase property within that (Prime) price band and when you are able to support it with a mortgage plan, it’s even more flexible for them. We have also ensured that even though we are delivering affordable homes, we are able to balance it with quality design thinking and functional spaces. So, you would see that at the apartments that we are delivering at the Dynasty 6 Project on Orchid road, for example, we are using high ceilings, high level doors, and the best quality materials which go to show that quality can also be delivered at an affordable price.
There has been an influx of real estate firms, especially in Lagos and other major cities. How do you take competition?
It is an open market; I am not trying to compete with anyone. I think that the housing deficit we have requires a lot of developers to be able to deliver on what is required, also backed up with some government support. The only challenge we may have is the lack of regulation that exists within this sector of the economy.
Poor regulation has meant that people who do not have any professional experience or knowledge of the real estate or the building industry, have moved in to develop low quality properties over the last few years. This has impacted negatively on off takers’ perception of developers. I have spoken to potential buyers who did not want to go for off-plan purchases because they had had their fingers burnt in the past. Oftentimes, I introduce myself as an Architect and lay emphasis on the strength of my technical and marketing team to aid conversations with intended buyers.
What are the challenges DRE is currently tackling and what is your approach to challenges generally?
The challenges we are trying to tackle are focused on home functionality and the purchase process (finance) – the ease and flexibility. The availability of a mortgage option has given several people the opportunity to purchase houses with a flexible payment plan which can be spread for up to 10 years and with the integration of NHF (National Housing Fund) among other things. Mortgages and flexible payment plans have also bridged the gap between home purchase prices and effective purchasing power of the buyer without it being a burden to the buyer(s) and their families. The homeownership process should indeed not be a difficult process.
How can the Government use Real Estate to re-energise the Nigerian economy?
That is a very good question. For me, the first thing we need to acknowledge is the fact that real estate is not just limited to housing as there are other fundamental aspects of the real estate chain that should be looked at. This is particularly important when you create real estate solutions while considering the age bracket of your target demography in Nigeria which is predominantly a youth market aged between 25 and 40. In line with this, there are several aspects of the real estate value chain that the government can seek to enhance and from different perspectives – hospitality and lifestyle, housing, commercial, industrial, to mention a few. The creation of strategic real estate within the various segments would drive the economy of the country significantly.
If you look at a city like Dubai, they have been able to create value added real estate services and properties which have enhanced their economy. According to their history, in the 90s they realized that in the next few decades their oil was going to dry up and they decided to channel their focus into real estate in building a destination city suitable to live and work in. This desert city strived to be the game changers and went for the largest structures; the tallest buildings, the largest malls and so on and they became a tourist hub. So, who says Nigeria cannot become the tourist home for Africa? We can only do this through a public-private partnership (PPP). With proper government partnership, I believe that this can be delivered within the next decade. All it requires is critical thinking and selfless acts.
Where do you see DRE Limited in next 5 years?
We believe that within the next five years, we are going to be forerunners in the real estate space. We are going to be models for a lot of other development companies to follow and this is not going to be based on just our delivery of units. Our organizational culture, processes, and approach to project delivery will be exceptional. We would create more communities that are habitable, more communities that are functional, and will set appropriate standards and a benchmark with every location we go to. This is our intention, to be able to provide fantastic project offerings, not just in Lagos but in other major Nigerian cities within the next five years.