The real estate business in Nigeria is one of the sectors of the economy that’s contributing immensely to the country’s GDP. But in the last few months, the sector has been hit with a high exchange rate of dollars and pounds and a lot of players in the sector have been lamenting that it is killing the real estate business.
Last week, the Chairman of Real Estate Developers Association of Nigeria, (REDAN), South-West zone, Mr Debo Adejana, who is also the MD of Realty Point, spoke about it in an interview with City People Reporter, ISAAC ABIMBADE (08155107955). Below are what he said.
How would FOREX affect the real estate market in Nigeria?
Definitely, it can’t be positive. The reason why it can be is that the construction cost is going up and that would also make the acquisition of houses go up. Prices of housing are going to be ‘jumping’ right now. So it’s not a positive effect at all, just like other sectors of the economy.
What does this mean to investors from the diaspora?
This is the best time for them to invest because with little foreign exchange you can achieve more. For those abroad, it’s a good time for them to invest.
What are the strategies you are applying to stay afloat in this period as a player in the sector?
One major way is to speed up your production time for any committed transaction. If I’m doing off-plan now and I have collected money from someone, let us say I collected 30m on a property and the person is paying, it is better for me to deliver that property even before the person finishes paying the money. It shows that I can control my cost within a short period. That’s one.
Second, allow fluctuations in your pricing mechanism; in the pricing strategy, allow some tolerance. What that means is that, if my company’s standard margin is 30 percent and the cost of production is 70 percent, ordinarily, you will think I should sell the property for like 91 because 30 percent of 70 would be 21. So if I put 21 on 70, the price I would arrive at would be 91. But because I know that pricing is not stable right now, I may have to be asking for 100 rather than 91. Be tolerant in your pricing so that you can adjust some shocks.
Another strategy is that, you can buy your materials ahead.
What advice do you have for local investors who are willing to go into real estate. What type of investment can you advise them to embrace?
It depends on the objective and it depends on the area of real estate. If you want to do speculation, you are advised to go for land. If you want to do outright investment you have to look for good property that can give you some rental income. They can actually do any of those investments. The fundamental thing should be, they must buy a good property with good titles and at the best price possible. And you are almost assured it would lead to profit at the end of it all, whether it’s land or building.
Do you have any advice for all the intending investors who are sceptical about going into the sector?
A time like this isn’t the period where you put your money in the money marketing business because it is 17 percent as of today. This means your money is losing value; it’s not yielding anything. The 10 percent interest is not even up to the inflation rate. And real estate still remains one of the sectors you can put your money into. What I would advise them is to move their wealth into assets, rather than keeping it in the money market.
During the Ambode government, Excision of land is what they mandated the developers to apply for but there is now an addition as the current government has introduced another one called Allocation. This allocation is highly expensive and developers like you have been complaining. What’s your take on this sir?
My position is not different from that of the association, the developers. As long as we continue like, this housing will continue to elude a lot of people because it would be much more expensive than they can afford. As long as access to land is difficult due to the cost of title, housing would continue to elude many Nigerians. It is still an appeal that we would make to the government to see how access to the land can be for everyone. Because all this would amount to the final pricing of the housing.
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