PROPERTY Recession: Developers tell their stories

Presently there is low demand for real estate in major cities like Lagos, Abuja and Port Harcourt, due to the harsh economic situation of the country.

Daily Trust investigations showed that real estate developers find it difficult to sell their houses and as a result could not embark on new ones. Also, many tenants are unable to meet up with their rent payments, leading to vacant residential properties especially in some highbrow locations in Abuja and Lagos.

Tenants are now moving to more affordable locations as a result of the economic crunch.

As a survival strategy, some developers are now concentrating on marketing their existing housing stocks rather than building new ones, mainly due to low demand and rising cost of building materials.

Commenting on the issue, President of Real Estate Developers Association of Nigeria (REDAN) Mr Chime Ugochuwu said that the downturn in buying and selling of houses is an automatic result of global economic change towards housing demand.

Chime told Daily Trust that globally, there is a shift from individual owning houses to direct funding of it through creation of mortgage.

The REDAN president urged government to develop or create the major infrastructure that will make for efficient mortgage system that will enhance the demand and access to housing.

“We need to develop a structure that will be in consonant with the global philosophy of home ownership - that is the mortgage industry. That has not been developed in the country. A lot of people are still doing outright purchase which is encumbered by the low availability of fund from the part of takers that is where we are today,” he said.

Chime said that the reality of the socio- economic situation will now force government to look into the two issues of: affordability and availability of houses for the people.

On the suggestion that the current crack down on corrupt Nigerians by the EFCC compounded the lull in property business, as looted money were hurriedly injected into the market in the past to keep their ill-gotten wealth, Chime affirmed this, but said it will only affect the high end properties.

“That is true but corruption is not sustainable to national development of any nation and therefore you cannot develop your nation based on corrupt funding - those are illicit funds. It is going to affect high-end houses which people cannot afford. Now, we need to be reasonable. Some of the property that we have in highbrow areas like Maitama are not okay. One man cannot have a house of 12 rooms because he cannot have people occupying it with a family of four. It tells us to now invest money in affordable houses where the masses are.”

He called for synergy between developers, government, planning authorities, mortgage institutions and design infrastructure that will be similar and comprehensive in the housing transactions to eliminate bottleneck in the system.

“These men don’t get money from corruption, they get money from their sweat so we have to design a mechanism whereby mortgage is available for those at low strata of our society where we have a huge number running into millions . It is a good development that we don’t have those funds any more in the property sector,” he said.

Another developer, Hajiya Salima Makara- Managing Director Shelter Plus based in Niger State said the lull in the property business is not peculiar to big cities like Abuja and Lagos alone. According to her, whatever happens in Abuja for instance trickles down to all component states.

She said, “The reason is not farfetched. Normally when there is recession, one thing that is affected is the property sector. People look at it as a huge investment so when people slow down on their investment and just do what is absolutely good for their survival it will definitely affect their purchasing power to buy landed property. So recession goes hand in hand with a lot in property market.”

On what developers are doing to cushion the effect and remain in business, she said: “Because most of us have invested our money and time in real estate what we are doing now is looking at an area where we can cut cost so that we can also bring down our prices in order to encourage potential buyers. So we are looking at it as bulk purchase. Also often carcass for the owner, maybe you have roof carcass for owner to finish gradually. Anything that we can do to come down to their level because we need them in as much as they need us. But at this moment we need them most because the business will be stagnated, finances tied down and all that. So, we are hoping that things will improve.”

Makara said developers are also bringing down the cost of rent as a result of the recession, saying “those that are renting at N750,000 are looking at N500,000; everybody is trying to cut cost and manage what they have.”

Engineer Uba Y. Mshelia, CEO of Salpa Nig. Ltd based in Adamawa said the ability of people to purchase property is not there presently.

“People are not properly empowered and are not in a position to have access to money for them to purchase property even though people are interested in having affordable houses; everybody wants to live in his own house. As you know the mortgage system too has not been fully developed.

“So, the market is affected in two ways: there is no proper mortgage system in place and low avenue for people to have access to money,” he said.

Mshelia said despite all the recent policies of the Federal Government to revamp the sector, the impact has not been felt by a developer like him.

“I am developing in Adamawa State and I have not seen government’s impact to enable me to perform optimally the way I supposed to. Government should not give land alone they should provide infrastructure because without it people will not occupy the houses and if they make developers provide it, it will jerk up the cost of selling those houses,” he said.