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Tuesday, April 24, 2012


        It was after reading Robert Kiyosaki book ‘Retiring young Retiring rich’ that I decided to explore the vast and unorganized real estate market of Nigeria which has continued to growth despite the slow growth in the Nigerian financial market. Nigerian economy to start with is one of the fastest growing in the world; it was recently ranked the third fastest growing economy in the world. The continue grow in the economy has left people with a lot of liquidity which they needed to invest  some where, and looking at the slow recovery experienced in the financial market after the last global financial crisis, real estate is one of the safest investments in Nigeria for one to put his hard earn money. But unlike the mortgage market in the United States that was at the center of the last global financial crisis, the Nigeria real estate sector is not very much connected to financial sector. The amount of capital that bank borrowed out to finance the real estate sector is not very significant. As it was seen during the last crisis, the major contributing factor to Nigeria finding herself in that crisis were loans given to finance purchases of shares (margin loan), credit extended to finance the importation of refine petroleum by oil marketers (in short, bad loans to sectors other than the real estate sector), poor corporate governance record of the Nigerian banks, and transmissions from the world wide crisis that emanated from the wall street. During that time it was real estate that came to the rescue of many Nigerian investors, forcing the price of assets in the market to go down as a result of too much liquidity. While in developed countries, housing wealth constitutes about 70% of the nation’s economic wealth the story is not the same in here, Nigerian housing sector has been neglected by the government. And, the private sector is still not ready to tap into the enormous wealth that is buried in the sector. At the centre of Nigeria’s current poor development of the real estate sector is the present of weak judicial system, absence of land right markets, lack of mortgage financing infrastructures, government neglect, and lack of awareness.
    One of the major factors that is mitigating against the development of real estate and mortgage finance in Nigeria is lack of land titles. Up till this time, despite the land reform act, a lot of land dealings are done outside the formal channel of Government who is charged with the responsibility of Issuing land titles to prospecting land owners. That is why it is difficult to obtained loan from banks by using a land certificate from say, Bauchi or Sokoto, here in the north. Most land certificates holders from the Northern part of the country with the exception of Abuja and some parts of Kano and Kaduna find it very difficult to scale through with their proposals before any credit committee of Nigerian banks. There is the problem of traditional land owners, like famers in Northern Nigeria, who divided their farm lands into pieces and sale to the public without government approval. And most governments in the North are not doing much to address this problem, instead they are busy aiding the problem by refusing to develop effective town planning schemes and make ownership of land title easier. In the south it is only Port Harcourt and Lagos that have growing real estate industry that allowed for large scale commercial investment. In Lagos, real estate is one of the major movers of the economy of Lagos, and it is easier to obtain a loan using land title from Lagos than any where in the country with the exception of Abuja. That explain the scale at which large scale commercial estate developers are entering the Lagos market; newly build estates are springing g up in Lagos from areas of land that were before used as bush or farm land. Just like in other developed climes, Lagos state is currently reclaiming some part of the ocean to add to it most expensive parts of the commercial city such as Victoria Island, in what is estimated to cost billions of dollars and the phase of the work has already reached an advance stage, being undertaken by one of the biggest firms in the business in the world. The reclaimed area is name Eco Atlantic City and the hope of the developers is to develop it into the new financial epicenter of West Africa with some of the tallest buildings you can find anywhere in Africa and beautiful streets. It is expected that it will provide accommodations and work space for about 25 million people by the year 2015.
      There are only one or two listed companies that are in the real estate business, all though recently I have seen some companies coming out with their public offering asking the public to buy into their company shares, the proceed of which will be invested in real estate businesses, the market is still yet to take up looking at the potentials on the ground. The housing deficit in Nigeria is very huge and any body who can do careful study of the environment and invest tactically will make a lot of money. Governments in both state and federal level are not doing much to address the housing deficit in the country; all the talks about building 10,000, 20,000, or 50,000 houses before this or that year are mere political campaigns, uttered during political rallies in order to get votes. Recently, the head of service of the federation Ms Ama Pepple was quoted to have said that government will require a minimum of N60 trillion to provide the 17 million new housing unit in order to addressed the current deficit. This is to tell you how large the current deficit is and like many professionals have argued government alone cannot handle this without the involvement of the private sector. Of private Mortgage banks that are actively in the sector I know of Aso loans and Saving because of numerous project I have seen them financing in Kano and Abuja. Aso savings was incorporated in 1995 as a primary mortgage institution with majority shareholding by government which it later sold to the public. The mortgage institution was later listed on the floor of the Nigerian stock exchange on April 25, 2008. It was responsible for the development of about five housing estates in Abuja and it has operations in Lagos, Rivers, Ondo and Niger among other places. Another mortgage institution that is quoted on the Nigerian stock exchange is Resort Savings and Loans Plc with its headquarters located in Lagos; it has over 18 years of mortgage business experience. Because of it concentration and focus in Lagos its does a lot of its businesses their and Abuja. At the state level you have institutions like the Dala building society that is based in Kano who help individuals acquire their personal houses.