Nigeria is undoubtedly one of the most prominent African countries. For a number of years, the West African nation has claimed leading positions in African finance, entertainment, and trade. In fact, Nigeria is the largest economy, as well as the most populous country in Africa. In addition to this, new industries like financial technology and real estate continue to develop rapidly in the modern nation.
A quick survey of the skylines of major Nigerian cities such as Lagos and Abuja underscores the great scale and value of the local real estate industry. But there’s more to the scene than tall buildings and grand designs. With the right strategy, process and information, one can gain significant returns from investing in Nigerian real estate.
High Demand and Property Market Value
With some of the most densely populated cities in Africa, it’s no surprise that Nigeria has an incredibly high demand for housing. Research shows that Nigeria’s housing deficit stands at more than 20 million units, the highest in Africa.
Furthermore, according to the World Bank, Nigeria has an urban population growth rate of 4.1 percent, with about 52 percent of the country’s population living in urban areas. Indeed, a UN Department of Economic and Social Affairs report suggested that around 700,000 thousand housing units will have to be built every year in Nigeria to keep up with the steady growth in demand for housing.
By extension, Nigeria’s property Market is not only large but valuable. According to the National Bureau of Statistics, Nigeria’s real estate sector accounted for 6.39 percent of the country’s GDP in 2020 (around $7.3 billion).
Consequently, these trends point toward an underlying need and significant opportunity for investment in the Nigerian real estate industry, especially within its fast-developing cities.
Prime Locations With High Return On Investment
The significant investment that has poured into cities like Lagos and Abuja over the years has led to the emergence of a property market that is characterised by grand scale, luxury, and high returns.
However, even within these cities, the choice of area can have a multiplier effect on the value and return of a property. For example, major parts of Lagos Island are more expensive than parts of the Lagos Mainland. Lagos’ Banana Island and Ikoyi, which have a significant concentration of High-Net worth Nigerians, arguably boasts some of the most expensive properties in the country. A 3-bedroom apartment in Banana Island typically sells for N100 million ($625,000) while a 5-bedroom house could cost up to N450 million ($2.81Million). Similarly, a 3-bedroom luxury flat in Ikoyi Lagos could cost around $700,000. Moreover, due to the considerable cost of purchasing properties, rental properties also remain highly valuable and in demand. Rent for a 3-bedroom apartment in Lagos could go as high as N10 million ($63,000) per annum. In terms of Land value, a 100m2 piece of land could be priced at $213,000 in Victoria Garden City and $1,489,000 in Banana Island.
The Lagos mainland also features increasingly attractive properties. In a report released by Nairametrics, Lola Afolabi of the Nigerian Institution of Estate Surveyors and Valuers (NEISV) stated that “The presence of supporting infrastructure has contributed to the capital value increase in the Mainland. Ikeja GRA and its surrounding areas like Maryland, Mende, Shonibare Estate remain the most expensive locations on the mainland part of Lagos State. This is expected to continue as more residential and commercial development comes up in these neighbourhoods, particularly Ikeja GRA, in a few years’ time.” Mr. Bamigbola also of the NEISV stated that “The median yield in Lagos state from consensus analysis is 4.32%.”
Financing Flexibility
Housing is typically capital intensive in Nigeria due to the high cost of construction, surging land prices and high interest/ inflation rates. The high capital requirement of housing has made long-term financing, especially critical in driving affordability; particularly for lower and middle-income groups.
Consequently, a significant number of banks and commercial institutions offer mortgages to support investors in real estate. Interest rates for mortgage products typically range between 15%-25% per annum for a tenor up to 20 years. While this remains comparatively high, some mortgage banks including Cooperative Mortgage Bank have gotten creative in reducing their interest rates by taking the burden of building residential properties and placing those properties on mortgages at single-digit interest rates of about 9% per annum.
Mortgage banks have also executed partnerships with cooperatives to design a system where their members can make convenient monthly contributions to the mortgage bank to qualify them for affordable and quality homes over time.
Furthermore, public sector schemes such as the National Housing Fund have been initiated to provide affordable mortgages that make residential real estate more accessible to Nigerian residents.
The Securities and Exchange Commission (SEC) also offers and regulates Real Estate Investment Trusts (REITs). REITs are collective investment schemes that pool investment capital from investors to acquire income-producing real estate or mortgage loans, or a combination of both. In a REIT, a single investor can own one or several property units, while the participating company manages all of the units on the investor’s behalf, including maintenance, advertising, and screening potential tenants. In exchange for conducting these management tasks, the company takes a percentage of the monthly rent.
Technology
In the past decade, the Nigerian real estate industry has seen rapid development and adoption of technology to meet the diverse demands of market participants. The exciting emergence of Proptech continues to improve security, efficiency, accessibility, and value of real estate transactions in Nigeria.
Perhaps even more importantly, Proptech makes the Nigerian real estate industry more attractive to foreign investors who have previously balked at the pervasive red tape and high costs of property transactions in the country. Indeed, these Proptech companies offer a gamut of important services for people looking to engage in Nigerian real estate including financing, property management, data and analytics, listings, sales management, and marketing.
Perhaps one of the most exciting Proptech companies to emerge in the Nigerian real estate market industry is Seso Global. Seso Global’s innovative marketplace offers a unique one-stop shop for digital real estate transactions.
Additionally, through its unique ecosystem of services Seso offers buyers access to trusted properties and professional services. This allows for a secure end-to-end property purchasing experience along the entire real estate value chain.
