Nigeria, one of Africa’s and the world’s most renowned countries, not only has the largest economy, but it is also the most populous, with over 213 million people. As a result of the aforementioned, there is an ever-increasing demand for real estate and infrastructure products and services.
Furthermore, the World Bank revealed via its World Bank Open Data: 2021 World Bank Open Data:
Nigeria’s population is estimated to be 213,401,323, with a total population growth rate of 2.4%; and this population is growing.
Nigeria’s yearly urban growth rate is anticipated to be 3.9%, with the urban population expected to double by 2037.
As widely reported, Nigeria is expected to have a housing deficit of approximately 20 million housing units by October 2021. According to the International Human Rights Commission (IHRC), Nigeria has a housing shortfall of 28 million units. While stakeholders in the Nigerian real estate sector are actively working to close the housing gap, it is apparent that there is still potential for further investment, since the real estate sector has played and continues to play an important role in the Nigerian economy.
According to the National Bureau of Statistics’ GDP Report for Q3 2022, Nigeria’s real estate sector grew by 4.44%, higher than the growth recorded in the third quarter of 2021, contributing a total of 5.34% to the country’s real GDP for the period under review (around NGN20 trillion – USD62 billion). The real estate sector’s contribution to GDP is expected to rise, barring any unfavorable unanticipated developments.
This article will examine recent trends and changes in the Nigerian real estate business in order to serve as a guide for investors, with a particular emphasis on Lagos State, Nigeria’s commercial center.
- The Lekki Deep Seaport’s opening
Lekki Port Investment Holdings Inc., a special purpose vehicle promoted by the Tolaram Group, and China Harbouring Engineering Company undertook the construction and development of the Lekki Deep Seaport in 2020 as part of a joint venture between the Federal Government of Nigeria, through the Nigerian Ports Authority, the Lagos State Government, and the project, which was estimated to cost USD1.5 billion. The project aims to relieve Apapa Wharf of its congestion and direct commercial and industrial activity to the Ibeju-Lekki neighborhood in Lagos State.
President Muhammadu Buhari launched the project on January 23, 2023. This project is intended to not only increase Nigeria’s GDP and create over 200,000 new employment, but also to spark an industrial revolution in the real estate sector, as well as direct and indirect investment opportunities for real estate developers and foreign investors.
- Flooding in Lagos (and other places in Nigeria) and its consequences for real estate
The year 2022 will be remembered in Nigeria as a year of heavy floods that impacted over 33 states, including Lagos, the country’s commercial metropolis. The deluge claimed numerous lives and destroyed several properties. Over 1.3 million people were estimated to have been forced from their homes, and over 108,393 hectares of farmland were devastated across the country as a result of the flooding.
Flooding was caused by a variety of factors, including the discharge of water from the Ladgo Dam in Cameroon, a neighboring country, climate change, severe rainfall, ineffective or blocked drainage channels, and other environmental issues.
The flooding reduced the value of real estate properties in flood-prone areas. According to a research report issued in November 2022, floods disrupted business and commercial activity and affected residential settlements, commercial assets, infrastructure development, and tourism-related income.
- The Banana Island construction collapse
Ikoyi is perhaps Lagos, Nigeria’s most affluent neighborhood, and it is home to the most expensive and elegant commercial and private residential projects. When a 21-story building collapsed in Lagos’ Ikoyi neighborhood in November 2021, killing 42 people, the State Government formed a six-man panel of inquiry into the collapse, comprised of real estate professionals and lawyers, to determine the cause(s) of the collapse and make recommendations on how to best ensure the safety of the construction space and prevent further building collapses in Lagos State.
Despite the efforts made by the Lagos State Government, another real estate disaster occurred on April 12, 2023, in the Banana Island district of Ikoyi, when a seven-story structure under construction collapsed, claiming one life and leaving many additional injured.
The Lagos State Government has already begun an investigation into the collapse, which occurred during the casting of a concrete slab on the 7th level of the structure, which was 80% complete at the time. It was established that the developers did not receive approval before beginning construction, but they continued to build while hiding beneath the security guards of the gated estate where the collapsed building was being built.
- The rise of proptech
Proptech, or property technology, is the digitalization of commercial activities in the real estate industry, which comprises the replacement of old means of performing real estate transactions with digital technology-compliant techniques.
Proptech is rapidly expanding in the Nigerian property sector, with some recent examples being the following:
- Real estate investing platforms that allow investors to become a fractional owner of property in exchange for rental income. This is especially important for investors who may not have the entire amount of funds required to purchase a real estate asset.
- The proliferation of real estate listing platforms. These platforms are set up to facilitate the selling and leasing of property. The platforms advertise properties for sale/lease, and potential buyers/lessees who use any of the platforms can remotely explore the market and locate properties for lease/purchase.
- The introduction of internet marketplaces where materials used in real estate development (gravel, iron rods, electrical wires, plumbing pipes, and so on) can be traded remotely.
- Short Letting
In general, available data reveals that demand for residential real estate has increased significantly in cities such as Lagos and Abuja over the last year. However, in addition to traditional shelter, the need for short-term flats is expanding, and these are becoming increasingly popular. Indeed, it is not uncommon to see that developers now deliberately designate some units of their development for short-stay. Furthermore, the rate of emigration to other countries in search of greener pastures is increasing, and property owners who have relocated prefer to use their homes as short-stay apartments.
Conclusion
Rising levels of demand, a continually growing population, increased industrialisation, and supportive legislative frameworks have all contributed to the Nigerian real estate market’s investment appeal. If one thing is apparent, it is that with the correct information and direction, the Nigerian real estate business is a good investment prospect at this time.
