A significant number of buildings have emerged in Nigeria over the past decade, particularly in Lagos, Abuja, Port Harcourt and Ogun State. Real estate investment has increased across the country as the economy has developed, and there are still real estate gaps to fill thanks to the growing population. However, there are concerns about real estate investments in Nigeria. These problems range from untamed inflation to political uncertainties.
Nigeria is a middle-income country of over 200 million people. In addition to being the most populous black nation, the country has the largest economy with an estimated gross domestic product (GDP) of $ 514.076 billion. Real estate investments are one of the easiest ways citizens can participate in this broad economy.
The population has increased the need for improved real estate. Personal preferences leaning towards technological advancement have yet to be met. Due to changed traditional living conditions, young people are looking for developers for residential buildings that meet their needs, while citizens prefer apartments with modern adaptation to modern security frameworks. Locations close to university locations are the markets with a strong need for safe housing. Students prefer safe housing close to their institutions or at least a large business district. However, this has yet to be updated.
There are also gaps in the office and retail property markets. The demand for luxury office buildings has motivated developers to develop modern structures in business districts. The challenge of securing rights to real estate in lively and trendy locations is certainly a reluctance. However, there are other strategic business locations where there is no real estate investment.
The influence of bureaucracy and technological deprivation
Aside from the challenges of regulatory approval, the technology has yet to be fully exploited in the real estate industry. Unlike similar international industries that are technology-driven in buying, managing and leasing, the Nigerian real estate market is outweighed by disadvantages that hinder the effective use of technology. One such disadvantage is the poor power supply. Real estate investments are active in the few regions of the country where the electricity supply is reasonably available. Given the global adoption of technology in the real estate sector, the growth of the real estate industry in Nigeria relies on overcoming obstacles to technological advancement. And once these challenges are overcome, the future of real estate in Nigeria will be more promising for many.
Involvement of foreigners in Nigeria’s real estate industry
The real estate industry in Nigeria could thrive due to the increased demand for real estate, but the future does not look so bright given the reluctance of foreigners to participate in the industry.
Citizens have the right to invest in a country, as do foreigners, however there are restrictions on foreign individuals and companies doing business in Nigeria and investors must follow strict rules to qualify. One of those rules is the acquisition of land through Aliens Acts, ALAL.
The law regulates the possession of real property by foreign persons who are classified as “foreigners”. These “foreigners” are non-Nigerian individuals or entities that are not majority owned by Nigerians. Foreigners under this law have rights to property, but not without the consent of the governor of the state in which the property is located. This consent, which must be in writing, is preceded by a statutory fee levied by the state.
According to this law, a foreigner may only own and build on the land for a maximum period of 25 years. However, there is a clause that allows governors to adjust the terms. In conclusion, the process of owning property rights in Nigeria as a foreigner primarily involves obtaining the lease documents as the governor only grants rights to land for a duration at his discretion and not a direct sale. After payments, the governor’s approval should be obtained through the land administration department of the state government. The burden of going through all of the records is a major drag on foreigners’ participation in the country’s real estate economy.
The impact of inflation and political uncertainty in Nigeria’s real estate economy
The rapid rise in the prices of goods and services is known as inflation. In Nigeria, the struggles caused by the inflation of the economy are very evident. Individuals, governments and corporations groan every day at their inability to cover the costs. As of May 2021, the Nigerian Statistical Office estimates Nigeria’s inflation rate at 17.93%. Real estate prices are not immune to these changes; they obey market conditions, but for the benefit of investors. Given that real estate in Nigeria is constantly increasing in value, investing in it today creates prosperity for the future.
Another influence on real estate investments in the country is the political environment, but its negative impact on the industry is minimal compared to other aspects of the economy. Lately there has been agitation for regional independence. When the motive of this agitation comes into play and the land needs to be divided, foreigners have the right to review the term of their property contract. If the right to an acquired property is trampled underfoot, redress can be applied for at a competent international court.
Like most countries in the world, Nigeria has faced challenges ranging from uncertainty and economic downturn to political unrest. The effect is very noticeable in the real estate industry. There were occasional ups and downs and, as with businesses, profits were made during these phases. With technological advances hopefully expected in the industry in the near future, various subsectors of it would be exploited, which in turn will increase the industry’s profit margin.
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