The ironies in Abuja property market
“Yes, there’re houses! Yes there’re estates! But can people afford?” a resident of Abuja asked rhetorically. According to him, the situation here is “not availability but affordability”. There are many houses but people who need them cannot pay for them. A typical Abuja property is out of reach for many reasons. Chief among these are […]
“Yes, there’re houses! Yes there’re estates! But can people afford?” a resident of Abuja asked rhetorically. According to him, the situation here is “not availability but affordability”.
There are many houses but people who need them cannot pay for them. A typical Abuja property is out of reach for many reasons. Chief among these are corruption and over centralization on the downtown. Developers in Abuja demand too much premium on their property. Some demand as high as 500 percent the actual value of the property.
What kind of market is this?
It is said that Nigeria suffers a housing deficit of 17 million units. There is no official statistics on what share Abuja has of this. But it is apparent that houses are in high demand in the Federal Capital Territory (FCT). Similarly, as evidenced by the deluge of housing advertisements in pamphlets, on television, on radio and other media, it is obvious that many houses are up for grabs.
Mr Udosen Imoette who is Managing Director of Abuja-based Country Home Real Estate Company has done real estate business in Abuja for many decades. He is equally appalled by happenings here.
Imoette who is member of the Nigerian Institution of Estate Surveyors and Valuers said, “There’s demand for housing. There’s supply. We can see all the houses but those two can’t determine the price! This is the only situation where demand is there, supply is there, yet supply can’t satisfy the demand. Because the developers don’t really need the money. When you talk of prices – demand and supply: you have demand and you have supply but they can’t determine price. Isn’t that a shock to us?
Root of the problem
The president of the Nigerian Institute of Quantity Surveyors (NIQS), Mr Murtala Aliyu concisely captured it recently when he led the team of NIQS officials to Media Trust headquarters in Abuja.
He said, “The truth is that quite a number of these property are used to launder money. People engaged in graft find it easy to bury their money in property. You can easily pick a property for N100 million if you cannot easily take it to the bank. As long as there’s corruption in this country, property will spring up. That’s why you find a number of them empty, unoccupied and the owners don’t care.
“It’s affecting the market. When people inject huge money to buy a piece of property, you find that it becomes uneconomical. I set an example. You pay N120 million for a piece of land and you put another N70 million and then somebody comes to pick up the house for N350 million – if you take it economically and you’re supposed to harmonise that – let’s say 40 years, apart from activities that will take place to keep it fit for 40 years, there’s no way you can recover N350 million in 40 years. These are some of the challenges that make the property market a bit difficult. Genuine investors in property don’t have the motivation to really invest.”
Speaking at this year’s Abuja Housing Show (June 23-25), the MD of Abuja Property Development Company, Mr B.S. Haiba itemized bottlenecks developers contend with in what he called too many pre-construction cost elements. These include: land, compensation for economic trees, surveys, designs, feasibility report, EIR business plan, planning processing and approval fees, site clearance, contemporary access to site, mobilization on site etc.
According to him, these are costs that banks hardly finance. Before a bank advances loans, it needs 15-20 percent equity contribution physically on site: collateral of very high value besides all the title documents on the land, insurance, legal services etc. These are besides the double digit interest rate on short-term loan of maximum four-five-year tenure.
In his words, “The cumbersome documentation, bureaucracy costs and frustrations developers and uptakers go through to obtain loan are too much.”
Bem Katsina-Alu, an estate developer cum politician described the housing market in Abuja as “a dicey situation especially as people have moved out of the city of Abuja to the outskirts.” He suggested decentralization of development in the main city as a way of normalizing the situation.
Who are these developers?
Udosen gave insight in the kind of people doing the real estate business in Abuja.
He explained, “They’re not common men. You’re talking about the financiers. Financiers of real estate in Nigeria aren’t hungry so they don’t really care. I know somebody that has an estate of over a hundred units and one has not been sold, yet he’s developing another one of about 50 units.
“That tells you that they’re not after the income – they’re just after putting money somewhere. There’re very few developers that are into the business for money. These ones aren’t the ones building all these 200-unit estates. Those are ones that maybe they have N10 million, N20 million, they want to develop the land they have and now want to put it in the market. This kind of developers are the real ones looking for money. These developers want to break even – they can sell at whatever price that will enable return to the bank.
“But the so called big developers – some are abroad, some are here, some are governors and ministers. They have hundreds of houses and they don’t care whether they make money or not.
“Let me give you a scenario. Recently, there’s one guy that took some billions in the police pension or something and he paid a fine of N750,000 for each count and he was released. This is somebody that embezzled N1billion. They seized most of the property they could get. In some of the estates he had up 10, 20 houses.
“Now, I’m in a ministry, I have a billion. A billion naira can give me 50 units of houses. I put the billion there and I’m expecting another billion in another part of my job as a director or assistant director, do you think I’ll think of what that N1billion bring? No, because I’m not hungry. I have another billion that is coming, I’ll think of where I’ll put the N1 billion. Because of the cashless system and all this CBN and EFCC concerns, they don’t keep cash in the bank. The only place to hide cash is in real estate.
“They aren’t coming down to what the market can afford. The price is artificial. The price is controlled by this same cabal. If somebody develops 100 units of housing and he’s starting another one somewhere – he hasn’t sold, where does he get money from? There’s no bank that will see that you took money to build 100 units, you’ve not sold, you’re building another one. That bank will shout.”
Investigations showed that houses go for as high as N400 million in Asokoro, Maitama, Guzape, Utako and Wuse districts. It is also said that the owner of a house near the Transcorp Hilton in Maitama is demanding N1 billion. The house has been unoccupied several years after it was completed.
Land allocations in the last three years
Another irony is demand for land is still high. Application papers are daily handed in but much of the land is meant for “speculation”, one of the things that account for high cost of building homes in Abuja. Records show that between 2010 and 2011, Abuja Geographic Information Systems (AGIS) received 117 applications for land for mass housing alone. Government housing estate 2. Government residential 2. Government staff quarter 1. Private housing estate 333. Private residential had 12,398. Private staff quarter 12.
Between 2011 and 2012: Mass housing 3,004. Private housing estate 1,683. Private residential housing 32,180. Private staff quarters 57. Government residential 6. Government staff quarter 15. Affordable housing 12.
How to improve the market
It has been suggested that government should up the anti-graft campaign. In specific terms, Haiba called on the FCT administration to comprehensively frame its housing policy to tackle its peculiarities – access to land, developer/constructor, mortgage, ownership securitization, foreclosure, redevelopment.
He wants low density plots not yet developed near transport hubs be redesignated as high density for high rising affordable mass housing.
Similarly, he called for establishment of stakeholders (including authorities, developers, contructors, financiers, professionals, association, PMIs, indigenous communities) consultative forum (town hall meeting) for periodic meeting and consultations to tackle the many challenges of housing delivery
There is disconnect between the size/type of the property and the possible buyers of the property. It is suggested that a different class of property be considered for residents of Abuja who are mostly low salary earners.
Another thing is management of infrastructure around the houses. Government is expected to adequately provide both primary and secondary infrastructure where homes are built. Leaving it to developers means passing the yoke to uptakers.