The real estate industry has witnessed positive growth in recent years. According to a report released by the National Bureau of Statistics, the real estate sector grew by 5.9% and contributed 8.37% to the GDP in the 4th quarter of 2014 alone.
Recently, another report released by PricewaterhouseCoopers (PwC), puts the value of the real estate sector in the country at $9.16 billion in 2014. According to the projections, further growth will increase the value of the real estate industry to $11.36 billion in 2016 and $13.65 billion in 2016.
According to the report titled “Real Estate: Building the Future of Africa”, the Nigerian real estate sector is growing at a rate of 8.7% and is now the sixth largest sector in the economy. The report also said that High Net Worth Individuals (HNWIs) invest 25% of their assets in real estate compared to 18% or less in equities and other instruments.
The report also identified the growth in the Nigerian middle class population and retail activity as the major drivers of demand for warehousing units as well as infrastructure-enabled industrial clusters and free zones.
In the commercial real estate sector, the report said that the market was being driven by an influx of institutional, foreign and private businesses into the country, as well as the growth of local established businesses and multi-national oil companies across the cities of Lagos, Abuja and Port Harcourt.
Rental rates in Lagos were said to be one of the highest in the world with achievable rents of more than $1,020/m2 (about N186,000/m2) annually.
However, the report listed the existing problems facing the real estate industry as:
Problems with access to finance; with a lack of long-term debt financing and underdeveloped mortgage market (mortgage loans represent less than 1% of the nation’s GDP).
Cumbersome and time-consuming processes for land acquisition and ownership documentation
Expensive land in urban areas
High cost of building materials and construction
Reliance on expatriate workers resulting from a shortage of expertise in the local construction industry
Security considerations as a result of local unrest
This report also indicates that there is considerable room for profitable investment in the real estate sector due to the huge housing deficit in the country.
If this growth pattern is sustained and improved on, numerous jobs will be created in the process and the housing deficit will be bridged sooner than later.