How poor regulation impacted real estate in 2019
Real estate for Nigerians in the year 2019 can be compared with that of other years considering that government policies, apart from coming from the same people, have implementation to contend with.
Policy summersaults and bugling of public friendly policies and encroachment of the government on the areas preferably reserved for private sectors gave the stakeholders in the industry great concerns.
Although, government has not regulated the real estate to delineate the rules for it to generate assets to buttress the financial sector and enable it to create asset-backed loans and securities, it has been serving the lower percentage of the poor masses. But for not regulating the sector, a lot of things go wrong yet, for the fact that there is free entry and free exit with no regulatory supervision, one cannot articulate to give the sector comparable template that matches what obtains in foreign lands. This non regulation resulted in so many land speculation cases that at times caused friction between neighbouring communities that ended in loss of lives and valuable property.
The diversification policy of the federal government notwithstanding, seems to be neglecting some areas that should be considered. This could be due to either volatility or non- government attention to the vagaries that abound in the sector. Real estate thrives where there is huge population and Nigeria is a potential fertile environment that can support the growth of real estate. In Nigeria, reforming the real estate sector has become fundamental to propelling economic growth and alleviating poverty in line with the federal government policy on diversification. Although, the policy has been mouthed, it was not captured in the economic diversification programme of government, an indication that government is merely paying lip service to the policy for ignorance of the role the sector could play in the economic growth of the country.
In spite of the above, a lot of factors played critical roles in shaping the real estate industry during the year 2019 and these factors if not checked could also determine how the sector will impact growth of the economy in this 2020. The current land titling system has remained a Herculean task that excluded a lot of Nigerians from owning property. This is why UBOSI-ELEH + Co – Estate Surveyors + Valuers suggested, based on the facts mentioned above that the real estate cannot work without a proper land registry while banks cannot lend against a property without evidence of ownership. This, kind of tickled the inflation activities in the financial sector.
During the year under review, foreign exchange and inflation stabilized amid emerging market pressures but crude oil reliance continued to leave the country vulnerable to external shocks thereby creating persistent volatility for investors in the country and affecting all sectors in the economy including real estate
Again the introduction of tax in property by Lagos State is seen by stakeholders in the industry as a clog to the development of the sector. This is because, the recent pronouncement by the Permanent Secretary in the Lagos State Ministry of Housing, Mr. Wasiu Akewusola which hinted that the state government will only entertain applications for housing transactions that are accompanied with evidence of tax payments by applicants. This according to Chief Anyegbuna Okafor, an independent developer in Anambra State, will introduce another vista in the real estate transaction system which will eventually discourage a lot of people from pursuing their programme on property ownership. The Permanent Secretary stated this during a meeting with the staff of the Ministry in his Ikeja office. He said, no tax defaulters would have the opportunity to embark on housing transactions with the Ministry and its agencies until such is rectified. Akewusola also affirmed that unless such applications are backed with evidence of payment of personal income tax, they will not be entertained.
According to him, the documents that would accompany all applications made to the ministry must include photocopy of Lagos State revenue receipt and bank deposit slip, assessment notice from the Lagos Internal Revenue Service (LIRS) as well as Electronic Tax Clearance (e-TCC) Card or three months salaries pay slips with corporate Identification Card of the employees. The implication of this is that prospective applicants for either outright purchase or rent to own scheme are advised not to forward any application that does not include any of the aforementioned documents as such requests will not be accepted.
They did not hold to mind that not everyone is employed and that no standard format for getting private income earners to get enrolled in the tax system. This, according to Yetunde Agboola, an architect with one of the frontline construction companies has compounded the already problems the public have with Nigeria Mortgage Refinancing Cooperation (NMRC) in the area of helping to finance property mortgage for the public.
The Nigerian Mortgage Guarantee Company (NMGC) propounded by the Central Bank of Nigeria (CBN) for Nigerians, if implemented logically will go a long way in bridging the nation’s million housing deficits. This means that federal government will start a mortgage- loan guarantee programme to improve lending to low- income earners and boost home ownership. This was not harnessed in 2019 and stakeholders believe that it will be taken seriously in this 2020. Meanwhile the plan of setting up this firm by the CBN which is to establish a mortgage guarantee product targeted at lower income borrowers will be used to guarantee some of the credit risk for this special group of lenders as a way of boosting home ownership in Nigeria. By this the guarantor is expected to pay a mortgage- loan provider of about 40 – 50 per cent of its losses if a customer defaults.
The housing deficit in Nigeria during the year 2019 had such impacts that the efforts of the federal government through the Federal Housing Authority (FHA) generated controversial reactions. Some stakeholders believed that for central government to do pilot schemes in the area of building estates in the states is wrong. They said that it is not the part of government to build, rather to provide the enabling environment for the private sector to do that. The dilapidation of infrastructure during the year under review also brought the real estate market its low ebb such that most sellers were unable to see buyers let alone selling.
Nigerians and operators in the built environment have been parading 17 million as a number for housing deficits despite the fact that the figure is not researchable. This is as a result of lack of data which professionals in the built environment have criticized and hoped that the federal government will have to rectify. These professionals posit that Nigeria arguably has about 23 million housing deficits. Though, some of the causes are high cost of property acquisition, a struggling secondary mortgage mortgage market, lack of incentives for housing suppliers to enable them put more products on the market at affordable prices and significant bureaucratic bottlenecks associated with obtaining title to property.