Mr. Kunle Awolaja is the West African Chapter Chairman, African Real Estate Society (AFRES), and senior member of the Nigerian Institution of Estate Surveyors and Valuers. He spoke to Property & Environment Editor, CHINEDUM UWAEGBULAM on land administration in the country and prospects of the sub-Saharan real estate market in a post-COVID era.
The legislative intent of the Rent Control Edict was to provide affordable rental housing. Do you think that the law has been effective in Nigeria, especially in Lagos?
Rent control has not been effective in Nigeria and globally, except maybe in communist and socialist countries. It won’t be effective in countries where market forces determine the real estate market and the private sector is the main driver for housing delivery. We have market forces such as demand and supply underplay in the market. It’s actually the forces of demand and supply in the market that ought to regulate rents. If there are shortages in supply, you are going to have a high demand and then the price will reflect the forces of demand and supply.
For rent control law to work and be effective, the government needs to be the major player in the housing supply. The fact is that the government can’t control the prices of building materials, land, and its values. These are the main elements that are involved in labour. Besides, the economy presently is unfavourable to rent control.
What then should be the proper way to ensure affordable rentals?
It is only under the social housing programme that affordable rentals or housing can work efficiently, but the government needs to provide enabling the environment through its policy that will guide land allocation and distribution.
For instance, the way land allocations are being carried out now is not so appropriate. Government should provide a good cadastral map of all land in the country, as about 25 per cent of Nigerian landlords seem not to have been fully covered by cadastral mapping. If this is done, the government will monitor and have records of all land in the country.
This will also enable the government to have data of houses and those involved in building construction such as artisans – bricklayers and carpenters, players in building materials manufacturing, and professionals in the sector.
With that, the Federal and State Governments can ensure an efficient title registration process. This can also be done by carrying out spatial data gathering, a comprehensive cadastral survey of all parcels, enable technologically driven land administration systems via Electronic Global Information System (e-GIS), and ensuring sincerity of purpose by government functionaries as well as agencies.
The government can also engage stakeholders in charting a way forward as well as reform the land legislation, especially the Land Use Act (LUA). The issue of land is so critical to be left on the vagaries of individuals’ decisions; rather it should be retained in the constitution with clear information guidelines and processes, as this is the global trend, especially considering land redistribution impacts.
Similarly, the government needs to complete the review process of land administration so that it would be able to deliver affordable housing and halt the struggle for land. What we have now is that everybody is making effort to secure land either in Sango Ota, Mowe, or any other sub-urban part of the country. If we’re able to reform our land administration system, the struggle for land will be minimised and people would have access to land easily.
In Nigeria, people are unable to create much wealth from their land assets, while at the state level revenue that should accrue from ground rent receipts is lost, as the bulk of the land is not covered by registered title. How do federal and state governments ensure an efficient title registration process?
The real challenges have been lack of sincerity of purpose on the part of the government, inability to engage stakeholders in charting a way forward, and lack of reform of the land legislation, especially the Land Use Act.
By now, everyone should also understand our peculiarity; the north and south don’t operate the same land tenure system. In some countries, such as Ghana our West African nieigbours, South Africa, they still recognise stools, traditional areas, protected zones, customary and former landowners, rights. In such cases, there is none or little land dispute. It is a fact that what we have in the north can’t operate in the south and likewise what we have in the south can’t operate in the north.
We should look at the process of reformation of our land system. The system should be technologically driven by now. In Nigeria, parcels of land that have registered titles can’t be up to five per cent, just up to 10 per cent. The rate of registration is abysmally low. Many of us can’t even create wealth from our land, while some of the lands under construction don’t have approved plans, and people use all their savings to build houses, as there is no good mortgage system. This is not supposed to be the case.
What we should do is to tie the land administrative system with technology and the critical element should be the sincerity of purpose on the part of the federal, state government officials, community heads, and the people towards an effective and efficient land administration system. The existing land policy can be reviewed to ensure people-oriented legislation.
The COVID-19 pandemic dealt a big blow to the real estate sector, especially the volume of transactions, use of credit, and real estate values. What are your expectations of the market in a post-COVID era?
The pandemic is global and affects even the third world countries. I expect a serious cash crunch in the market. COVID-19 has accelerated some trends already in evidence, whereas other trends may reverse. For example, demand for online shopping has increased and will likely continue, while the ongoing trend for the densification of work and living space is now under scrutiny.
Another thing that has also come out is that life continues, and emphases have been on a technologically driven process to connect parties and reduce some of the barriers to productivity. Some applications such as blockchains and e-GIS have also been handy. A lot of companies and institutions have pursued vigorously the digitalization of all business processes in the value chain from end to end.
On our part in the African Real Estate Society (AfRES), we are looking at how to ensure the delivery of our services and products through technology. In Nigeria, the market will surely lose some of its dynamics, with luxury apartments being the worst hit, while affordable housing such as low-income apartments will be more promoted by property developers.
Before the coronavirus, Africa’s rapidly growing property markets attracted increased interest from international investors, developers, and occupiers. What makes sub-Saharan African real estate appealing to both developers and their lenders?
The West African weather has the highest sunshine duration and green areas of land that always attract foreigners. There are also vast areas of green development in sub-Saharan Africa as well as large population density, which brings wide market opportunities for investors.
Even though sentiment has been dampened, investors’ appetite in certain segments of the market has remained in spite of challenges to transacting, healthcare, and logistics. Assets continue to garner interest, especially since many of these have been supported by governments as essential infrastructure and are seen to be defensive and resilient.
Although investment in real estate has also fluctuated over the years through various downturns, the overall trend has been for higher preference for real estate, and I see no reason for this trend to reverse.
Real estate continues to offer good risk-adjusted returns that are less correlated to other asset classes. This portfolio diversification advantage of real estate investments is only emphasised in periods of increased volatility in the equities and commodities markets.
The spread between real estate yields and government bond yields remains at levels that more sufficiently reward the real estate investor. Given this, I expect to see continued flows of capital into real estate over the medium to long term. Many retailers will rethink their operations and supply chains. Some of them will increase their infrastructure for the fulfillment of online orders, as the trend will continue to be crucial in the retail market.
What are the efforts of the African Real Estate Society to raise awareness in the region’s real estate market?
AfRES is part of a global and affiliate of the International Real Estate Society (IRES), along with Sister Societies in North American (ARES), Asia (ASRES), Europe (ERES), and the Pacific Rim (PPRES).
Ours is a continent-wide organisation that seeks to promote networking research and education among property professionals across Africa. We’re looking at teaming up with colleagues in the other regions on research, networking, engagement of African Leaders through African Continental Free Trade Area (AfCFTA), and African Union.
Other areas are, exploring partnerships in the application of technology, and investing in real estate education through youth engagement in tertiary institutions. We also are looking at how to make West
Africa’s real estate is buoyant in comparison with other regions and partners with other professional bodies to share experiences.
How best can we deal with the limited supply of private housing and the lack of mortgage markets in sub-Saharan Africa, especially Nigeria?
We can deal with a limited supply of private housing and lack of mortgage market by government’s providing the enabling environment in terms of access to land, through Public, Private Partnership (PPP); financing mortgage, lowering of interest rates, encouraging corporate and individuals to benefit from soft loans, supporting building materials’ producers, by encouraging the use of locally sourced materials, technology, and provision of infrastructure.
The government should also provide an enabling environment for private initiatives to thrive, allow private organisations to create process development ideas, and encourage foreign direct investments as well as embark on urban regeneration and reward. There should also be tax incentives for housing initiatives, encouragement of housing cooperatives, and engagement in accelerated/land titling and registration processes.