VENTURES AFRICA – As the world focuses on Africa’s fast growing economies, Nigeria, the continent’s second-biggest economy and one of the fastest growing economies in the world, is poised for massive development in all sectors as an influx of behemoth investors lobby for a share in the continent’s prospects. One area that is crucial to economic growth is infrastructure, and in Nigeria, Real Estate is a highly lucrative, fast developing sector with several infrastructure and property developers shaping its framework. Lagos, Nigeria’s economic hub is arguably the hotspot of real estate in the oil-rich West African country with its landscape dotted with large scale developments from Lekki Free Trade Zone, Eko Atlantic City, middle-level shopping mall projects and housing projects.
Ventures Africa sat with Ruth Obih of 3INVEST Ltd, a real estate company established in 2007 providing acquisition and investment service for consumers, investors and private fund portfolios. Adegoke Oyeniyi spoke with Ruth to hear her thoughts on developing the sector and strategically positioning it for foreign investment.
VA: Nigeria, with a population of 160 million, is currently under-housed. Its real estate potential is largely untapped. How promising is this potential? What contribution can it make to the nation’s economy?
RUTH: The figure for housing deficit in Nigeria presently stands at 18 million. This means 11.25 percent of the population presently lacks basic living facility. To understand the potential of the sector, you have to imagine a ready-made market of 18 million potential consumers of a product which you have to offer. The importance of Real Estate to the future of Nigeria’s economy cannot be overemphasized especially when one takes into consideration the role it has played in the improvement of economies of countries like China, Brazil, Russia, India, South Africa, and so on. So there is a future for the sector despite the fact that it currently contributes less than 5 percent to Nigeria’s gross domestic earning.
VA: Current security challenges in Nigeria might scare foreign investors from investing in real estate. As a consultant in this sector, what strategies do you think can pull in the elusive FDI to reduce the estimated 18 million housing deficit?
RUTH: Sadly, there is little the private sector can do besides paying taxes when due hoping the government utilize them effectively. However, when discussing prospective investments with foreign clients, I always put any fear to rest by including detailed insurance policies that cover security issues that may arise and threaten the resources of the investor. The guarantee of a refund of resources invested into my projects thus gives the investor the confidence to proceed. Thankfully, the insurance sector has been revamped by way of the recapitalization effort and the re-engineering of ethics and practices which the central bank has made mandatory for companies in the sector.
VA: There has been an influx of foreign investors in Nigeria, including international hospitality and retail brands. Recently, Shoprite announced it would invest $126 million to build more shopping mall structures in Nigeria to provide for its expansion because of the lack of retail store structures. What are Nigerian developers doing to position for these opportunities and harness them?
RUTH: The role of Real Estate developers in the real sense of the word is to acquire properties in under-developed areas, put structures and infrastructures in place, then market these properties to the potential consumers which can take as much as a minimum of 5 years in exceptional cases. Some take as much as 10-12 years. This has never been the case with international brands because they focus on acquiring properties in strategic locations that enhances the prospects of their ventures’ profit-making, in the immediate. That said, international brands recently coming into Nigeria, usually have their in-house construction department; what they do is hire someone that has a healthy knowledge of the new terrain they are going into and in some cases, they engage the services of an independent consultant.
VA: Real estate is a capital-intensive sector, thus it restrains aspiring entrepreneurs with limited resources. What measures are the government and the private sector putting in place to lower the financial barricade and encourage these aspiring investors?
RUTH: What the government can do is to provide an enabling environment that supports and encourages wealth creation. We have witnessed this in Lagos state in particular. Innovation is the key eventually. Once people can think and create opportunities that will make them create wealth for themselves, we will all be good.
VA: Overall, real estate still remains a lucrative sector in Nigeria. How viable would you say it is?
RUTH: Real Estate is one of the most lucrative ventures anywhere in the world. So Nigeria cannot be a different case. So long as shelter; in whatever form, is still a basic need of man real estate will continue to be a lucrative sector. Nigeria’s Real Estate Sector is one of the most lucrative in the world. An incredible expanse of land, a growing middle class, and a whopping population of 160 million people! All we need is to get the sector right and Real Estate will become another black gold of sort.
VA: Within Nigeria, which real estate hotspot would you rather make your investment? Also which of the current infrastructural investments in the country excites you?
RUTH: Well, what you call hotspot is relative. However, I understand your question clearly. Let me state that the ‘hotspot’ are so called because of a single principle of demand and supply. Those armed with effective demand are not the lower income earners; they are the high income earners, so highbrow areas will continue to thrive than low cost areas because the low cost market, though has the need for housing, they do not have the resources to translate their needs.
Be that as it may, retail real estate is the bulls eye now because of the growing middle-class and the population’s need. A lot of investments are looking into the country and this has increased the demand for space – either grade A office space or shopping malls.
Images via: BN