Addressing the Housing Deficit in Nigeria Part 2

Nigeria, by all indices and despite its challenges, represents a huge market for real estate development; and Mr. Fashola has shown that he understands the business of government in providing an enabling atmosphere for investors. Nigeria needs almost one million housing units annually; offers a high return on investment in prime real estate; and hosts one of the world’s fastest growing populations: investors see opportunities in these figures.

Below are things that needs to be done

  1. Housing enumeration should be conducted: In order to effectively tackle the housing deficit in Nigeria, the principal thing that needs to be done first is a proper nation wide housing enumeration, classification and grouping. This should be done from Kaduna to Fika (Yobe State) to Osisioma, to Emele, to Elelenwo, to Mowe, to Ajangbadi etc across the entire country. Knowing what we have, would help in telling what we need vis-à-vis the population. The houses should be classified and ground in terms of design and accommodation eg studio apartments, 1 bedroom apartment, 2,3,4, bedroom apartments, detached houses, etc


  1. The government would also need to promote favourable macroeconomic policies which will in turn encourage private sector investors to partner with her in providing low-cost mass housing. These policies must result in low interest rates, stable exchange rates and low inflation to encourage investors move into mass housing projects and low-income earners move from rented (substandard in most cases) housing to their own affordable mortgage-enabled homes. Lagos State Government started something in that regard called rent to own, but the implementation is not as effective as anticipated. These policies, in conjunction with a broader economic growth stimulation that results in lifting more Nigerians above the poverty line, will make low-cost housing actually affordable for the low-income earners.


  1. Processes for land acquisition, construction permits and property registration must also be simplified and automated in line with global best practice. We simply cannot continue with a culture that frustrates estate developers and discourages prospective home owners. In extreme cases, prospective property owners have had to wait years to secure required approvals and documentation. Controversial legislation such as the 1978 Land Use Act and the 2012 National Housing Policy must be revisited to tackle areas of their implementation that stifle the growth of the real estate sector.


  1. Tougher sanctions for landlords who refuse to develop land in anticipation of future higher resale: Real Estate is not a commodity item that should be banked and should not be treated as stock. Developers should be encouraged to develop vacant land and if after two years of ownership with no improvement, the land can be sold to investors who are ready to utilize same. Policies can be introduced to encourage development, whilst taxes imposed for no development on land


  1. Overhauling of NHF and FMBN: There is need for complete overhaul of the National Housing Fund (NHF) and the mortgage system to impact positively on the nation’s housing development. Although, the Federal Mortgage Bank of Nigeria (FMBN) recently reviewed NHF rules, yet there is more to be done. Nigerians above 18 with a steady paycheck will now be able to access up to N5 million housing loan without equity contribution, under the new conditions of the Federal Mortgage Bank of Nigeria (FMBN). Initially, beneficiaries must contribute 10 per cent to access up to N5 million, 20 per cent on N10 million and 30 per cent to access N15 million.

The government needs to do more to further breakdown the requirements and remove other bottlenecks hindering easy access to the fund to make it more accessible to average and low-income earners.

With the present conditions, not many of the targeted Nigerian workers can still access the fund because there are still other hidden charges and the Primary Mortgage Banks also have their conditions too. In conclusion, the entire NHF and the mortgage system need to be completely overhauled before it could have positive impact on the nation’s housing development.


  1. Developers should adopt the china model of not profit centric: Chinese manufacturers tend to have incredibly thin margins and they do this for many reasons. For instance, china is responsible for assembling the Iphone, but China only makes $8.46 or 3.6% from an iPhone. That includes a battery supplied by a Chinese company and the labor used for assembly.

The truth is that China has the second largest economy in the world, with a population of over 1 billion people. Hence, the country is doing well.

People often then ask why China Cheaper is. The secret of China’s cheaper prices is a complex, national strategy of China to become the preeminent superpower of the 21st Century. Hence, to achieve this, they lower prices in order to dominate the market.

Our real estate developers can take a cue from this model, by limiting profit after deduction of all cost to between 5 to 10%. With this model, there would be quick but not necessarily high turnover, mass housing is developed, sold on time, capital is not tied down and more are reproduced. It is simple, affordability is important in addressing Nigeria’s housing deficit


  1. Cultural change in terms of land utilization: While it is important to have free space and circulation area for landscaping, car parking on a land after erecting building, it is equally important that space be well managed. We are faced with housing deficit and acts that would encourage land availability and more developments should be encouraged. We have seen a detached house being built on 4000 square metres of land, whereas same 4000 square metres can accommodate 10 detached houses or 10 blocks of 6 units 2/3 bedroom apartments, thereby providing accommodation for 60 families at least. This is known as subdividing land. Successfully subdividing your land into residential lots can have many benefits, including providing a landowner both increased profits and flexibility. If a developer has 500 square metres of land and does not need more than 250square metres, the remainder land can be sold or used to produce more development for others, rather than keeping the land without use. This is what we call highest and best use in real estate.


  1. Developers can focus on the lower and medium class citizens in other areas apart from the super luxury neighborhood. Like the popular saying ‘All fingers are not equal’ Nigeria has different classes of people. The super rich, the rich, the middle class, lower class and the poor. The rich and the super rich are those that would be able to afford to buy houses in the GRAs, Ikoyi, Banana Island, Lekki, VGC, etc where most real estate developers are concentrating. However, the middle class and the lower middle class seem to have been forgotten and housing schemes less than N10million are hardly available. Someone who pays an annual rent of between N500,000 to N1,000,000 should be able to own/buy a house worth between N10 and N20million with good mortgage system. Mortgages for 10 to 20 years can help offset payment to the developer, whilst the home owner can spread payment to the mortgage institution over 10 to 20 years. This would help in addressing the housing deficits to some extent, as there would be more houses for the middle class. Developers should be encouraged to look at areas like Ikorodu, Ketu, Surulere etc where mass housing schemes can be developed for the middle class.


See Part 1 of this article HOUSING DEFICIT IN NIGERIA PART 1

This article expresses a personal opinion as well as the view of others  pertaining to some of the challenges in Nigeria’s housing sector, and does not in anyway substitute for such professional advice or services and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business, without consulting a qualified real estate Advisor.

Ademola Ladega  (ANIVS, RSV MNIM, FIMC) is the managing partner of AOL Management Consult ( He is a highly experienced real estate consultant with field/practical experience spanning over 9 years, having previously worked at Ismail and Partners, where he contributed a great deal to the success of the firm and rose to the position of the Head of Valuation and Senior Associate 

Mr Ladega has extensive experience of providing valuation services in Nigeria to large public and private companies in many sectors including utilities, banking, insurance, financial services, agro-industrial, shipping, commercial and trading sectors. As well as experience in reporting in accordance with the regulatory requirements of Nigeria, in full compliance with ESVARBON Nigeria Valuation Standards (Green Book) 2018 IPSAS, IFRS, RICS,  and IVS

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