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Finance | Property & Real Estate

H1 2022 Nigeria Real Estate Market Review - Campaigns, Crusades and Marks of the Age

Aug 12, 2022   •   by   •   Source: Northcourt   •   eye-icon 287 views

Nigeria’s real estate market appears to defy the odds. Whether it's the growth in diaspora funding for residential neighbourhood retail projects, deft developer realignments to market realities or renewed levels of investor reapproachment, there's quite a bit to say for an emerging market recovering (rather quickly) from a pandemic. This report will attempt to discuss possible reasons for all this and the short, mid and long-term implications. 

 

Due in part to the Russia-Ukraine crisis, oil prices have been at their highest in the last 10 years. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) confirmed losses in excess of 115,000 barrels bpd due to theft and vandalism between January 2021 and February 2022. This adds up to $3.27bn. Nigeria's bonds have continued to attract interest, even though the rates could be better for the country's pocketbook. Between January and June, the Federal Government raised over N3.02trn in bonds. Lagos-based fintech startup, Flutterwave raised $250m in a Series D round, raising the company's total haul since its founding six years ago to $475m. The startup reached a valuation of $3Bn, becoming the most valuable in Africa. The Lagos Free Zone Company also raised N25Bn as part of its Series II Corporate Infrastructure Bond.


MTN and Mafab Communications paid $273.6m for the 5G spectrum licence. This is expected to support the nation's transition into a more tech-driven services economy. The first telecommunications licenses sold in the early 2000s have now become an estimated market cap in excess of N11trn.
 
But all eyes are on yet another make-or-break election cycle as politicians jostle for positions. The governing APC party sold expression of interest and nomination forms to would-be office holders ranging from N2m for House of Assembly to N100m for Presidential aspirants – with enough marketing savvy to introduce a50% discount for persons under the age of 40. These prices only emphasise a disconnect between the political class and much of the country. At the national level, some suggest an apathy for the governing APC while others demonstrate hope in the fast-rising Labour Party (LP).


The precipitous decline in the currency's exchange value has contributed to higher capital and rental prices. The five-year National Development Plan calls for each state to set aside 50ha of land to boost the housing sector. The Family Homes Fund has contributed over N19.9bn to the building of 2,754 low-income homes in six states.

 

For residential developers, building gated communities (and to a lesser extent, new towns) has become a leading development pathway. Existing gated communities are already seeing 25 to 30% YoY price growth. Eko Atlantic welcomed the start of preparations to develop the US Consulate General. In building on successes enjoyed in 2021, the short stay submarket saw additional growth. For the purpose of financing 80% of its Purple Urban residential project, Purple Group raised N5bn in Sukuk bonds. Mixta Africa unveiled its retirement community in a largely untapped senior living sub-market.


The costs and implications of green finance, greenwashing, sustainable building methods, and certifications are being discussed with increasing frequency amongst market stakeholders. As the demand for energy-efficient structures grows, it is anticipated that the global number of smart buildings will increase from 45m this year to 115m in 2026 by which approximately 90% of smart building expenditure will be allocated to nonresidential properties. Famfa Towers in Ikoyi, Lagos is Nigeria's newest Grade A office building (which is currently 94% complete), emphasises this.
 
The attractive remodelling, design, and space options offered in suburban areas further encourage the increased demand for residential conversions to office use. To further develop its digital retail infrastructure, Konga, has teamed up with Airtel Nigeria. The demand for industrial warehousing, cold storage, healthcare logistics, and medical warehousing is growing and far ahead of the available supply. Equinix completed its $320m purchase of MainOne and launched a new data centre in Lagos. 

 

On one hand, Dangote Cement raised N116bn in bonds and commissioned its 500ha, $2.5bn fertilizer plant. On the other hand, the firm will need additional funding to complete its refinery. Pan-Africa development finance institution, Shelter Afrique, completed its debut bond issuance, raising N46bn in the Nigerian capital market through its 5-year and 7-year Series 1 Fixed Rate Senior Unsecured Bond Issuance as part of its N200bn bond issuance program.


The Governor of Lagos State signed the Lagos State Real Estate Regulatory Authority (LASRERA) Bill into Law even though some of its key functions may be a duplication of existing efforts. The President signed the National Health Insurance Authority Bill 2022 into law to improve healthcare investment.

 

The debates around monthly rent payments for residential apartment, as opposed to the current annual payment system, continued in the Nation's legislature. In rounding out our findings, we explore land titling perspectives and their influence on infrastructure in Akure, the Ondo state capital. We also note that on aggregate, investment has increased in Nigeria’s real estate market and it’s projected to do so.

 

Download PDF Report Here

 

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