Real Estate in Nigeria

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If you’re just starting to invest in real estate in Nigeria, you’ll find out that you have a lot to learn. There are so many “dos and don’ts“, many unwritten rules and lots of learning to do.

Unlike other investment options like stocks, agriculture or even cryptocurrency, real estate investment is a lot more complicated. There’s the financial requirement, understanding the legal aspect of real estate and due intelligence on your own part.

With a population of almost 200 million, increasing rural urban migration, increasing demand for both luxury and affordable housing, investing in real estate is the perfect investment for both new and experienced investors in Nigeria.

Real estate investment is a long term investment and not some “get rich quick scheme”, your returns on investment may not be as fast as investing in other businesses but you can be sure you’re guaranteed huge recurring returns on your investment. This is why you need a solid education before you make your first real estate investment.

The state of real estate in Nigeria

Nigeria’s population is currently at 180 million and it still expected to increase(with a yearly average growing rate of 3% ).With the increasing population comes the increasing demand for affordable apartments, office space, shops and landed properties.

According to the world bank, over 16 million new houses need to be provided to solve Nigeria’s housing problem.

With the federal government doing next to nothing to help solve the increasing demand for affordable housing, real estate developers, private investors, high net worth individuals, entrepreneurs and ordinary people like you and I have a role to play in solving this increasing demand.

Rural Urban Migration is at an all-time high

More Nigerians are moving to the city. Thousands of Nigerians are leaving the rural areas in search for higher education, good jobs and better life in the cities.

According to world bank data, the rural population in Nigeria as decreased from 85% in 1960 to 51% today and it’s still expected to decrease in the coming years .

Over the coming years, many more Nigerian will need a roof over their heads in the big cities. The increasing rural-urban migration will bring out an increasing demand for accommodation and real estate properties across cities in Nigeria. 

The Nigerian Real estate industry is still growing

Despite recording negative growth in 2016, the Nigerian real estate sector is expected to grow at an average rate of 5.39 percent between 2017-2020.

Experts reported that, the growth would depend on the support from private and public investments in the sector, agricultural revolution, favourable oil prices and increase in volume of oil production.

Why you should invest in real estate in Nigeria

Real estate guarantees steady income: most Nigerians investing in real estate do this because of the steady flow of cash through rental income. Depending on where your property is located, you can earn millions in rental income monthly or yearly (depending on your rental agreement).

Long term financial security: in addition to steady income, investing in real estate brings financial rewards for a long time.

Real estate appreciates over time: think about the cost of a plot of land in your area a few years ago and now. Or the cost of plot of lands in Ibeju Lekki a few years back and today. It’s a well-known fact that the value of real estate generally increases, any no matter the amount you paid for it today, it’ll still be worth more in years to come.

Your property can be used as loan collateral: we all know how difficult it is to get loans to start a business in Nigeria, banks will usually require collateral that is equal or greater in value to the loan amount you are asking for. And in most cases your car and furniture doesn’t qualify even though they fit the description of what a collateral is Banks usually prefer real estate as a collateral because of the known fact that real estate will continue to increase in value.

Tips for investing in Nigerian real estate

Before you buy your first property, here are some tips you should remember:

Location matters: Before making payment for that property, make sure it’s in a good location. Paying millions for a property in a good location is a better investment decision that paying thousands for a property in a bad location (except there’s a speculation).

Hire the services of a professional. So as not to get scammed, it’s advisable to hire the services of a trusted and reliable real estate agent or company.

Educate yourself: don’t just leave it all to the agents and consultants.Get to know the ropes too. Read books by real estate moguls, watch videos, attend real estate seminars and read real estate blog and news articles too.

Decide on which aspect of real estate you want to go into for a start. There are various ways you can approach real estate investment. For a start, you’ll have to decide which aspect you want to go into. Are you going to start acquiring plots of land for a future sale, buying old buildings and renovating them, acquiring rental properties, developing shops, malls and offices spaces? You can start off with one aspect and later grow into other aspects.

For a start, you can consider investing in rental properties, since rent is usually paid in advance, so there is little risk involved.

Real estate investment opportunities in Nigeria

Low cost Housing

At a staggering cost of $350 billion needed to provide 16 million houses to solve Nigeria’s housing problem, real estate investors have huge role to play in solving the housing crisis.

The housing deficit provides real estate investors a big opportunity for profitable investments.

Student Housing

Over 1.8 million students wrote the 2017 Unified tertiary matriculation examinations (UTME) and the number has been on the increase every year.

Sadly, the growth in the number of students in tertiary institutions across different states in the nation doesn’t correspond to the student accommodation.

The gap can be filled by investors building houses close to a student populated areas and constructing hostel accommodations for students. Investors not only get to solve a problem, but also realize steady income on his property.

Shopping centers

The number of shopping centers may seem high to a lot of people , but, it’s still low compared to the size of the upper and middle class household in Nigeria

Rental properties:

Owning a rental property is not just a great investment, it’s one of the best ways to invest in real estate. You can either buy or build and then rent it out to tenants.

With your rental property, you’re automatically guaranteed a fixed rental income monthly or yearly (depending on your rental agreement)

The only downside to this is dealing with tenants. At one point, you’re bound to hear stories from your tenant, delayed payments or damage on your property.

Land speculations

This process is quite easy:  buy plots of land in up-coming areas where you foresee future growth and price appreciation and wait.  Mostly, it takes years to get returns on your investment.

Today, most lands around Ibeju lekki has been bought off by real estate investors, though most of the lands are still undeveloped. Many of the owners have no plans to develop and are merely waiting for the right moment to sell.

Please note: land speculation is very technical in Nigeria. You have land grabbers and in some cases government to deal with. It’s best to hire the services of a good lawyer versed in land matters if you plan on taking this route.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) are corporations or trusts that use the pooled capital of many investors to purchase and manage income property and/or mortgage loans. REITs are traded on the Nigerian stock exchange (NSE) just like stocks; you can buy or sell REITs through your stockbroker​ as with other types of shares.

You can read about how to get a property with a real estate investment trust in Nigeria here.

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