Skyrocketing Building Costs: Real Estate Sector Crippled by Economic Policies

President Bola Tinubu’s first year in office can be decently depicted as a turbulent ride, with the impact felt overall features of the economy.
Petrol subsidy removal, naira float, inflation, and other hiccups within the system, shot up the costs of building materials to stratospheric statures.
As real estate got to be awfully affected, most citizens have been unable to meet their accommodation needs as the dollarisation of the economy made things worse.
Stakeholders within the built environment have variously prompted the incumbent administration to grant more consideration to real estate through the establishment of mortgage financing institutions, foreign exchange regulation, land use acts, and other laws unfriendly to its development.

They demand that the real estate sector can grow in Nigeria if an enabling environment is created for operators. They believe that if the operators and the buying public can assess funds to either develop or purchase apartments and pay in installments, the challenge of shortfall and unaffordability of houses will be a thing of the past.
Assessing the performance of President Tinubu’s first year in office, the majority of the operators spoke to reporters that one year isn’t sufficient for a young administration to make an impact in the real estate sector given the level of decay inherited from past administration. However, a few believe that real estate isn’t a major priority of the administration, thus, no serious focus on development is seen from the president.
In the conclusion of Mr. Merckson Innocent Okoro, Principal Partner, M.I Okoro, and Associates, the president is navigating a very challenging time and real estate does not appear to be a top priority. According to him, the President said plans for mortgage reforms, social housing, and other initiatives, have not materialized yet.
“Similar to foreign policy, focusing on creative mortgage solutions in real estate for 25-year term could be exceptionally beneficial. Shockingly, it appears these plans have not progressed.

“Social housing would also be valuable. However, as mentioned, the current focus is on broader governance issues. It is too early to definitively judge the president’s performance in real estate. We will need to see his second year to assess the implementation of any planned policies. While some policies have not been enacted yet, it may take time for their benefits to become evident. At least, there is an effort to communicate this time, unlike the previous administration. The new approach emphasizes collaboration and good intentions, which is a positive step.
“However, there’s more work to be done. While real estate is not a quick fix for broader economic challenges, it should not be completely ignored either. The reason is, unlike other commodities, real estate is highly sensitive to macroeconomic disruptions. There was a recent effort at communication from the government, a shift from the past.
“While improved communication is a positive step, more action is needed to address the housing crisis. Real estate is particularly vulnerable to economic fluctuations. When the dollar rises, the cost of developing properties increases and this discourages development and reduces supply, leading to a surge in housing prices. For example, properties that sold for N400,000-N500,000 just a few months ago are now priced at over a million,” he noted.
On the need for sustainable solution, Okoro stated that, “the high cost of electricity further burdens the real estate sector. Due to reliance on imported diesel, multi-tenant buildings face exorbitant service charges. Solar energy offers a viable alternative. While the initial investment is higher, solar panels have a lifespan of 15 years, significantly reducing long-term costs. The government’s recent decision to encourage solar usage is a positive step.
“Heavy dependence on imported building materials with inflated costs without government encouraging domestic production of essential materials like cement and roofing sheets is worrisome. We have the resources and a deliberate effort to utilize them would create jobs, reduce reliance on imports, and even foster exports. An example is the steel industry. Revitalizing domestic steel production would eliminate dependence on imports. Nigeria is blessed with abundant natural resources. However, ineffective leadership hinders us from exploiting these resources to our advantage. Our leaders often view the country as a personal piggy bank, enriching themselves at the expense of the nation. A patriotic leadership that prioritizes the nation’s well-being is crucial. Nigeria has the potential to solve its housing crisis. By embracing renewable energy, promoting domestic production, and electing responsible leaders, we can create a thriving housing market that benefits all Nigerians.”
In his evaluation of President Tinubu’s first year in office, Mr. Chudi Ubosi, Principal Partner, Ubosi-Ele & Co., stated that the country has endured continuous failures of leadership culminating in the eight years of the last administration.
According to him, “the nation is going through tough times but one key thing is that we at least have a leadership that’s listening, engages and reacts, unlike the last administration where it was dead silence even within the confront of extreme crisis.

“From my perspective, land use act, dollarisation of the economy, lack of enabling environment, and all the issues raised above will continue to serve as threats to the sector if not handled. Again, the major threat is the government and its unwillingness to help the sector. A lot will flow from their actions or inactions. Access to affordable land, fairly priced and durable building materials, cost of funds for developers, access or lack of access to cheap long-term mortgages, etc., all serve as major threats to the growth of the real estate sector.
“The damages of a decade and half cannot be fixed in 12 months. It will get worse before it gets better. I believe we are now in that phase before we sight the light at the end of the tunnel. It has not been easy and continues to be difficult at all levels but I am optimistic that the economy will come out stronger.”
In terms of real estate, Ubosi further said, “the president has done a few things but I think the key one will be the Coastal Road to Calabar from Lagos. This, I believe, will be a game changer with all the services and infrastructure proposed therein. Real estate on this corridor will boom and trade and commerce will boom too. I am not one who believes that the government at any level should be involved in housing development etc. I believe the government should just provide the enabling environment and let the private sector get on with it. In my opinion, this is going on well to the extent that the government is pushing for a review of the Land Use Act to bring it in line with the realities of modern-day Nigeria especially as per its many clauses that do not reflect the interests and thinking of stakeholders.”
For Victor Okafor, the Admin Manager, Dofas Nigeria Limited, a Company that deals in sanitary wares, “We have been in business in Nigeria for more than 30 years but doing business in Nigeria has not been very conducive. The dollarization of the nation’s economy, electricity supply that has not been very appealing to businesses, and security challenges are the factors stopping our company from establishing a factory in Nigeria.
“All our products are manufactured in Germany and they are of the same high quality. Our products, sanitary wares are produced from one spot so the quality is always assured. The administration of President Bola Ahmed Tinubu in terms of advantages to our business can only come after the man has stayed at least two years and some months. It is too early to judge the President because the country before him has already been rotten. Everybody can see how the problems he met accumulated from the past administration, however, I can say he is doing well now but he needs everybody’s support to be able to wriggle out of the problems.