The Nigerian real estate market is grappling with several significant challenges that threaten its growth potential and goal of reaching a projected valuation of $2.42 trillion by the end of 2024. Key issues identified include rising inflation, contentious compensation disputes for land acquisitions, and frequent demolitions. Stakeholders in the industry, such as real estate executives and estate surveyors, have shared concerns about these obstacles in interviews, underscoring the vast potential of the market amidst these daunting challenges.
Olufemi Oyedele, CEO of Fame Oyster & Co., highlights how economic reforms, particularly those initiated by the Monetary Policy Committee of the Central Bank of Nigeria (CBN), have led to an increase in the base interest rate and the removal of oil subsidies. Such changes have led to escalated costs for petroleum and construction materials, further complicating an already struggling sector. The controversial compensation initiatives, particularly concerning the Lagos to Calabar coastal road project, have diminished investor confidence and clouded prospects for growth. Oyedele points out that misinterpretations of the Land Use Act have contributed to fears regarding land tenure security, an essential factor that discourages Nigerians abroad from remitting funds for potential real estate investments back home.
In parallel, estate surveyor Olorunyomi Alatise emphasizes the severity of the economic landscape that the real estate sector must navigate. Alatise notes that operational and transportation costs have surged following the fuel subsidy removal, resulting in higher borrowing costs and inflated development expenses. This further dampens enthusiasm for investment, particularly as the cost of construction loans has become exorbitant. The ongoing public agitation surrounding inadequate compensation for compulsorily acquired properties exacerbates the issue, undermining the credibility of land acquisition processes and stalling the development of key projects.
The cumulative effect of these challenges has created an atmosphere of uncertainty that is dissuading both domestic and foreign investors from engaging with the Nigerian real estate market. Alatise cautions that achieving the anticipated ₦2.08 trillion market value by the end of 2024 hangs in the balance, contingent upon crucial variables, including stable government policies, macroeconomic stability, and regained investor confidence. While the road ahead appears daunting, the sector’s resilience in adapting to past adversities gives a flicker of hope for its future recovery and growth.
Despite the hurdles, recent research indicates a projected valuation of $2.42 trillion for the Nigerian real estate market by 2024, with residential real estate expected to account for the largest share of this growth, reaching an estimated volume of $2.08 trillion. The market is anticipated to maintain a compound annual growth rate of 7.08% from 2024 to 2029, with wider implications for the sector’s development. Comparatively, the United States could generate the highest value in the real estate sector, with a remarkable anticipated volume of $132 trillion by 2024, further illustrating the staggering potential differences between markets.
Additionally, there is a noticeable surge in demand for luxury apartments, especially in Nigeria’s major urban centers, as the industry attempts to cater to an evolving customer base seeking quality living spaces. This burgeoning interest could provide a pathway towards partially offsetting the adverse effects of the aforementioned challenges, allowing the sector to pivot strategically to attract investors and foster growth. Furthermore, by addressing governance and regulatory hurdles in land acquisitions, Nigeria can bolster confidence among potential investors, encouraging more robust participation in the real estate market.
In conclusion, while the obstacles facing Nigeria’s real estate market are formidable, there exists a considerable potential for growth if the relevant stakeholders can align their efforts towards improving investor confidence, establishing stable governmental policies, and addressing the issues surrounding land tenure and compensation disputes. Navigating these challenges effectively would not only enhance the market’s valuation but also reinforce Nigeria’s standing within the global real estate landscape as it seeks to reach its full potential by the targeted year of 2024 and beyond.
