Is real estate a good investment in Nigeria?

Investing in real estate in Nigeria can be an attractive option for several reasons. Here are some key factors that make real estate investment in Nigeria appealing:

First of all, Nigeria has one of the lowest homeownership rates in the world Nigeria has a 25 per cent homeownership rate. Nigeria has a housing deficit of 22 million units Despite its size, Nigeria’s real estate business still falls short of addressing everyone’s demands.

Real estate presents diverse investment options

Real estate can be purchased in a variety of ways. You may sell land for a profit, crowdfund with friends or business partners, or develop and rent out residential or commercial space, depending on the funds available. Another alternative is to put money into a REIT (Real Estate Investment Trust) (REIT). This may be accomplished by purchasing a REIT stock.

Over 20% of Nigeria’s total real estate value is concentrated in Abuja and Lagos.

Buying land in Lagos can be considered scary by some. However, for the well guided, investing in lands in the right location at the right time has been a source of major wealth. 

Nigerian real estate operates like real estate markets in other countries, with some unique characteristics specific to the Nigerian context. Here’s an overview of how Nigerian real estate works: 

 

Buying and Selling: The process of buying or selling real estate in Nigeria typically involves the following steps:

  1. Property Search: Buyers typically engage real estate agents or search online platforms to find suitable properties.
  2. Property Inspection: Prospective buyers visit the property to assess its condition, location, amenities, and potential value.
  3. Price Negotiation: Buyers negotiate with the seller or their representative to agree on a purchase price.
  4. Documentation: Once the price is agreed upon, a lawyer prepares the necessary legal documents, such as the sales agreement or deed of assignment.
  5. Payment: The buyer makes the agreed-upon payment, often in installments or through a mortgage loan, if applicable.

  6. Transfer of Ownership: The property’s ownership is transferred to the buyer through the execution of the necessary legal documents, such as a deed of conveyance.

Real Estate Agents: Real estate agents, also known as estate agents or realtors, play a significant role in connecting buyers and sellers. They facilitate property searches, negotiations, and help with documentation.

Real Estate Developers: Real estate development is a thriving sector in Nigeria. Developers acquire land, obtain necessary permits, and construct properties for sale or rent. They often offer various housing schemes, such as estate developments or gated communities, with amenities like water supply, electricity, and security.

Real Estate Regulations: The real estate sector in Nigeria is regulated by various government agencies at the federal and state levels. These agencies ensure compliance with building standards, and zoning regulations, and protect consumers’ interests. Examples of regulatory bodies include the Federal Ministry of Works and Housing, the Federal Housing Authority, and the state-level ministries of housing.

It’s important to note that Nigerian real estate practices may vary across regions and states, so it’s advisable to consult local professionals and legal experts for specific information and guidance when engaging in real estate transactions in Nigeria.

Property Types: Nigerian real estate encompasses various property types, including residential, commercial, industrial, and agricultural properties. Residential properties include apartments, houses, and duplexes, while commercial properties include office spaces, retail outlets, and warehouses.

Ownership and Land Tenure: The land tenure system in Nigeria consists of three main categories: statutory land, customary land, and acquired land. Statutory land is owned by the government, while customary land is owned by communities or families based on traditional customs. Acquired land refers to land that has been purchased from either the government or private individuals. Proper due diligence is crucial to ascertain the legal status of the land before purchasing.

Buying lands in Lagos can be considered scary by some. However, for the well guided, investing in lands in the right location at the right time has been a source of major wealth.

HOW TO LEVERAGE REAL ESTATE MARKET FOR WEALTH CREATION

1. Population growth: Nigeria has a rapidly growing population, which is expected to become the world’s third-largest by 2050. This demographic trend creates a high demand for housing and commercial properties, making real estate investment a potentially lucrative opportunity.

2. Urbanisation and migration: The country is witnessing significant urbanization and rural-urban migration, leading to a rising demand for housing and infrastructure in cities. This trend presents opportunities for real estate investors, especially in areas experiencing rapid urban development.

3. Strong economic growth: Nigeria is one of Africa’s largest economies and has experienced consistent economic growth over the years. A robust economy translates into increased purchasing power and a growing middle class, driving demand for residential and commercial properties.

4. Infrastructure development: The Nigerian government has been investing in infrastructure development across the country, including road networks, transportation systems, and power supply. These improvements enhance property values, attract investments, and create more opportunities for real estate development.

5. Housing deficit: Nigeria faces a significant housing deficit, with the demand for housing far exceeding the available supply. This gap presents a compelling investment opportunity, particularly in affordable housing projects aimed at addressing the housing shortage.

6. Rental income potential: The rental market in Nigeria is vibrant, with a high demand for residential and commercial properties. Investing in rental properties can provide a steady stream of income, particularly in prime locations or areas with high rental demand.

7. Diversification: Real estate investment offers diversification benefits, allowing investors to hedge against volatility in other asset classes such as stocks or bonds. Adding Nigerian real estate to a diversified investment portfolio can help reduce overall risk.

8. Favourable government policies: The Nigerian government has implemented various policies and incentives to attract local and foreign investments in the real estate sector. These include tax incentives, mortgage financing programs, and streamlined processes for property acquisition and development.

9. Natural resources and tourism potential: Nigeria is endowed with abundant natural resources and has a growing tourism industry. Real estate investments in areas rich in resources or with tourism potential can yield long-term returns as these sectors continue to grow.

10. Long-term capital appreciation: Real estate has historically shown the potential for long-term capital appreciation. As Nigeria’s economy continues to grow and develop, property values in strategic locations are likely to appreciate, providing investors with potential capital gains.

It is important to conduct thorough research, seek professional advice, and carefully evaluate market conditions and risks before making any investment decisions.

Consulting professionals before embarking on any investment journey serves as a vital resource for individuals, businesses, and investors navigating the complexities of property transactions. By leveraging expertise, market insights, and strategic guidance, consultants empower clients to make informed decisions and achieve their real estate objectives effectively.