Alpha Mead Group is a Total Real Estate Solutions and Healthcare Company with significant investments in the Facilities Management, Property Management, Real Estate Investment and Real Estate Development sectors. In this interview, our Group Managing Director, Engr. Femi Akintunde, discusses the property market and how to chart a path forward.  

 

Nigeria and the African property market, in general, is evolving rapidly. What are the major challenges facing the sector?

There are various challenges that can be categorized into different stakeholder groups. The first is with the developer and the acquisition process. In Nigeria, the land belongs to the government, and anyone interested in Real Estate must have an interface with them and therein lies the problem. Land is not viewed as an asset that can be leveraged; it is difficult to use land to unlock wealth. Therefore, a review of the Land Use Act is required. The cost of land acquisition in certain areas is also a problem; and so is the process of acquiring it and obtaining the right title. Making matters worse is the fact that even when land is purchased with the right title, the problem of “omo-onile” persists, which means it is difficult for developers who need land in large sizes. The second challenge relates to funding developments and project management capabilities where the rising cost of building materials has increased developmental cost. Owing to this, ROI on most projects is difficult to attain for builders.  

On the buyer side, finance costs including operation and management fees are also issues belabouring the sector. The economy-induced dwindling purchasing power has imposed a constraint on buyers – be it residential and commercial. As a result, a lot of incentives from the developer is required to enable acquisition, which in turn, reduces the margin. For commercial property, for instance, most of what is sold are foreign goods and affordability remains a challenge for most of the target audience.

 

With the current climate change conversation happening globally, what solutions are to be implemented in the built environment against climate change?

The biggest solution is more awareness on the side of the public, and the government playing a more active role to incentivise developers who pay attention to measures that will preserve the environment. We all know that the threat to the environment is real. Case in point being the fact that the U.S. National Oceanic and Atmospheric Administration estimates that the global temperature has increased roughly by 0.18 degrees Celsius each decade since 1981. During that same period, the sea level had risen to 4.4 millimetres annually. In other words, flooding becomes an issue when the sea rises just like we are experiencing in Nigeria, the question then becomes what we need to do to reduce it? When we also look at carbon emission, this not only accelerates global warming but also creates health and safety challenges for everyone. If we do not do what we can within our sphere of influence, things will get worse and will be negating the core principle of sustainability which states that we should live responsibly without endangering the lives of future generations.

Government has to put more incentives in place to motivate players and and take strict measures to ensurecompliance on matters that affect the environment, but individuals must also be willing to take conscious decisions and act responsibly to preserve the environment.

 

The issue of building collapse in Nigeria has been a recurring decimal. What roles should real estate developers and investors play to tackle it?

All stakeholders have roles to play to buck this trend, including the government. For the government, ensuring compliance with necessary permits and regulatory standards. We also must move away from selective application of the laws where influential people are untouchable. Regulatory agencies must be properly resourced and capable of executing their jobs professionally.

For developers, we must understand that what we do impact lives. This places an enormous responsibility placed on developers whom people trust that properties they are bringing to the market conform with necessary regulatory standards and they are safe and secured to live and occupy, either for residential or for office or commercial. In essence, developers have to live up to that level of trust and it starts with ensuring that their designs conform with the national building code. Also, engagement of qualified consultant to guide in the construction, design and delivery of the project is paramount. The money paid to consultant is not the money you count as a loss.

 

The increased number of aged buildings in most urban centres such as Lagos, Ibadan, Kano and Port Harcourt has increased the demand for urban renewal across Nigeria. How can this act as a panacea to sustainable housing development?

There has to be a consistent urban renewal policy and government must be intentional in this regard. The buildings that occupy the city centres and prime locations 20, 30, 50 years ago are no longer the type of building that should remain there today. Also, the value of land appreciates as the community evolves and develops, which means that the Lagos Island of 50 years ago was the prime, was what was celebrated, but those buildings today are not the kind that are required in certain locations. Like countries that have successfully implemented urban renewal, government must have an unequivocal policy for urban renewal from time to time, it could be every 10 years to review certain locations and ask ‘’what should this location look like in another 10 years’ time?’’ with consistent effort and deliberate policy put in place for renewal and upgrade of those type of location. Urban renewal requires resources and engagement.

One important thing that must be put into consideration when it comes to urban renewal is the concept of national heritage; it is about culture. If you plan urban renewal for a particular location, what are asset of national heritage that you want to preserve in that location? Is it the first court in that area? is it a particular type of building that we want to preserve? And we must continue to treat it as a treasure.

 

You mentioned the need for people to have houses before retirement including pensioners. What efforts should the government put in place to ensure this is possible?

What I meant is that institutional investors are needed to smoothen the homeownership process. Byinstitutional investors, we mean wholesale investors that have access to cash to finance big projects. Accordingly, you will be talking of institutional investors like pension fund. Pension funds are key in what we are talking about and we must realise that workers are those who contribute to the pension fund whose assets today stands at about 12 trillion naira. Ironically, what was invested in real estate was less than N500million. Only 1.8% was spent on infrastructure and less than 0.2% was spent on real estate. When Real Estate is not invested in, these workers will have no roof over their heads during retirement and at that time they will be adjudged to have no credible source of income to access mortgage. Now that they employed and contributing to the pension scheme why can we not have a deliberate policy that allows a percentage of their pension funds caters to their housing needs?

Therefore, if the pension is being contributed by people, then let the government legislate that a percentage of a pension fund must be available to finance housing for people then we will see a game change. But right now, it is not a priority to the pension funds to finance housing, which is why developers are struggling to raise capital and there won’t be stock of mortgageable properties. Also, primary mortgage institutions cannot have stock of properties that they can finance, and if they don’t have properties, they cannot finance them. That is what I meant that an urgent intervention is needed to reverse the trend that when people get to their retirement age before they receive a lump sum of money to build a house.

FG is working on something with the Ministry of Works and Housing but direct building is not the way forward as they are competing with the private developers. What should be done, in my opinion, is land swap where developers build a certain portion of land for the government in lieu of cash payment.

 

The pandemic has stunted the performance of private developers, making the sector one of the worst-hit in the current crisis. What strategy could be employed to reposition real estate?

 

Yes, the pandemic affected both the public and private sectors, but the Real Estate sector felt the impact severely. We feel like what has happened has further aggravated the impact of inadequate housing that we have for people. Currently homeownership is 25% in Nigeria compared to 60 or 70 percent in other countries, even Kenya is about 60%. There is still a major gap in homeownership and Real Estate developers cannot do much if there is no support, hence developers must build capacity. Capacity to develop, deliver and raise finance for projects. They also need to build credibility among stakeholders, because it is only when you are credible that you can raise capital especially from the capital market. Not too many developers today have the right business model and capacity to deliver quality projects on a sustainable and large scale. We have too many developers that are doing projects on small scale just because the environment has incapacitated them, it has not allowed real estate to grow at the pace every other sector such as telecoms and oil & gas is growing. There has to be a deliberate and conscious effort for developers to also grow their capacity, but a lot of support is required from government to create an enabling environment for them to flourish while developers must be prepared to subject themselves to good corporate governance standard. A lot of developers just feel they can continue to operate small scale and do things the way they like, so all the shenanigans that we are seeing is because of poor regulations in the industry and it is affecting everybody.

 

Your firm AMDC is one of the first developers in Nigeria to have its residential estate, Lekki Pearl, certified to the International Finance Corporation’s Excellence in Design for Greater Efficiencies Advanced standards. How has this international recognition helped in navigating the industry? Can you share more about your Rent2own and Ren4 Less scheme?

 

The EDGE certification takes you through a process to deliver real estate that conforms with the new global standard for climate protection. Carbon footprint is reduced, less water is used, energy is conserved and less embodied energy in materials. This means that the materials you use for the building are as close to nature as possible, not the ones that have undergone extreme energy processing. Looking at the preservation of the cooling of the building, the material that we use are such that the ingress of heat outside into the building, so the amount of air conditioning you need is less, the design of the building and the positioning in terms of ventilation, in terms of lighting is such that it reduces the amount of lighting you need inside the building during the day. These are part of our contribution to the preservation of the environment and are beneficial to both developers and homeowners on the long run. All our developments moving forward will also be certified to green standards.

 

Rent4Less and Rentto-Own are of two models that enables affordability in housing. A lot of landlords over the years used to the idea of 1 and 2-year rent on their properties, so Rent4Less found a middle ground to meet their own objectives. Government is looking into monthly payment, but the approach is not the right one as you cannot legislate on what you do not own. What should be done is meet the objectives of landlord and tenant for the system to work. But ultimately, monthly rent is the way forward and that idea, by the government, is the right one. Rent4Less approaches landlords with large units, pay upfront and fill it up with tenants who want to pay monthly. Our total real estate solutions capacity also helps ensure that these assets are managed end-to-end. Rent-to-Own is a scheme that combines our affordable housing solutions and mortgage accessing capabilities to help subscribers on Rent4Less own their homes.