Expectation is high among real estate stakeholders that there will be a rebound in activities and more foreign investments in the sector following the announcement of a single forex market by the Central Bank of Nigeria (CBN) which put paid earlier rigid forex regime that cast a cloud of uncertainty around the economy.
Arguably, in no other sector of the economy have investors exhibited more caution and restraint than they have done in the real estate sector where the attitude has been clearly that of sit-don-look as the CBN continued to tinker with monetary policies that hurt the economy badly.
An otherwise burgeoning market driven by ‘easy’ money, foreign inflows and, to a little extent, personal savings, the real estate sector has been experiencing investment drought as everybody, buyer and sellers alike, have chosen to hold on to cash as they do not know what to expect or see next.
“Investors have been cautious, especially with earlier forex regime of the CBN, because they don’t know if they bring in their money today, naira will be devalued tomorrow”, says Femi Akintunde, MD/CEO, AMFacilities Limited.
The impact of this waiting game is already showing, especially in the housing market, where vacancy rate at the upper end residential segment has risen sharply to 42 percent from 27 percent in just 12 months, May 2015 to May 2016.
But with this new development which Munachi Okoye, MD/CEO, MCO Real Estate Limited, describes as “fantastic news”, considerable risk and uncertainty attached to capital importation will be removed.
It is a positive development for the economy that government is gradually clearing the uncertainty that had beclouded the economy.
Before now, foreign inflows and remittances to Nigeria have reduced and Okoye hopes that with this CBN’s pronouncement, “a lot of FDI that has been sitting on the fence can now be deployed in the country”.
Damola Akindolire, Executive Director, Alpha Mead Development Company, agrees, pointing out that though it might increase the cost of construction by about 50-75 percent due to rate increase and cost of imported building materials, “there will be increase in real estate investment due to foreign inflows.”
The retail sector which is experiencing growth challenges due largely to issues around foreign exchange is most likely to witness what, experts say, a return to life after a long season of inactivity in the building and construction of shopping outlets.
“A lot of people went to town to develop malls because of the success of Ikeja City Mall and Shoprite. Between 2009 and 2013, investment in malls was becoming the in-thing, but so many of the retail projects have slowed down and some of the developers are scaling down the size of their projects with far-reaching implications,” Akintunde notes.
He adds that most of what are sold in retail malls are imported and a lot of the foreign retailers have their money stuck in Nigeria because they can’t have access to foreign exchange. “And when they succeed in bringing in their wares and convert the cost to local currency, it goes way beyond the reach of average Nigerians”, he notes further.
Connect via email
- Nigeria’s Buhari returns home after three-month sick leave in Britain – Reuters
- Naira falls against dollar at parallel market – NAN
- Nigeria strengthening economy attracts forex traders – The Cable
- Permanent secretary forfeits N664m, $137,680.11,properties to FG – THE NEWS NIGERIA
- Naira to weaken further as dollar demand increases – PUNCH