Gradually, investor confidence in the real estate sector of the Nigerian economy is returning after a prolonged lull that followed the contraction in the economy and the recession, which eroded individual and corporate income, and buying power.
The situation in the sector within the last quarter of 2016 and the first quarter of 2017 was such that activities literally ceased. Developers stopped embarking on new projects and estate agents hardly closed any deals be they sales or rentals.
“But now, we can see some activities in the sector; new investors including local and foreign ones have started showing interest and a lot of things are now looking up in the sector”, said Adetokunbo Ajayi, MD, Propertygate Development and Investment Company, in an interview.
Though it is not yet ‘uhuru’ for the economy, the macro-economic environment has improved a little, but enough to engender confidence and investment interest. PricewaterhouseCoopers in its report, ‘Emerging Trends in Real Estate: The Global Outlook 2017’, says “it is striking that while concerns around geopolitics are at unprecedented levels in recent times, confidence in the ongoing flows of capital into real estate remain high”.
The report adds that consensus is that the current macro-environment of geopolitical uncertainty and fragile economic growth is set to remain a strong feature, but real estate will remain in risk-off mode. It also notes that “global cross border investment into real estate is holding up given the chase for yield and real estate’s position as a safe haven”.
Ajayi agrees, stressing that a combination of factors will help to drive growth in the real estate sector, including population strength of the country and its growth rate, growth in the economy, and increase in the flow of foreign/local capital, with investors returning to the sector.
Others include massive expansion in infrastructure by government, the readiness of operators in the sector to leverage on the much awaited government investment in infrastructure and the need for real estate products and services, which remains quite huge.
He disclosed that, at a corporate level, Propertygate believes that the huge potentials of the Nigerian economy and the vast opportunities in the sector remain strong, adding that the company, in demonstration of its commitment, will continue its development and investment activities in residential and commercial properties, in addition to other opportunities it intends to leverage on within its strategic plan.
At the company’s Annual General Meeting (AGM) for the year ended December 2016, Ajayi noted that the year was a particularly difficult year for the country and businesses as the country entered recession within the year and ended with GDP growth of 1.51 percent negative.
“The economic challenges of the year included inflation at record high 18.71 percent, drastic fall in national revenue, acute scarcity in forex market, badly weakened naira, decline in foreign and local investment, high interest rate, and atmosphere of uncertainty. Most sectors of the economy were adversely impacted”, he pointed out.
According to him, the real estate sector’s contribution to GDP declined compared to the preceding year. He said that lending to the sector dropped and those brave enough to lend, did so at very high rates.