Buyers gain as recession pushes innovation in property market
For the Nigerian property market, it is not a hopeless situation as challenging times pose difficulties for operators but yet present opportunities for innovations, which ultimately benefit not just the sector, but also buyers and consumers of real estate products.
Operators in this property market have, increasingly, discovered that in the midst of these challenging times, a major way out for them is innovation and enhanced value proposition, which is why high-end luxury properties offer out-of-ordinary facilities such as energy efficiency, hi-tech security, etc, and friendly and convenient payment plan that does not put pressure on the buyer’s pocket.
Some mortgage banks are also responding to these challenging times and, for Trustbond Mortgage Bank, this response is not only critical, but also imperative and urgent, hence its management has embarked on creating customer-centric solutions through the use of smart technologies in a professional and friendly atmosphere.
“We are changing our business dramatically from reliance solely on branch banking for customer engagement to multi-channel banking in response to a constantly changing business environment and customer preference”, says Adeniyi Akinlusi, the bank’s MD/CEO.
According to Akinlusi, the bank would soon formally launch its mobile banking App and ATM card, noting that the pilot scheme for both technology devices was already being tested while the launching would come up early next this year.
Though some operators hope for a better business environment in the new year based on possible oil price climbing from current level of 50/55 towards around 60/65 by the middle of this year, the out-gone year was a watershed for the market with 8.20 percent sectoral contribution to GDP, which was a decline compared to 8.74 percent recorded at the third quarter of 2015.
As an economic indicator, real estate is regarded as a laggard, meaning that its performance follows and mirrors the performance of the economy which in 2016 suffered a great deal from the combined impact of falling national revenue, liquidity squeeze, decline in foreign and local investment, high interest rate, weakening currency and atmosphere of uncertainty.
This was a year when, according to a Central Bank of Nigeria’s report, interest rate on prime lending to real estate activities from 26 percent of lending banks was only between 24 percent and 29 percent per annum and 18 percent-23 percent per annum from 52 percent of lenders.
“The maximum lending rate from most of the lending banks (87 percent) was between 24 percent and 36 percent per annum while mortgage financing to property buyers did not fare better, with unpleasant consequences for dreams of potential property buyers and real estate operators”, says Adetokunbo Ajayi, CEO, Propertygate Development and Investment Company.
Ajayi notes that 2016 did not show mortgage lending in 50 percent of the banks, adding that the prime lending rate from banks that gave out mortgage was 24 percent-29 percent per annum (42% of lending banks), and maximum lending rate was between 24 percent-32 percent per annum (83% of lending banks).
But as an asset class with a hedge against inflation, He points out that real estate continues to enjoy attraction from investors. “Unlike the capital market, the sector has not recorded major market volatility, thus positioning it as an asset of choice,” he posits.
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