12 THINGS TO KNOW ABOUT REAL ESTATE IN NIGERIA
Nigeria, a country with more than 200 million people, needs 17 to 21 million more homes. This is an opportunity for real estate investors. Nigeria is a great place to invest because the number of people living there is growing all the time, making it a ready market for tech, financial services, and real estate investments.
But when we talk about real estate investment in Nigeria, we need to be aware of and understand how different things are here. If you don’t realize, understand, or value our differences and try to paint Real Estate investment in Nigeria with the same brush as it is done in other places, you may run into problems.
WHAT DOES IT MEAN TO INVEST IN REAL ESTATE?
Real estate is as old as God’s green earth, and ever since people started farming land and marking their territory, Real Estate Investment was born out of the business that grew up around using that piece of land to make money and all the things that happened on that land.
If you go back to the basics of economics and look at the four factors of production, you’ll see that between land, labour, capital and entrepreneurship, and is sitting on top. In the past, you couldn’t start any kind of business or trade without owning land.
Real Estate Investment is Big Business in Nigeria. Nigeria is a good place to invest in real estate because the market is ready and there are people who want to buy. But you should treat it like a business with the goal of making money. That’s the way to do well! If you want to invest in real estate or start a real estate business in Nigeria, you should definitely pay attention to the following:
- Get ideas from Nigeria’s successful real estate companies, businesses, and developers. If you want to learn more about how to invest in real estate in Nigeria and make money, it goes without saying that you should look at some of Nigeria’s most successful real estate companies and developers. You have to look at how they have invested in real estate in Nigeria for years and done well. Even though they’ve faced a lot of problems, they’ve found a way to not only survive but also grow. These businesses and developers are similar to Mixta Africa, Communities in the First World, Brains, Hammers and so on. If you want to invest in real estate or start a real estate business in Nigeria, you should definitely watch what they do. I can say that they are doing many things right. I’ve learned a lot about real estate by watching how these companies in Nigeria do business and invest in real estate. They have taught me more than any book or school.
- Choose the Best Way to Invest in Real Estate. In general, there are four (4) main ways to invest in real estate:
- Rentals: One of the oldest, safest, and most reliable ways to make money from real estate is through rentals. In Rentals, you buy a house or apartment to rent out on a monthly or yearly basis. It has a lot of benefits, like regular cash flow, asset growth, security for loans, and the ability to sell the property later for a profit. The problem is that, like in many apartments in Lekki and Banana Island, you may not be able to use your apartment for long periods of time. But a hot axis such as has few units that are empty. Dangote has signed a lease for more than 50 units, and if you buy one of these properties to rent it out, you’re guaranteed to make NGN800, 000 per year in rental income.
- Buying and selling land and houses: You buy a property to sell it as quickly as possible for a profit. This is also called “land banking” or “property banking”. One of the most important ways to invest in real estate is to buy and sell land while building infrastructure around new homes and businesses. They can get a return on investment of over 100% because they buy this land cheaply from Omo-onile through “sponsorship deals”.
- Investing in Real Estate: Property development involves buying land, putting up buildings, creating infrastructure, and selling the property to a purchaser either at carcass (lintel level), fully finished with fixtures, plumbing, and so on, or fully finished and furnished. This may be the best way to make money. But real estate development requires a lot of money and a lot of work to be successful.
- Real Estate Investment Trusts (REITS): In other words, a group of investors who pool their money to buy, run, and/or manage income-generating real estate. There are many different kinds of REITS, such as Equity REITS and Mortgage REITS. It pays dividends to shareholders from the money they make from their own properties and investments. On the Nigerian Stock Exchange (NGX), REITs are traded just like stocks. Stockbrokers can help you buy or sell REITs.
So you can see that no matter which of the above strategies you choose, it is not a walk in the park so you have to set yourself up for success.
- Know what the government does. In Nigeria, the government plays a very important role. When ride-hailing technology for motorcycles hit the market, all it took was a simple announcement to destroy investments and ways of making a living. Investors gave millions of dollars to companies, and it was all over in one day. They had to switch to the logistics side. Now, to show how important the government is to this business, the Land Use Act says that the Governor has full access to all land in the state. So, every time land changes hands, the Governor has to sign off on it for it to be legal. You will get in trouble if you don’t understand this or the role the government plays in correcting, ratifying, giving titles, and approving transactions.
- Know land laws and who owns what. From what was said above, you should know that you can only legally sell or buy a property with a proper title that is registered at the state’s registry. The C of O is the most important title you should always keep an eye out for. The certificate of occupancy is a piece of paper that says a person has a 99-year lease on a piece of land. You should also know the other land titles available.
- Pick the Right Place. People often say that location, location, location is everything in real estate. The same thing is true here in Nigeria. No matter what strategy you choose, the location is the most important choice you will make.
HOW TO CHOOSE THE RIGHT PLACE TO INVEST IN REAL ESTATE
When you have a property in a prime location, it sells itself. Abuja’s best places to live are the City Centre, phases 1 and 2, which are close to the airport and face a major road. But the problem with great places is that they cost a lot. So, what do you do if you don’t have enough money to live in a prime location? Then think about the areas that border these prime areas.
Lagos is such a diverse place that it draws investors, expats, people on vacation, people on business trips, and so on. So, there aren’t enough homes for more than 2 million people, and the number keeps growing. The rental business is having trouble keeping up with demand, and most people don’t want to rent for long periods of time or stay in hotels. So what should we do? Apartments with service!
In order to take advantage of the short-term rental market, a lot of property developers are putting their projects on the market. You could save a lot of money on your initial investment and make a lot of money if you could find lucky places that would do well in a few years. You could buy now at a good price and make the most money when you sell, rent, or put the property on the shortlet market.
- Do what the government wants you to do. If you want to do business or invest in real estate in Nigeria, you need to pay close attention to the government’s policy direction and areas of interest. For example, when Governor Rotimi Amaechi was in charge of Rivers State, he started the Greater Port Harcourt Scheme. It said that the government had a special interest in certain parts of the state, and it made plans for infrastructure to drive development outside of the main city, Port Harcourt, to other local governments in Rivers State. This meant that the value of land in these local governments went up, and it took more paperwork to get a title in these places that used to be considered “rural”. The government now had plans for every square meter, whether it was for a business, a home, a road, a hospital, etc. In Lagos, places like Badagry, Festac, Agege, and Ikorodu aren’t top real estate destinations because the government doesn’t care much about them. This affects how much people think a property is worth, how much people want to buy it, and how interested investors are in it.
- Use cities to your advantage. Based on the above, Lagos state has decided that As an urban area, it falls under “Global acquisition,” which means that the government is interested in it and plans to build big projects and infrastructure there. According to the Land Use Act, the government “commits” a lot of land in these cities for use now or in the future. The rest of the land is free, and ancestral land owners can take ownership of these free parts through a process of regularization, ratification, or excision and use them however they want. Because of this, aonce-remote place has become a place where people live and do business. – Dangote Refinery, Alaro City, Free Zones, and others have invested billions of dollars there.
- Use GRAs when you can. In Nigeria, it can be taken as a code word for wealth and a higher standard of living. The first people to live in these exclusive areas were white colonial administrators. But after Nigeria got its independence, Nigerians started to take over senior administrative jobs that had previously only been held by white overlords. This included their posh and private GRA residence. GRAs are usually well-maintained areas with good roads, estates that are taken care of, and sometimes the state’s government house. Politicians, celebrities, and other influential people in the country also live in GRAs. Ikeja GRA and Ogudu GRA are the only GRAs on the mainland. On the island, there is only one GRA. Putting money into a GRA is a good real estate investment because no matter what you do with it—rent it out, build it up, or flip it—you’ll make a lot of money because these areas are exclusive and always in high demand.
- Use beach fronts to your advantage. Both the Atlantic Ocean and the lagoon are on either side of Lagos, Nigeria. With hectares of beachfront land and a beautiful shoreline, this is prime real estate that you can use for beachfronts like VI and Lekki.
- Use areas where plans are being made to improve infrastructure. Infrastructure projects, construction, and new developments all make real estate more valuable, and by Nigerian standards, Lagos is trying with infrastructure projects that are in different stages of completion, such as:
- The Red Line Rails: A 37-kilometer rail system that runs from Agbado to Marina.
- The Blue Line Rails is a train line that goes from Marina to Okokomaiko and is 27.5 km long.
- The Green Line Rail: This is an 18-kilometer rail line that starts on Lagos Island, goes through Lekki Peninsula, and ends where the proposed Lekki International Airport will be built. It branches off to the Dangote Refinery and the Lekki Free Trade zone.
- The 18.75km Lekki Epe Expressway Project. It is a six-lane road with a solid pavement that goes from Eleko junction in Ibeju Lekki to Epe T junction in Epe.
- Project for the 26.7Km Lekki Epe Expressway from to Abraham Adesanya Junction in Eti-Osa axis. This building is a step toward the well-known 4th mainland bridge.
- Building a road network with 4 roads totaling 3.75 km. These roads are Thompson Avenue, Milverton Road, McDonald Road, and Lateef Jakande Road.
- Ojota – Opebi Link Bridge.
- Traffic light signal (TSL) technology was used to make six major intersections better in Lekki phase 1 and 2, Ajah, Maryland, Ikotun, and Allen Avenue.
- The Lekki Regional Road network is 10 km long and connects neighbourhoods from Victoria Garden City scheme 1 to Lekki Freedom way.
- 1.4km long Agege/Pen Cinema Flyover Bridge.
- Use Free Trade Zones to your advantage. Free zones are special economic zones in a country where the federal, state, and local governments don’t get in the way much or at all. It is mostly driven by the private sector, which means that many of the bottlenecks and red tape that can slow down exports, imports, and local trade are avoided. Because of this, free zones are very appealing to both foreign and domestic investors and bring in a lot of foreign direct investment (FDI). There are some free zones in Nigeria, such as Eko Atlantic, Alaro city, LFZDC’s Free Trade Zone (Lekki Free Zone Development Company), Dangote Refinery and so on. Some of the benefits of Free Zone Enterprises (FZEs), which are companies that are based in these special economic zones, are:
- There is no tax taken out of dividends.
- Zero corporate income tax on free zone income.
- Inside the free zone, there are no VATs on purchases.
- Imports have no customs fees.
- FX controls and de-dollarization policies are not allowed.
- No strikes, goods stay in the ports for a long time.
- Invest early in megacity projects. Lagos is a busy city with a lot going on. It is a hub for real estate, and every other month, hundreds of new real estate projects pop up. Some of these projects stand out, though. Maybe it has more to do with how big the project is, how ambitious it is, what services and amenities it will offer, and how well it is planned, but these Real Estate projects almost never come as a surprise! Just like Banana Island, they start out small but grow into high-end, exclusive communities that pay investors a lot of money over time. Depending on how early you can spot these projects, they are no-brainer, sure, guaranteed Real Estate investments that would pay huge dividends, and no matter when you invest, you are guaranteed your returns.
How do you pay for these projects if you know all of the above about real estate investments? There are several strategies you can use, such as:
- Spending money. The most common and obvious in this part of the world, you can easily fund real estate projects with savings and salary, depending on your budget and scale. There is something for every budget and every size.
- Use payment plans if you can. You might not be able to pay millions of dollars all at once, but there are different payment plans you can use. After putting down a certain amount, which is usually a small portion of the total cost, you can spread out the rest of the payments over a month, three months, six months, 12, 24, or even 2–4 years. Most of the time, you have to pay a little interest on these after the third month, but some of them are interest-free for up to 4 years!
- Bank Loans. People might not like this method as much, but a lot of real estate developers and businesses use it. It’s all about taking OPM (money from other people) and putting it into Real Estate projects. Even in this part of the world, where banks don’t usually lend money to people or businesses, they are happy to pull out their check books for Real Estate projects and developments. Even after making money from their Real Estate Investment projects, most companies still get together to talk about the interest rate.
- Co-op businesses. This is a very popular way to fund real estate projects in Lagos, where groups of people, companies, and other groups get together to pool their money and pay for real estate projects. Payment terms are flexible, and as a group, they can buy a lot of land at once, start building on it at the same time, and keep it safe, rather than doing it alone among so many wolves. The Chevron cooperative is a popular co-op in Lagos. They have a lot of real estate investments, including Nicon town estate, Chevron Drive, Northern Foreshore estate, and a few estates in Abijo GRA and opposite Fairfield Apartments Abijo.
- Deals with sponsors. Ancestral land owners, also called omo-onile, who have a lot of land usually don’t have enough money to develop it. When they want to make money for themselves, they sometimes work with developers and sponsors to develop and sell their land. Sponsorship is a way to do this. In exchange, they give you plots of land that are equal to the amount of land you work on.
- Joint Ventures (JVs). Joint ventures are another way to get money to start or invest in a real estate business. Most of the time, two, three, or more people are involved- The person who owns the land (usually owned in a prime area or a massive expanse); the person or company who wants to build on the land and put infrastructure there and the investor. Most of the time, the developer is also the investor, but sometimes the investor pools money to either run the project or put money into it in exchange for a return when the property is sold or rented.