- Real Estate Industry Still in Recession – Experts
Property developers as well as estate surveyors and valuers have said the real estate industry is still in recession despite the rebound in the economy.
Some of them, who spoke with our correspondent, said many houses were still vacant and there was still high rate of default on rent payment by tenants.
According to experts in the industry, the real estate market is often the worst hit in times of recession and also takes a longer time to pick up unlike other sectors.
The National General Secretary, Real Estate Developers Association of Nigeria, Mr. Akintoye Adeoye, said investors, especially those in the residential sub-sector, had yet to feel the impact of a rebound in the economy.
He noted that despite several innovative options that had been made available to buyers, developers were still unable to sell off or lease properties.
Adeoye stated, “As developers, we haven’t felt any change in the economy. It is still the same as it was about one year ago when the recession was biting hard. Many houses are still vacant despite the fact that developers are becoming very innovative with offers to investors.
“We have come up with offers some of which allow subscribers to pay between 20 and 30 per cent deposit, move into the houses and spread the balance over four to six-year period. But despite this very generous offer, many subscribers are not forthcoming, because they are unable to come up with the deposits even on houses as cheap as N9m. So, in the real estate industry, we are still in a recession.”
According to Adeoye, the rental market is also not faring better as many landlords and tenants are in court over default on rent obligations.
“It has been a tenant’s market for some time now, but even that has not helped. As a lawyer, I can tell you that rent-related court cases are on the increase; tenants are defaulting and taking their landlords to court and vice versa,” he said.
He added that the top end and luxury markets in Lekki, Victoria Island and Ikoyi in Lagos, and some parts of Abuja, were the most affected.
The Senior Partner and Chief Executive Officer, Nelson Thorpe Alonge, a firm of chartered surveyors and estate surveyors and valuers, Mr. Victor Alonge, said it would take at least six months to one year post-recession for the real estate industry to pick up.
He explained, “As far as we are concerned in the industry, there has not been much change. In a recession, real estate is always badly hit; it is a cyclical challenge that real estate faces. And the key thing is that because real estate backs the economy, even when the economy is out of recession, it takes a while for that to be translated to the industry.
“Things have not changed as long as real estate is concerned; capacity is still low, uptake is still very low; we have very high vacancy rate and even where there are tenants, the rate of default is very high and landlords have had to take the heat.
“It will take a minimum of six months before the exit from recession reflects on the industry, because then, the economy will allow for planning, which will feed into other sectors. Evidence from places with robust data show that it will take about six months before we begin to see the effects; but the full effect will take over a year.”
Alonge said the recession had adversely affected practitioners as the traffic had been low and supply into the market constrained.
“No one wants to start a project that won’t be taken up. Prices have also nosedived and because of the challenges of having to spend more time and resources selling one property, our income has been affected and it has been challenging for estate surveyors and valuers and others too,” he added.
According to another estate surveyor and valuer, Mr. Akin Olawore, the recession within the real estate sector is brought about by high vacancy rates as the housing stock is excess of demand, while rents are being negotiated downwards due to low purchasing power, with high rent default rate.
“Tenants seem to have an upper hand at this time as landlords are usually caught in between increasing rent or retaining existing tenants in order to avoid vacancy,” he added.
The Principal Partner, Kola Akomolede and Co., a firm of estate surveyors and valuers, Chief Kola Akomolede, said it might take up to the third or fourth quarter of 2018 for investment in the real estate industry to return to normal, adding that this was also subject to a continued improvement in the economy.
He added, “Investment in real estate takes time to respond to economic issues. Like economists will say, demand and supply are inelastic. So, it will take time for the market to react to the economy’s exit from recession.
“For instance, if there is a shortage in supply, it takes time to improve on it and if there is a shortage of demand too, it takes time for it to improve. As far as the market is concerned, we are still in recession; tenants still owe rent.”
Akomolede, however, advised that this was the best time to invest in real estate as well as construction activities.
“Whoever has the capacity to build should go ahead with construction because when the market begins to boom again, they will look back and realise they made the right decision. Same goes for those who can afford it and wish to buy houses; there is no better time than now to do that,” he added.
Olawore said a time of recession meant there would most likely be reduced head-on competition in the space as some investors would prefer to back out and wait for the economy to pick up, adding that this was the best time for smart investors to come in.
“A time of recession is where the bravery and strategy of real estate investors are called upon,” he noted.
Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17
Tony Elumelu owned Heir Holdings Limited and its related company Transnational Corporation of Nigeria Plc on Friday announced it has completed the purchase of 45 percent stake in Oil Mining Lease (OML 17) through TNOG Oil and Gas Limited.
The acquisition includes all assets of Shell Petroleum Development Company of Nigeria Limited (30 Percent), Total E&P Nigeria Ltd (10 percent) and ENI (five percent) — in the lease.
It was further stated that TNOG Oil and Gas Limited will also have the sole right to operate OML 17.
The field presently has a production capacity of 27,000 barrels per day. Also, there are estimated 2P reserves (proven and probable) of 1.2 billion barrels and an additional one billion barrels in possible reserves — all of oil equivalent.
A consortium of global and regional banks and investors provided a financing component of $1.1 billion for the largest oil and gas financing in Africa in over a decade.
In a statement released on Friday, Shell said the completion was after all the necessary approvals have were received from authorities.
“A total of $453m was paid at completion with the balance to be paid over an agreed period. SPDC will retain its interest in the Port Harcourt Industrial and Residential Areas, which fall within the lease area,” the SPDC said.
Speaking after the completion of the deal, Elumelu said “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.
“As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.
“I would like to thank Shell, Total and ENI, for the professionalism of the process, the Federal Government of Nigeria, the Ministry of Petroleum Resources, and the NNPC for the confidence they have placed in us.”
Tony Elumelu is the Chairman of Heirs Holdings Limited, Transcorp and United Bank for Africa Plc.
Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods
Exporters have said the recently introduced pre-export requirements by the Central Bank of Nigeria is creating unnecessary bottlenecks for exporters and the movement of goods out of the country.
Exporters, who spoke under the aegis of the Network of Practicing Non-oil Exporters of Nigeria (NPNEN), said the electronic Nigeria Export Proceed Form now required by financial institutions from exporters had come with so many challenges.
Ahmed Rabiu, the President, NPNEN, explained that the new policy had several requirements that often led to delays and loss of income on the part of exporters.
He said, “We acknowledge the CBN’s desire to ensure that all exports out of Nigeria are documented in order to ensure that the proceeds of such exports are repatriated.
“However, the reality on the field shows that the process is causing undue delays and consequently, encouraging corruption.”
According to them, in the new pre-export requirements, the Central Bank of Nigeria wants an export transaction to be initiated through eNXP processing on the trade monitoring system.
After which exporters are expected to have a pre-shipment inspection agent, the Nigeria Customs Service and other designated government agencies carry out their pre-export inspections.
The exporters said the pre-shipment inspection agent was expected to issue a clean Certificate of Inspection while Customs would issue the Single Good Declaration. All these they said takes time and delay goods from leaving the country on time.
Pointing to a recent report, they said about N868 billion worth of goods bound for export were stuck at the ports due to the new policy.
Speaking further Rabiu said, “For example, for the PIA to issue the CCI, the exporter is required to upload a certificate of origin as one of the supporting documents for the eNXP.
“The PIA is also required to upload the CCI to the TRMS(M) and until this is done, the Customs service will not issue the Single Good Declaration.”
He added, “After issuing the SGD, the customs is further required to upload it into the TRMS before the goods are allowed to be gated into the port and loaded on the vessel by the shipping line.”
Ardova Plc in Talks to Acquire Enyo Retail and Supply Limited
Ardova Plc, Nigeria’s leading integrated energy company, has commenced discussions to acquire Enyo Retail and Supply Limited.
According to the statement issued and signed by Oladehinde Nelson-Cole, Ag. Company Secretary/General Counsel, Ardova Plc, Enyo is one of the newest and fastest-growing retail and supply companies in the downstream sector.
It stated, “This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.”
“This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.”
Speaking on the yet to be completed deal, Mr. Olumide Adeosun, CEO, Ardova Plc, said upon completion, Ardova will retain the Enyo branded stations which will operate side by side with the Ardova brand while simultaneously leveraging on the strengths of Ardova and its group companies.
He added that the two companies are determined to conclude the deal by the end of Q1 2021.
Enyo presently operates over 90 stations across the nation and attends to over 100,000 retail customers on a daily basis.
Ardova Plc and Enyo Retail & Supply Limited promised to furnish stakeholders with more information on the progress of the deal.
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