'Absence of long-term financing impeding real estate growth' - Experts

Real estate sector experts have shared their concern that paucity of funds and high cost of credit are major factors impending to real estate growth.

They advised authorities to boost infrastructure provision and reduce the high interest rate that hinders the cost of financing and delivery of housing projects across the country.

The experts made this known at a forum entitled: Navigating Nigeria’s Real Estate Landscape in 2024” organised by Nairametrics and held virtually.

The Managing Director, M&E Kaiser Limited, Jamila Faniyi, stated that one of the significant challenges faced in the construction and real estate sector is the inability to access long-term financing at single-digit interest rates.

According to her, when infrastructure is in place, every other thing will fall in line. She also added that if the nation can resolve issues such as roads and rails, single interest financing, as well as increases in building materials, challenges within the industry will significantly come down.

The Deputy Chief Executive Officer, Purple Real Estate Company, Obinna Onunkwo, also lamented that there is an ideology mismatch in the industry.

According to him, most investors tend to approach the sector from a short-term point of view, while real estate is a long-term investment.

He said: “Real estate, across the world, is where you store wealth. Whatever wealth you create at the retail or institutional level is stored in real estate because it is a long-term asset. Many of the players are not approaching it from a long-term perspective, they approach it from the short-term point of view, and there’s a mismatch.

“If you look at the FMDQ data on the amount raised from Commercial Papers (CPs) over the past five years compared to corporate bonds issued within the same period, it tells a story. The banks and financial institutions are more interested in 90 days and one-year transactions. In real estate, building a mall can take you a minimum of 20 to 24 months, while the bank is giving you money for 90 days.”

Other contributors, Chief Executive Officer, Nigerian Mortgage Refinance Company, Kehinde Ogundimu and Head, Strategy and Public Affairs, Nairametrics, Uade Ahimier, also stressed on that absence of long-term financing in the industry and how it hinders progress.

They noted: “Developers are hardly able to get any long-term financing with single-digit interest rates. What we’re able to get are mostly double-digits, and you know that as inflation rises, so does the interest rate.”

BEB