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Developers to tread cautiously on Nigeria’s real estate frontier

Illustration of a proposed estate that will increase the housing stock in Lagos
Illustration of a proposed estate that will increase the housing stock in Lagos

APPARENTLY buoyed by the growing apathy by commercial banks to fund projects and impact of on-going reforms by the government, a new report has predicted that developers will be more cautious in property development as the economy remains slow, and prepare for a changing landscape.

The Lagos Housing Development Market – 2016 Outlook Report by Residential Auctions Company (RAC) disclosed that “the next coming months and beyond will be testing times for developers as demand is likely to be curtailed with clients cutting back on spending until a clearer picture of the economy emerges to restore consumer confidence in the market.

“It is expected that a lot of developers will tread carefully when embarking on new projects to launch and location of choice will be a paramount factor. Also to hedge risks, developers will cut back on the size of projects they embark upon and will seek to develop small size projects that will provide not more than three – ten units, which will quickly attract sales even at the off-plan stage hence eliminating the occurrence of idle units waiting to be sold several months after completion which will increase the cost of keeping stock.”

Given the current economic atmosphere, the report projects that only a third of the 14,415 units currently under construction will be delivered this year resulting in 4,325 units, “but unless developers can seek alternate funding asides from the commercial banks then this figure might not be delivered.

“Some of these developments date back to over five years and there are several plausible reasons for the delay in delivery, one of such reasons could be a lack of funds which will hinder the ability of the developer to finance the progress of the development or it could be a litigation case between parties involved. In most cases it is usually the former that happens and unless a source of finance emerges the development will remain in limbo until a solution has been found.

This could potentially present an opportunity for developers to pursue “Crowd funding” which is an alternative form of raising finance from a group of investors through an online platform and is a relatively new concept.”

The research says that 62 per cent of new housing units in the development will be delivered into the Lagos Island market as shown above. This should not come as a surprise since the Lekki- Epe axis still has a vast area of green field sites (un-developed land) in Lagos.

“The future of this market looks pretty much intact as supply will continue to increase with demand and infrastructure is improved to attract more businesses. We cannot categorically say that Lagos Island has more green field sites than Lagos Mainland or vice-versa as there is currently no data to show or prove this theory, accordinng to RAC Managing Director, Mr. Omorotimi Akinlose.

He explained, “Notwithstanding the fact that Lagos Island has the bulk of new units under going development, we cannot neglect or overlook that some locations on Lagos Mainland such as; Ayobo-Ipaja, Badagry and Okokomaiko also have vast number of units in the development, a major consequence of a few mass housing schemes launched under Joint-Venture (JV) arrangements and are still awaiting completion.

RAC report said: “With the on-going rehabilitation and expansion of the Lagos-Badagry Expressway and the construction of the Blue Line Lagos Rail Transport (LRT) mass transit transport system by the Lagos State Government (LASG), the Okokomaiko – Badagry axis part of Lagos Mainland has the potential to emerge as the next “Lekki” of Lagos Mainland in the future with regards to the delivery of new housing units in Lagos provided infrastructures continues to improve along this axis.

“This will have a directive positive impact on commercial activities in the location and will act as a catalyst to lure more residents from other locations on Lagos Mainland to migrate. The Blue Line is a 27km urban rail line that will run from Okokomaiko to Marina. There will also be a Red Line which will run from Marina to Ikeja International Airport.

The report revealed that under the Eko Atlantic City project, a Public-Private-Partnership (PPP) initiative involving the Lagos State Government and a private company South Energyx Nigeria Limited (a subsidiary of the Chargoury Group of Companies) under the auspices of the Federal Government of Nigeria, over 1,000 units of apartments of various room sizes ranging from one bedroom to four bedroom penthouses are already under construction.

Leading the pack of these developments are Eko Pearl Towers by ESLA International. Eko Pearl Towers are high rise residential buildings to be located in the centre of Eko Atlantic City.

It will comprise of five stunning residential towers on the harbor of Eko Atlantic. The towers are; White Pearl Tower, Black Pearl Tower, Indigo Pearl Tower, Champagne Pearl Tower and Aqua Pearl Tower. In total the towers will provide just slightly over 560 apartment units with one tower completely sold out and the first set of units will be delivered as early as 2016.

Another high rise development currently under-construction in Eko Atlantic City is Eko Energy Tower Estate being developed by oil and gas logistics firm Orlean Invest West Africa a Nigerian group with over 25 years of providing corporate and real estate services. Eko Energy Estate is a premium residential neighborhood that will cover approximately 450,000 square meters of land and will be located in the Northwestern corner of Eko Atlantic City.

The first phase of Eko Energy Estate will consist of three high rise 20 floors residential towers that will provide about 260 apartment units of various number of bedrooms as illustrated above and is expected to be delivered by 2018.
It is projected that by the full completion of Eko Energy Estate there will be 5,000 apartments in 50 – 60 residential towers.

Other notable residential developments currently in the works in Eko Atlantic City are Lagos Sky Tower, LeReve Tower and Azuri Penisula.