Micro-mortgage can bridge affordable housing gaps – Loft & Keys CEO

Chief Executive Officer of Loft and Keys Properties LLC, Albert Austin, speaks with JOSEPHINE OGUNDEJI on major challenges in the real estate sector

How does regulation uncertainty impact foreign direct investment in Nigeria’s real estate sector?

Regulatory uncertainty can significantly hinder foreign direct investment in Nigeria’s real estate sector by creating risks that make investors hesitant to commit capital. One major consequence is the increase in operational costs. When regulations are unclear or frequently changing, investors must spend more on legal, compliance, and advisory services to navigate the landscape. This adds to the cost of doing business, potentially driving investors to seek more stable markets with predictable regulations.

In addition to higher costs, regulatory uncertainty elevates the perception of risk. Investors generally prefer environments where legal and regulatory frameworks are stable, allowing them to forecast returns with confidence. However, when policies shift unpredictably, such as sudden changes in property laws, land use policies, or taxation, ongoing projects can be disrupted, and profitability can be threatened. This unpredictability makes foreign investors more reluctant to engage in the market, fearing that sudden regulatory shifts could jeopardise their investments.

Another consequence of regulatory ambiguity is delayed decision-making. Investors may adopt a “wait and see” approach, postponing their investments until there is more clarity regarding the regulatory environment. This hesitation slows the flow of FDI into the real estate sector, impeding not only immediate investments but also long-term planning and infrastructure development, which are critical for the sector’s growth.

Furthermore, regulatory inconsistency can erode investor confidence over time. Frequent policy reversals or weak enforcement of existing regulations diminish trust in the government’s ability to uphold contractual agreements. This erosion of confidence lowers the attractiveness of Nigeria’s real estate market as foreign investors become wary of entering an environment where the rules are not reliably enforced or can be changed unexpectedly.

To address these challenges, Nigeria needs to strengthen its legal framework by ensuring stable and transparent regulations, particularly around land ownership and taxation. This will give investors a sense of security and predictability. Clear communication of new policies or regulatory changes is also essential to reduce ambiguity. Engaging with stakeholders early in the process will ensure that concerns are addressed and guidelines are understood.

Institutional reform is another critical step. Strengthening land registries and urban planning agencies will streamline processes, such as land titling and property registration, making it easier for investors to do business. Additionally, establishing frameworks for public-private partnerships can help mitigate some of the risks posed by regulatory uncertainty. These partnerships can foster infrastructure development while ensuring that investor interests are protected through stable, long-term agreements.

By addressing these issues, Nigeria can reduce the negative impact of regulatory uncertainty and create a more attractive environment for foreign investment in the real estate sector.

What can be done to access affordable housing finance for low-income earners in the country?

Improving access to affordable housing finance for low-income earners in Nigeria requires a multifaceted approach. One crucial aspect is reforming the mortgage sector to make it more inclusive and accessible. The current system is largely geared toward higher-income earners, leaving low-income individuals with limited options for homeownership. Streamlining the mortgage process and lowering barriers, such as high interest rates and strict lending criteria, can open up opportunities for more Nigerians to access housing finance.

Another key strategy is expanding micro-mortgage schemes. These schemes cater to the financial realities of low-income earners by offering smaller, more manageable loans. By tailoring loan products to meet the needs of this segment, financial institutions can provide affordable options that align with the incomes of the informal sector, where many Nigerians work. Micromortgages can bridge the gap between low earnings and housing affordability, enabling more people to buy homes without the need for large, traditional mortgages.

Government intervention is also essential in this effort. Subsidies and low-interest loans can provide critical support to low-income households, making it easier for them to afford home purchases. Increased government involvement in the housing finance market through initiatives like these can alleviate the financial burden on individuals and encourage greater participation in homeownership.

In addition, public-private partnerships should be promoted to boost housing development and financing. By leveraging the resources and expertise of both the public and private sectors, these collaborations can lead to the creation of affordable housing solutions on a larger scale. This model allows for shared risk and reward, making it attractive for both government and private entities to invest in affordable housing projects.

The development of housing cooperatives is another viable solution. These cooperatives allow individuals to pool their resources to collectively finance and build homes. This community-driven approach not only reduces the financial strain on individual households but also fosters a sense of ownership and cooperation among members. Housing cooperatives can be an effective way to address the housing needs of low-income earners who may struggle to access traditional financing options.

Lastly, innovative financing products that cater to the informal sector need to be developed. Given that a significant portion of Nigeria’s workforce operates outside the formal economy, traditional lending models may not always be suitable. By creating flexible, alternative financing solutions, financial institutions can tap into this market and provide the necessary support for low-income earners to secure housing.

Improving the mortgage-to-GDP ratio is not only beneficial for low-income earners but can also stimulate broader economic growth. A stronger mortgage sector contributes to the overall health of the real estate and financial markets, leading to job creation, increased investment, and a more vibrant economy. By taking a holistic approach to housing finance, Nigeria can address its housing challenges and create a more inclusive, sustainable real estate market.

Capacity gaps on the side of developers and procurement of substandard materials lead to building collapse. How can this issue be addressed?

Building collapses in Nigeria have become a critical issue, with several factors contributing to this recurring tragedy. Capacity gaps among developers, the use of substandard materials, poor construction techniques, and inadequate oversight by government agencies are among the major causes.

One of the key challenges is the capacity gap among developers. Many developers lack the technical expertise, experience, or proper certifications to manage complex construction projects effectively. This leads to poor planning, inadequate safety measures, and a failure to adhere to established building standards. To address this, mandatory training programmes for developers should be implemented. Continuous professional development must be enforced to ensure that developers stay updated on modern construction techniques, safety protocols, and industry best practices. This will raise the competency level of developers and minimise errors that could lead to building collapses.

Another significant issue is the procurement of substandard materials. In many cases, developers resort to cost-cutting measures or face inadequate quality control during procurement, resulting in the use of weak materials that compromise the structural integrity of buildings. To combat this, the government must enforce strict quality control measures in procurement processes.

Developers should be required to source materials from certified suppliers, with traceability systems in place to ensure materials meet approved standards. Regulatory bodies like the Standards Organisation of Nigeria must ensure that all building materials conform to international quality standards. Routine inspections and penalties for the sale or use of substandard materials will act as deterrents and ensure compliance.

Inadequate government oversight is another factor that exacerbates the issue of building collapse. Regulatory bodies often lack the necessary resources, capacity, or commitment to enforce building codes, conduct regular site inspections, and ensure that safety regulations are followed. To address this, government agencies need to be strengthened through better funding, training, and staffing. These agencies should conduct frequent inspections at various stages of construction and have the authority to halt projects that fail to meet safety standards.

Additionally, the implementation of digital monitoring systems can enhance oversight. Government agencies should adopt real-time digital tracking systems to monitor construction projects and ensure compliance with safety standards, building codes, and approved designs. A centralised database for building permits and inspections can also improve transparency and accountability, reducing the likelihood of regulatory lapses.

In conclusion, addressing the issue of building collapses in Nigeria requires a holistic approach, including capacity building among developers, strict enforcement of material standards, and strengthening the oversight functions of government agencies. By tackling these root causes, the country can significantly reduce the frequency of building collapses and improve the overall safety and quality of construction projects.

How is rapid urbanisation affecting the housing supply?

Rapid urbanisation has a profound impact on housing supply in Nigeria, contributing to heightened demand, the growth of informal settlements, strained infrastructure, and increased housing costs. Although this situation brings several challenges, it also opens doors for innovative housing solutions and sustainable urban development.

To effectively address these issues and guarantee sufficient housing for all urban dwellers, it is crucial to implement sound policies, engage in thorough urban planning, and foster collaboration among various stakeholders. By proactively addressing these challenges, Nigeria can strive to create urban environments that are more livable, equitable, and sustainable.

How has the high cost of land in major cities affected real estate development?

The high cost of land in major cities profoundly affects real estate development by driving up project costs, shifting preferences toward high-density and alternative locations, and complicating the provision of affordable housing. While this situation presents numerous challenges, it also encourages innovation and alternative strategies to navigate the complexities of urban development. Addressing these issues through effective policy-making and collaboration among stakeholders is essential to ensuring sustainable growth and adequate housing supply in urban areas.

Could you share a bit of your journey and how your experiences have shaped who you are today?

My journey has been shaped by a combination of experiences, challenges, and opportunities that have profoundly influenced my character and aspirations. Growing up, I was always curious and eager to learn, traits that fuelled my pursuit of knowledge and understanding of the world around me. From an early age, I was exposed to diverse perspectives, thanks to my family’s emphasis on education and open dialogue. This background instilled in me a strong belief in the power of knowledge and the importance of continuous learning. It also fostered my appreciation for different cultures and ways of thinking, which has been invaluable in both my personal and professional life.

Establishing Loft & Keys Properties marked a significant milestone in my journey. This endeavour allowed me to merge my passion for real estate with my commitment to creating meaningful spaces for people. Navigating the complexities of entrepreneurship has taught me about the value of perseverance, adaptability, and innovative thinking. It has also deepened my understanding of the real estate landscape, especially in addressing housing challenges and fostering community development.

How can the Federal Government tackle the country’s housing deficit?

Addressing Nigeria’s housing deficit requires a comprehensive, multi-faceted approach that includes improving access to affordable housing finance, incentivising private sector participation, simplifying land acquisition processes, and promoting innovative building technologies. By increasing public investment in housing, upgrading urban infrastructure, and fostering collaboration with state governments, the Federal Government can create a more sustainable and inclusive housing market that meets the needs of all Nigerians.