By Danlami Nasir Isah
The real estate sector is gradually proving to be a force to be reckoned with in the Nigerian economy.
Recent data has shown that the real estate sector grew by 2.26 per cent in the last quarter of 2021 as seen in the GDP growth report recently released by the Nigerian Bureau of Statistics (NBS).
The figure, which is 0.3 per cent lower than what the sector recorded in the third quarter of the same year, has not only raised investors’ hope and deepened their confidence in the sector, but also brightened sectors’ outlook for 2022.
Though the performance of GDP, which grew by 3.98 per cent in Q4 2021, does not capture the extent of real estate investments in any given year or quarter, it is worth noting that notwithstanding the low consumer purchasing power, the statistics showed that investors were showing growing interest in the sector.
Recall that the sector returned to positive growth trajectory in 2021 after about 12 consecutive quarters of recession and negative growth. It recorded 3.83 per cent growth in the second quarter of that year which was, arguably, its strongest in four years.
Earlier in 2022, experts had expressed optimism in the sector, predicting a positive outlook for 2022. They had believed that 2022 being a pre-election year that is, historically, characterized by completion of abandoned projects and investments in new ones to appease the electorate.
Frank Okosun, senior partner/CEO, Knight Frank Nigeria, in a live television programme monitored by Valuechain stated that within the first quarter of 2022, the sector would grow by 1.5 per cent, hoping that by the third quarter, it would have surpassed last year’s growth record.
“This is just January and we are seeing activities on top gear. Transactions running into billions of naira are being closed. We have it on good authority that some foreign investors are on their way to Nigeria to invest in the sector and also in the healthcare sector, and they are coming with billions of dollars,” Okosun revealed.
“Going into 2022, the narrative on real estate investments will not be far from what was witnessed in 2021 as part of the increased projects under construction in 2021 will be completed in 2022, ultimately expanding real estate consumption.
“Obviously, with this year being a pre-election year also, many governors, and indeed the federal government and ramping up abandoned projects to enable them include it as part of their achievements, so the sector is in for a whole lot of activities this year,” he added.
Similarly, the expected Central Bank of Nigeria (CBN) intervention in the housing sector, enabling environment and deployment of technology, have also been projected as possible reasons the sector will, in 2022, surpass the performance of the previous year.
Recalled that in November 2021, the Central Bank of Nigeria (CBN) announced that it is set to commence special funding and other strategic support to about 400 selected strategic manufacturing enterprises across the country in the next one year under a new real sector intervention scheme.
The scheme is driven by the new financial instrument known as “The 100 for 100 PPP – Policy on Production and Productivity” popularly known as (100-For-100).
The CBN explained that the scheme is anchored on the need to strengthen the domestic economy towards self-reliance and even global competitiveness, in the circumstance of structural defects in the economy.
Meanwhile, investments in real estate sector in Nigeria has proven over time to be a source of cash flow and to an extent, a retirement plan for many property investments whether commercial or residential.
Research shows that most people invest in Real Estate to earn rental income and some people have gone as far as making it their retirement plan.
In the same vein, one of the advantages of real estate investment is that it soars with inflation. For Instance, the National Bureau of Statistics recently announced an 8-month high of 16.8 per cent.
Simply put, while other investment classes struggle in an inflationary economy and this has negative consequences on portfolios. Treasury Bills, for instance, pay investors so little returns today in Nigeria due to the high inflation rates which have affected the performance of the investment. Real estate, on the other hand, soars during inflation.
In the same vein, rents tend to increase in response to market forces and real estate investors benefit from this.