PROPERTY DEVELOPMENT IN NIGERIA

 

INTRODUCTION

Real estate development, or property development, is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of developed land or parcels to others.

Real estate developers are the people and companies who coordinate all of these activities, converting ideas from paper to real property.[1] Real estate development is different from construction or house building, although many developers also manage the construction process or engage in house building.

Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control, and orchestrate the process of development from the beginning to end.[2] Developers usually take the greatest risk in the creation or renovation of real estate and receive the greatest rewards. Typically, developers purchase a tract of land, determine the marketing of the property, develop the building program and design, obtain the necessary public approval and financing, build the structures, and rent out, manage, and ultimately sell.

What are the three stages of land development?

The Land Development process will consist of three stages: Feasibility, Entitlements, and Land Development Construction.

1. FEASIBILITY ANALYSIS

 During this stage, developers are running feasibility analyses. This is where you will determine if it makes sense to develop. Can you develop/build and turn a profit? That’s the golden question! This is the phase where you need to research the local area, the market, growth, zoning restrictions, the timing of the market, nearby amenities, good schools, demand for your particular housing product, etc.

The Offer!

So if everything is checking out, the developer will put together what some may refer to as the “quick and dirty” or “back of the napkin” analysis to come up with an offer. And most likely that offer will be based upon their best assumptions and experience because you must understand something, it is IMPOSSIBLE to vet out every unknown cost associated with the site promptly before making an offer on it!

Now, I’m not saying that you shouldn’t do your due diligence. You absolutely should! But it’s all about the timing! You must understand the timing of your approach. Too much due diligence before you submit an offer could cause you to lose out to someone else who ties up the property before you do. And all the while you’ve wasted a ton of your resources along the way (time, money, energy, etc).

Get Rough Estimates for Now!

This is why home builders and developers can analyze property so fast and make an offer pretty quickly. BECAUSE THEY HAVE THE EXPERIENCE! They know how much the fees will cost, how much it costs to develop the land, and how much it costs to build their homes. And they also know how much similar houses are selling for in that particular area! That’s your “back of the napkin” offer!

But it’s not to say that YOU cannot get these costs and make an offer. Rather, you may just have to spend time calling and talking with consultants, contractors, builders, etc. to find out some rough estimates. (TIP: It’s easier to try and get a “per lot” cost or a “lineal footage frontage” cost depending on how your specific area looks at things. Because if you can get numbers that you can easily scale over the number of potential units, it makes this process a whole lot easier.)

As mentioned previously, every site is unique, which means the costs are going to vary from project to project. So the “back of the napkin” offer as stated above is not 100% accurate. Your real numbers will start coming together during the next stage: “ENTITLEMENTS”.

2. ENTITLEMENTS

So now that the seller has accepted your offer, you now move into your “Entitlements” phase. Similar to buying a house, you will also put down earnest money and have a time where you must perform a more thorough level of planning and due diligence before closing. And this is an EXTREMELY extensive and meticulous process (especially in California) that could take up to 3-6 months or even a few years!

You MUST have the following two things when getting started:

• Environmental Site Assessment (ESA) – Phase I
• Prelim Soils Report

And as you progress you will then obtain the following:

• Environmental Site Assessment (ESA) – Phase II
• Biological Survey Report
• Environmental Impact Report (EIR)
• Archaeological study
• Acoustical Study

Environmental Site Assessment (Phase 1)

Your ESA Ph 1 will look for potential contamination by hazardous materials within the soil or groundwater beneath, which may be harmful to people or to the environment. This assessment will look for hazardous waste, underground paint, etc.

Keep in mind, that you may or may not need this report. It will depend on if there was an environmentally-sensitive industry or business on it in the past that has sold, supplied, or dispensed fuel, gasoline, oil, or other hazardous materials.

Preliminary Soils Report

If you’ve been following along with all the previous posts and videos on this site, then a soils report should not be anything new to you.

As a recap, your soils report is a thorough investigation and study of the soils that exist on your site. It includes recommendations for grading, building foundations, and structures, etc. It’s necessary to help civil engineers prepare site grading plans and gives subcontractors an idea of what they will be dealing with. (Which is HUGELY important when obtaining cost estimates!)

Environmental Site Assessment (Phase 2)

While the ESA Ph 1 will mainly consist of site inspections, review of records, and interviews (with owners, neighbours, etc.), Ph 2 will consist of laboratory testing. This is done to confirm the presence of hazardous material and levels of the samples.

Biological Survey Report

A biological survey report will deal with sensitive plants or endangered animal species located on (or NEAR) your property. For example, depending on your location some of those animal species can be burrowing owls, Mojave ground squirrels, desert tortoises, gnatcatchers, yellow-legged frogs, etc. And believe it or not, a tiny little critter can halt a massive project IMMEDIATELY and push your schedule back. It’s also not completely unheard of for an endangered bird nearby to require a contractor to spend an extra couple hundred thousand of dollars for a sound wall barrier because it’s nesting.

And also, be careful if your site naturally stores water and creates ponds after it rains. As a result, it could become a natural wetland for new critters and other wildlife, which means more jurisdictional red tape to jump through. Your land just may become a new home to an endangered species and they will get priority!

10 Problems of Housing In Nigeria And Possible Solutions

The shelter is one of the most basic human needs. It is in fact a necessity. Universally, shelter is considered as the second most important human need, after food of course. Having a good house to return to after the day’s work brings a certain comfort.

In Nigeria however, there is a housing deficit. This article seeks to highlight the problems of housing in Nigeria and possible solutions.

This is what good housing should look like

It is pertinent to mention that the origin of housing problems in Nigeria can be traced as far back as the colonial period.

Housing In Nigeria – Photo Source: http://saopaluwah.blogspot.com

The British colonial rulers wanted houses that met up to the living conditions of their own country and proceeded to develop special areas, hence the establishment of Government Residential Areas (GRAs) around the country. The houses in such areas were well planned and furnished with all necessary amenities. This approach only solved housing issues for a select group.

Over the years, the Nigerian government has at various times tried different housing policies and programmes to treat the housing problems in the country. Some of these policies are reflected in:

a. Land Use Act, 1978

b. Mortgage Institutions Act, 1989

c. Federal Housing Authority Act, 1990

d. National Urban Development Policy, 1997

e. Housing and Urban Development Policy, 2002

Some of their interventions include:

a. The Nigerian Army Housing Scheme

b. The Nigerian Police Force Housing Scheme

c. The Nigerian Port Authority Housing Scheme

d. Freehold Housing Scheme and Sites and Services Estates

e. Workers Housing Estates

f. With these interventions, there is still a housing deficit in Nigeria. Here’s why.

1. Land Use Act

The Land Use Act of 1978 put all land under the management of the government. The decree was to be advantageous for the country and its citizens with regulations to protect the public interest as well as create efficiency of land use all over the country.

Purchasing land in Nigeria today without acquiring a Certificate of Occupancy (C of O) from the government puts you at a disadvantage since the land is not really yours.

This prevents access to loans or funding to develop such property. Asides from the high cost of land acquisition, the cost of acquiring a Certificate of Occupancy and the process involved seems to be very cumbersome and this poses a problem for housing development by individuals or real estate developers.

2. Lack of Infrastructure

Basic facilities such as good road networks, water supply, electricity, drainage systems, rail tracks and tunnels are still lacking in many areas in Nigeria.

These are infrastructures that if improved on and installed where they are lacking will greatly ameliorate the living conditions of the people and bring about better housing situations.

3. Documentation Process

The process of documentation and property registration takes too long. This makes people cut corners and when due process is not followed, it becomes a problem for housing development.

There is also the problem of harassment from community boys during property development; a problem that can be eliminated if the main documentation process is adequately pursued.

4. High Cost of Building Materials

The high cost of building materials and how it affects property development cannot be overstated. Most building materials are imported leading to their high cost.

The more expensive these materials, the harder it is for low-income earners to purchase them. This translates to incomplete structures, substandard houses and high cost of rent which are all contributing factors to the housing problems faced in Nigeria.

5. Shortcomings of Mortgage Institutions

There is a limited number of mortgage institutions in Nigeria. The ones that do exist compared to their overseas counterparts are still lagging behind.

6. Rural-Urban Migration/Urbanization

This is the movement of people from rural areas to urban centres causing population explosion in such areas. Over the years, there has been rapid urbanization in Nigeria. This has led to people settling in very unsanitary environments as seen in the pictures below.

  These are scenes from present-day Lagos, a region in Nigeria that has been a major recipient of rural-urban migrants.

7. Poor Quality Houses

This can be easily traced to the high cost of building materials, inadequacy to satisfy the increasing demand for houses, lack of planning, difficulty to secure mortgage loans and a host of other reasons. The result of all these are the poor quality houses obtainable around the country.

8. Dilapidated Condition of Houses

Rent is constantly on the increase in Nigeria. Tenant landlord relationships get sour when this happens as the house owners attribute the increase to high cost of building materials and maintenance of property. Such maintenance hardly ever occurs leading to dilapidated condition of the houses.

9. Inadequate Implementation of Planning policies

Institutions charged with development plans in Nigeria are falling short in many ways. Even where these plans exist as regards housing, they are too focused on urban development while the rural areas are neglected.

Generally, there is a lack of rural and urban development plans as well as a great implementation deficiency which is a major cause of the housing problem in Nigeria.

10. Lack of Enlightenment

The root cause of this problem cuts across the professionals in the housing sector, the agencies involved in housing and the common man on the street.

Given the terrible state of housing in Nigeria, there is a dire need for the professionals like architects, civil engineers, land surveyors, mechanical engineers and the lot to orient the masses on issues of housing.

Organisations like the Nigerian Institute of Architects (NIA), Nigerian Institution of Civil Engineers (NICE) or better still, the Federal Ministry of Lands, Housing and Urban Development should enlighten people on how best to develop their property as ignorance is also a contributing factor to housing problems in Nigeria.

The problem of housing should be of concern to a government that prioritizes the welfare her citizens and as such, seek to solve them.

Solutions To Housing Problems In Nigeria

1. Research institutes should be encouraged to exploit local raw materials and produce alternative building materials from them.

2. Critical review of rural and urban housing policies should be carried out by the appropriate agencies.

3. The national development plan of Nigeria should thoroughly take housing problems in the country into consideration and give provision of habitable accommodation to citizens its rightful place.

4. Development of rural areas to reduce rural-urban migration.

5. The government should partner with cooperative societies and real estate developers to provide housing infrastructure.

6. The federal government should ensure that the Federal Mortgage Bank of Nigeria (FMBN), Federal Housing Authority (FHA), Federal Mortgage Finance Limited (FMF), Urban Development Bank (UDB), and all other relevant agencies perform their roles effectively.

7. The government should also make the process of registration and documentation of property less bureaucratic. Getting approval for building plans and acquiring a Certificate of occupancy should be made easier for legit property owners.

8. Provision of social amenities such as electricity, good road networks, proper drainage systems and the likes will go a long way to ease housing development in areas where these are lacking. It will also help decongest populated cities.

According to the Federal Ministry of Lands, Housing and Urban Development, a minimum of an additional one million housing units per annum is required to reduce the national deficit of about 17 million housing units if a housing crisis is to be prevented by year 2020.

There is a housing crisis already and these solutions will not only affect housing delivery positively, but will also yield national benefits.

Implementation of these solutions to housing problems will result in job creation, infrastructure development throughout the country, better living conditions, improved health, increased GDP, a new market for locally made building materials and generally, national development.

 

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