As the Bola Tinubu administration rolls out its policies, their far-reaching consequences are becoming increasingly evident in various aspects of society and the economy. Over the past five months, these policies have sparked debates and discussions across Nigeria, with many attributing the rising cost of living, declining national productivity, business closures, and a surge in job losses to their implementation.
One sector significantly affected by these policies is real estate, where industry players face a myriad of challenges spanning development, material sourcing, marketing, financing, and the cost of funds.
According to a recent report from Northcourt Real Estate, property buyers should brace themselves for price adjustments as the market adapts to the new policy landscape. The construction sector is also expected to undergo transformations to align with these policy changes.
Ayo Ibaru, the CEO of Northcourt Real Estate, explains that design concepts for projects will evolve, with a more pronounced shift towards mid to low-income residential submarkets in Tier one cities, driven by high land competition. Smaller lots and more intense land use will become more prevalent as a response to the high cost of capital, weak aggregate demand, and tight revenue margins.
In specific terms, the report highlights several key impacts of these policies:
- Exit of Low-Risk Developers and Investors: Short-term costs are putting pressure on real estate market players with a low-risk appetite, potentially leading to their exit in favor of investment options such as government securities. However, this opens up opportunities for new, long-term investors as foreign exchange harmonization and fuel subsidy removal policies start to yield dividends.
- Increased Infrastructure Development: The removal of fuel subsidies, particularly, has a positive impact. The government’s substantial spending on fuel subsidies could have been redirected to essential sectors such as healthcare, education, agriculture, and defense. This presents an opportunity for the government to prioritize infrastructure investment.
- Increase in Abandoned Projects: Removal of fuel subsidies, along with rising construction material costs, labor expenses, and transportation charges, could lead to the abandonment of construction projects. Investors may reevaluate their involvement, potentially putting on-hold ongoing housing estates.
- Increased Urban Congestion: The rise in living costs due to fuel subsidy removal is increasing transportation expenses. As a result, more people are seeking accommodation options near their workplaces, driving up demand for co-living spaces within congested urban centers.
- Adjustment to the Finishing Regime: Ongoing projects may experience delays in delivery due to foreign exchange policy changes. Developers might temporarily halt construction due to difficulties in accessing funds, and some may opt for more affordable finishing materials.
Tinubu’s policies are reshaping the real estate landscape, ushering in both challenges and opportunities. Stay tuned for a closer look at how these changes will continue to impact the sector in the coming months.
