Viewed from the prism of Lagos, its formal capital and commercial nerve centre controlling over 90 percent of its property market, Nigeria ranks highest in property transaction cost among its peers like include China, South Africa and India.
Available record shows that whereas property transaction cost is as low as 3 percent of the value of the property in China, 8 percent in South Africa, and 9 percent in India, it is as high as 22 percent in Lagos, Nigeria.
Analysts say, however, that this is to be expected in a country that is also among the highest in terms of the cost of doing business, but one with the lowest contribution of real estate sector to its GDP at 0.05 percent.
Lagos State government officials readily explains to whoever cares to ask that land particularly is expensive because it is scarce and by virtue of the high demand it commands, it is their own oil well.
“Lagos is an island with limited supply of land; demand increases by the day but supply is inelastic. So, since we can’t increase supply, what we have in stock has to be rationed out at very expensive prices to only those who can afford it,” a commissioner in the state, said at a forum recently.
Property investors/developers are worried that in spite of the high cost of accessing land, infrastructure is almost non-existent in the state, pointing out that infrastructure alone constitutes 25-30 percent of their construction cost, making it impossible to build for low-income earners.
Oby Ezekwesili, former minister of education, pointed out at an infrastructure conference in Benin City, Edo State, recently that “lack of infrastructure accounts for over 15 percent additional burden on the cost of doing business in Nigeria.”
According to an analyst who spoke in an interview with BusinessDay on the condition of anonymity, high property transaction cost, infrastructure deficit, among others, are reasons for high cost of housing in Lagos and other major cities in Nigeria, notably Abuja and Port Harcourt.
He wanted governments, especially federal and states, to come up with programmes and incentives that would attract developers to invest in low-cost housing for those who cannot afford what the market offers at the moment.
“Elsewhere, what government does is to look out for those things that are unattractive to investors. Different governments have done this differently. Government can decide to give incentives for investors to do what is ordinarily unattractive. In a country where there is a good tax system, government can give a developer tax waiver in order to build for certain classes of people whose income cannot support buying houses,” he said.
Continuing, he said “the error we make here is that people always think that developers should build low-income houses for people to buy, forgetting that not everybody can buy houses but they need shelter; so, there should also be consideration for people who can just rent.”
To him, government doesn’t have to build, but should come up with programmes and schemes that will encourage private developers to do so and sell or rent to low-income earners.
He cited Europe where government designs a programme that attracts developers to build certain kind of homes, which are rented out to those who cannot buy but can rent like teachers, the police, etc.