Housing needs in Nigeria are rising in four cities, including Lagos, Abuja, Ibadan and Kano, recording 20 percent yearly increase due to growing population and urbanisation.

The country has a fast-paced urbanisation such that 53.9 percent of the country?s estimated 200 million population is urban, meaning that about 125 million people live in urban areas of the country.

In Lagos, particularly, the situation is dire. According to Obafemi Hazmat, the state?s deputy governor, about 6000 people enter Lagos on a daily basis from various rural areas of the country and about 3000 of them stay back with no known addresses.

This explains the increasing housing needs in the state and in the country generally. Bismarck Rewane, the chief executive of Financial Derivative Company, noted recently that over the last two decades, housing deficit in Nigeria has grown by about 300 percent dur to rising urbanisation.

By 1991, he said, the country?s housing deficit was seven million. It moved progressively to 14 million units in 2012 and 28 million in 2023 which, according to the World Bank, requires about 700,000 housing units to close.

He noted that, since 2018, Nigeria?s urbanisation has exceeded the 50 percent mark which shows that over half of the country?s population has transitioned to urban areas. This is why housing deficit in the country continues to widen due to the inability to keep up with the increasing urban population.

?A lack of affordable housing options persists; rapid urbanization without effective planning has led to chaotic development patterns; urbanization has driven up land and material costs, increased urbanization leads to deforestation, pollution, and strain on resources,? he said.

Rewane, who spoke at an Annual Real Estate Summit hosted by UPDC Plc, attributed the country?s low homeownership rate to the snowballing housing deficit. As against 80 percent in Indonesia, 60 percent in South Africa, and 47-50 percent in Ghana, homeownership rate in Nigeria is as low as 25-30 percent, only ahead of Kenya at 21 percent.

He explained that the rate is high in Indonesia because of cultural preference and rural housing trends. In South Africa, there is a government-subsidised housing programme while in Ghana; there is incremental rural building and housing deficits. In Nigeria, he said, the rate is low because of high urban costs and large housing deficit.

Added to this, he said, there are major structural constraints that impede the growth of housing and real estate in the country, including title transferability problems, shallow financial sector, and a judiciary system that is not only bureaucratic but also slow and unreliable.

Other constraints are skyrocketing prices of building materials, soaring land price and fragmentation, high interest rate which is limiting mortgage demand, inflationary pressure, geopolitical uncertainty, electricity, poor contract management skills and high price of imported products arising from high exchange rate.

Rewane said that the real estate sector in Nigeria underperforms national growth with a consistent decline in growth rate that was as low as 0.75 percent in Q2 2024. He noted that persistent inflationary pressures have increased the cost of construction materials; eroded disposable income, thereby reducing demand for housing and commercial spaces.

?Weak naira increased the cost of imported construction materials and equipment while increased borrowing costs further reduced access to affordable financing for developers and potential homeowners,? he added.

He stressed that inflation poses enormous challenges for low-and mid-income houses as it shrinks the supply of affordable housing, thereby worsening existing housing deficit and putting pressure on the lower-income population.

Biodun Adedipe, an economist and CEO, B.Adedipe and Associates Limited, agrees, noting that the on-going economic reforms in the country have worsened housing challenges, especially with high interest rates driven by high costs of funds, high construction costs, massive housing deficit and low mortgage penetration.

Adedipe, however, sees positive impact of the tax reform on the sector which Ayo Ibaru, CEO, Northcourt Real Estate agrees with, explaining that there are tax exemptions on commercial real estate which, according to him, gives developers of such assets flexibility in terms of pricing and giving concessions to tenants.

Going to 2025, Ibaru projected positive developments in the sector that would offer opportunities for investment in land-banking because of its resilience as an investment asset class, warehousing, hospitality, logistics, residential will also be good but developers should not over-build. (BusinessDay)

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