Stakeholders in the real estate sector have said interest rate stability is vital to strengthening the sector.
They made this known at the West Africa Property Investment Summit, organised by Africa Property Investment Summit recently in Lagos.
The Head of Marketing and Corporate Communication, Knight Frank Nigeria, Lanre Sonubi, said the real estate sector was affected by inflation through factors such as building materials and labour costs.
He said, “The real estate sector is a direct recipient of the inflation, and those at the hem of affairs in terms of regulating our fiscal policies, economic policies, among others, need to stabilise the interest rate, promotion of export to help us improve our balance of trade so that we can get forex to settle our forex obligations.
“Hence, stable interest rates are needed for the real estate sector to deliver property at a reasonable rate and manage them effectively. Unfortunately, the current inflation situation in Nigeria is expected to continue until at least the end of 2025.”
Similarly, the Chief Executive Officer, Dutum Company Ltd, Temitope Runsewe, mentioned that every sector was affected by the interest rate volatility. However, every developer needed to become more creative.
He said, “Developers should have funding to enable them to buy building materials early, though that brings the challenge of cost of funds. So, the developer then needs to compare the cost of funds with the potential cost of inflation and decide which of the two is preferred.
“In addition, managing building projects within short periods is very important, and engagement of the right contractors so that it does not cause a delay in delivery.”
Meanwhile, the Head of Real Estate Finance, Stanbic IBTC, Tola Akinhanmi, said the real estate sector had remained resilient in spite of the economic challenges.
He said, “The real estate sector has remained resilience, though impacted by the macroeconomic environment with the surge in inflation, exchange rate volatility and interest rate hikes. So, given the long-term structure of asset class, it is expected to be resilient through the nature of different economic cycles.
“However, what we do at Stanbic IBTC bank is work with our sponsors, understand the assets, and structure the solutions to allow the assets to stabilise to aid relevance in providing basic infrastructures.”
“The government could play a role in creating access to land and investing in infrastructure to support real estate development. Land availability and infrastructure expansion are key factors in reducing the housing deficit and opening up new areas for development.”
Decrying the state of the commercial real estate sector in the country, the Director of Capital Markets, Jones Lang LaSalle for Sub-Saharan Africa, Pepler Sandri, said it had hit a relatively low point.
He said “You could say it is the bottom of the cycle and we may be seeing the green shoots of recovery in the sector. Looking back a few years, the COVID-19 pandemic put a halt to the market globally and since then each country has had different rates of recovery. I would say Nigeria has also had macro issues affecting that recovery and as such is really at a difficult stage in the cycle.
“I think looking forward as interest rates stabilise and JLL’s house view is that across most developed markets, interest rates should be coming down in the next six to 12 months in the global developed markets. Whether Nigeria will follow that trend is still up for debate.”
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