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  • Writer's pictureAbdulgafar Asimi

Real Estate Developers and the Tightening Economy in Nigeria

The current Nigeria economic situation is extremely tough for real estate developers in Nigeria.

However, it favors some by smiling to their banks while some are groaning. It’s the game of ‘survival of the fittest’. The following might consider to be prosper as a developer in this struggle economy.

A.  OFF – PLAN SALES: Off-plan sales is a method of putting certain property up for sales before the construction of structure. In this case,  the purchaser can secure much better finance terms from his lenders. Most investors love to engage in this method of purchase in order to make substantial capital gain.

This usually comes in the form of discount in response to the sales plan which can be spread within 12-24 months.

It is important to note that for off-plan sales to be attractive, high level of different infrastructures should be put in place such as schools,  shopping malls, access roads etc.

In a rapidly growing housing market,  buying off-plan enables investors and home buyers to buy a property less than the completion of their chosen property. To the developers,  it’s one of the smart ways of getting a project financed since the money will be coming directly from different different potential homeowners. With this,  you may not likely tie your money down as you are only buying for the owners.

B.  JOINT VENTURE AGREEMENT (JV) : In a JV,  there is an agreement between a developer and a landowner  to develop a particular project in terms of pulling resources together. A non properly planned venture may result in an ugly termination of the agreement before the completion of the project. Therefore,  it needs a careful attention to some considerations to increase the prospect of mutually profitable relationship.

The element that make a successful Joint Venture is from the developers perspective by ensuring that the project to be embarked upon is profitable. He has to consider the following

  1. The Feasibility studies

  2. Land location

  3. The value of the land

  4. The development budget

  5. The target market and

  6. The price of the project.

The developer also have to consider those we call ‘the off-taker’ (people who have committed to buying the units before the completion). So, in this regards,  they project is usually sold out before the project is completed.

And from the other perspective which is the landowner. He needs to ensure that the developer has the capacity to complete the project. He needs to take the following into consideration…

  1. Developer’s past experience

  2. Human resource in terms competent Engineer, Quantity Surveyor, Architect and Project Manager

  3. Modern Equipments.

The landowner should not overvalued the land and the developer should also be honest and do things professionally. The developer should also follow due process such as applying for building approval, conducting soil test and obligue to the state government building laws

JV is an excellent means means of complementing the strength of the developer and that of landowner.

C.  GETTING OFF-TAKERS: the off-takers help to validate the project and assure financial backing to the project. Banks are always the financier and they always want to some assurance that the project they want to finance has a good demand rate which will make repayment easier for developers.  Getting off-takers for a project gives the developers some good financial standing To be able to put down some money for the project aside from t&e loan to be collected. It will also assist the developer to hit the ground running in terms of the race to deliver the project on time.

D.  FLEXIBLE PAYMENT PLAN: The flexible payment method is one of the strategies to push sales and encourage people and business to patronize their brand in the period of recession. In other words,  flexible payment options or instalmental payment which requires purchaser to make and initial deposit of between 30-60%  and spread

E.  DISCOUNTED PRICE OFFER: In this kind of economic recession,  buyers are at the receiving end. For real estate developers,  the competition will be stiff and the only mechanism to survive is to give a discounted price to potential subscribers.

F.  CARCASS / SHELL DELIVERY: delivering a housing project at carcass level means it will not be done to the finishing stage.  the advantage of this to the developers is that it allows them to play the price bargain game. It therefore means that the cost of the finishing will be removed from the price of the project. And this will as well give opportunity to the buy to build to his taste.

G.  DIASPORA MARKETING: a smart developer should not focus mainly on local marketing.  Marketing to the Nigerians abroad is a greater opportunity.

These and other factors can boost your Real Estate Investment and relieve you from unnecessary struggles in this recession.

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