The Executive Director of the Housing Development Advocacy Network (HDAN), Festus Adebayo, noted that the recent increase in interest rates by the Central Bank of Nigeria (CBN) to 27.75 per cent is causing concern in the real estate sector, with operators who warn they could. significantly increasing construction and maintenance costs across the country. weighed on the matter.
He said that “the mortgage sector has already been hit hard and developers are finding it almost impossible to access finance for housing projects.
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According to the housing expert, “This is not a normal situation and we call on the Central Bank to create a special intervention window for the housing sector to avoid further tightening of an industry that is already in struggle
“Without this, the housing deficit will worsen and the sector may face even deeper challenges,” Adebayo said. Industry experts say that banks can lend at about 40%, which prevents developers from accessing credit.
Experts say this scenario is poised to choke housing supply and force landlords to raise prices and rents.
“Real estate developers are investors. Any change in the price of construction materials or the cost of funds will make them increase their prices or rents to recover their investment and make profits,” Odunayo Ojo, CEO of UPDC Plc, said in a discussion with BusinessDay.
With the new interest rate, Ojo predicts house prices will rise faster than rents, as renters typically face annual rent adjustments. “The increases are applied on the anniversary of the rents,” he explained.
Olubisi Shaola, a Lagos-based real estate lawyer and real estate developer, echoed these concerns, noting that the current rates discourage developers from applying for bank loans due to unsustainable fees. “When developers can’t get financing to build, housing deficits will increase as supply decreases while demand increases,” he said.
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The implication of increasing demand without a corresponding increase in supply is a forecast of higher prices, with rents for one-bedroom apartments in areas such as Surulere, expected to increase from N500,000 to between N850,000 and N1 million to move to the areas. more affordable and more distant, leading to longer commutes and lower productivity. Rising costs are also likely to lead to increased rent arrears and project delays. Gbenga Olaniyan, chairman of Estate Links Limited, said although the CBN aims to stabilize the naira and fight inflation by raising rates, the reality may worsen the situation.
As construction costs rise, projects are renegotiated, with some costs doubling in a short time. Olaniyan warned that non-payment of rent will be more common in the middle income market, while high-end markets can absorb the rising costs without major problems.
