The demolition of the Landmark Beach front located in Lagos is causing some of businesses to consider downscaling their investment plans in Nigeria or relocate to other jurisdictions, a new report has stated. Titled: “Nigeria Real Estate Market Review H1 2024” published by the Northcourt, the report stated that high inflation rates were increasing construction costs, posing challenge to project viability and reducing the development of new real estate projects.

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The report said: “The Paul Onwuanibe-led Landmark Group received notification from the government that the Landmark Beach resort was slated for removal due to its proximity to the proposed Lagos-Calabar 700km coastal highway.“The Landmark centre, estimated at $200 million contributes much in tax revenue – with some estimates at $1.5 million.

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“The demolition of the Landmark Beach front raised concerns among investors. Some considered downscaling their investment plans, others have reallocated investments to other jurisdictions on the African continent. ”The report also stated that the demolition of the Landmark’s property has caused Nigeria’s reputation for policy inconsistency and inadequate stakeholder consultation.

“Landmark still advocates for a reconsideration of the highway route to minimise adverse effects on local businesses and the environment. Analysts reiterate the importance of sustainable urban development in the planning and establishment of eco-friendly urban settlements,” it added.According to the report, high inflation rates (officially 33.95 per in May) have led to a decline in consumer purchasing power, directly influencing the real estate market.

“Inflation has increased construction costs, challenging project viability and reducing new developments,” it stressed. The report stated that construction costs spiked by over 78 per cent YoY, while rents are on the rise across low income areas, reinvigorating the calls for affordable housing.

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According to the report, Nigeria’s real estate market has been impacted by steep and unfavourable movements in foreign exchange rates and inflation, posing challenges for developers and investors. “This has hindered developers’ ability to import construction materials and equipment. Project timelines have been delayed, and construction costs have surged,” it stated.

It, however, underscored government’s intervention to the end that construction costs are lowered, tax rebates for construction companies, and support for the local production of building materials. Commenting on the report, the Chief Executive Officer of Northcourt, Mr. Ayo Ibaru, noted that the real estate sector contributed 5.20 per cent to Nigeria’s Gross Domestic Product (GDP) in Q1 2024, lower than the 5.31 per cent it contributed in Q1 2023.

Ibaru said: “Poor economic performance has contributed to unfavourable business conditions and has led to a decline in Foreign Direct Investment (FDI) in Nigeria, limiting the availability of capital for real estate and construction projects. There have also been political gaffes,” stressing that “population growth continues to drive the demand for residential real estate, particularly in mid-market areas. ”He added: “The growing demand for affordable housing and sustainable building practices has led to a continual mismatch between supply and demand. ”He, however, projected that the real estate market in Nigeria could grow by 7.24 per cent and might reach a total estimated value of $2.14 trillion by the end of 2024.

According to him: “residential real estate holds the largest share, with an estimated market volume of $1.77 trillion by EoY 2024.”

Even though that it has been reported by The Economist that 70 per cent of the buildings required by 2040 are yet to be constructed, the Northcourt’s report noted that the Nigerian real estate sector is faced with challenges such as obtaining long term financing on friendly terms.

It added: “There are ownership complications stemming from the application of the Land Use Act of 1978. This is yet to be reviewed. This makes financing difficult.

“Limited mortgage availability due to high rates and lack of collateral means only a minute percentage of the population can access mortgages.

“Cooperative societies seem to be making some progress in raising fund for housing – if only for their members. Little drops of water take quite a while to become an ocean. Large-scale housing developments are largely between planning and early execution stages.”