Housing construction is currently on the high side. Properties comprising residential, commercial, and industrial are presently becoming more capital-intensive due to increase in the prices of building materials which is affecting housing delivery across the nation.
Aside high cost of building materials, cement price has gone up from N2,700-N4,000 per 50kg bag, making developers to seek external support to finance their projects.
More so, the high-interest rates of commercial banks of between 18 and 30 per cent have made developers have come up with new financing method to remain in business.
The high interest rate has made investments unprofitable to many real estate developers and limiting their capacity to in housing delivery.
Worried by this high cost the industry experts have called for the pooling of funds together by investors for housing development with a prospect of receiving a certain percentage as Return on Investment (ROI). Already, the new methods are being used in Abuja, Lagos, and Ogun states.
The initiative, which is an income-generating investment is assisting developers, meet short-medium term cash-flow housing financing.
A senior official of Propvest, a real estate development company, Adeola Subar, explained that the method would enable people to invest in real estate projects with a minimum of N250, 000 over a few months, adding that the investment option is being embraced by Nigerians and people in the diaspora because of the prospect of returns. She said most people preferred it to putting their money in the banks.
“When people invest, the fund will be used to build the properties and will be completed within six months and on the seventh month, they will be sold out. Investors will get their returns back with their initial capital.
She explained that the return ranges from 40 to 45 per cent, depending on the amount committed with signing of investment agreements by parties to the project that are provided to serve as a binding document.
Investors, she also stated are updated on activities on the project from beginning to completion.
Commenting, Chief Operating Officer, Refin Homes Limited, Mr. Kazeem Owolabi noted that the scheme has become inevitable in the sector, adding that other investment options like treasury bills are not as profitable or favourable as the cofounding alternative.
He stated that the new model helps investors to share the risks of investing in real estate projects.
Owolabi said, “There has been an increase in the number of people doing co-funding in real estate now. When you want to embark in a real estate project, single funding that could be invested may not make sense if you don’t come together with other investors. For instance, if you have an N25 million project, five investors could contribute N5 million each into the project, with the hope of getting returns.
“So coming together makes accessibility to the fund for real estate project easier. Such a model also guarantees easy delivery of real estate projects.
“When a prospective buyer takes a large number of the flats after completion, the investors will be making good returns.”
However, he noted that there could be a challenge of parties to the deal being dissatisfied along the line with the investment because an individual might not have 100 per cent control over the transactions.
According to him, the returns might not be as high compared to when an individual funds a project alone, but restated that it’s still better than what is available in other investment options in the country.
Also commenting, President of Housing Development Advocacy Network (HDAN) Festus Adebayo said that collaborations and unity of purpose among real estate stakeholders is the way to go in improving housing delivery and the sector as a whole.
The real estate expert who is also the organiser of the annual Abuja Housing Show (AHS) stressed that the collaboration will make banks feel secured in supporting housing projects.
He said, `When people come together, banks will feel good supporting them. We have been advocating this in Abuja Housing Show for people of like minds and interest to put fund together to boost housing development and bridge the countrys 17 million housing deficit.’’
He added that such collaboration or partnership among businessmen can metamorphosed into establishment of companies for the manufacturing of building materials. He, however urged all partnering parties to check records and sign all necessary legal agreement before the commencement of such projects.
Lending his voice to project co- founding Chairman, Faculty of Housing, Nigerian Institution of Estate Surveyors and Valuers, Adesina Adiatu, said such innovation has helped to energise real estate projects by reducing the number of abandoned projects due to paucity of funds.
