Nigeria’s inflation rate has risen from 15.63% to 19.64% in the last eight months. These figures may appear far removed from the average Nigerian consumer until the costs of goods and commodities over the same period are examined.
However, the impact of rising costs is felt in markets other than food and commodities. With some ongoing mid-market developments in strategic locations in the country, there is a volatile price instability in the construction industry.
Prices for everything from cement to iron rods and roofing sheets to granite, interior fittings, and wood have quadrupled in some cases. How does a middle-market real estate company stay afloat in the face of fierce competition and market illiquidity?
Here are three strategies that real estate professionals can employ to stay afloat until the economy stabilizes:
1. Maintain consistency – While conditions are admittedly difficult in all sectors of the economy, and the number of working-class professionals leaving the country is increasing, Nigeria still has a sizable addressable middle-income market. Those who are present and consistent in the real estate space during this period will be those who will excel when the market booms again. Where people may not have readily available funds at the moment, they are taking note of developers with integrity with whom they can work once the economy improves.
2. Don’t overspend – Many developers are becoming desperate to finish stalled projects that have been caught up in the maelstrom of price inconsistency. Completing a project with excessive debts that sales proceeds cannot clear is not a sound business decision. Review development contracts with your clients. Discuss with funding partners to renegotiate terms. Profitability is still key if business is to remain afloat.
3. Never Undercut – There will be a strong temptation to cut corners, use inferior products, and avoid regulatory approvals. Do not attempt it. During this time, health and safety precautions are especially important, as clients should not be forced to pay for properties that end up being their graves. Integrity is essential, and it is one of the key values required for a successful real estate developer to endure in the industry. When it comes to construction, there should be no shortcuts. Costs should be reviewed as needed, clients should be kept informed, and financing models that work for all parties should be discussed.
No doubt, Nigeria will emerge from its difficult economic crisis. With experts forecasting 14.9% inflation, and ongoing efforts to resolve the Russian-Ukraine war, there is definitely hope for the real estate industry, its operators and clients across board.
