Professor Austin Otegbulu, a lecturer in the Department of Estate Management, University of Lagos, is also the chairman, Board of Trustees of the Nigerian Institution of Estate Surveyors and Valuers (NIESV). In the interview with DAYO AYEYEMI, he expresses worry about the state of the abandoned Federal Government’s properties in Lagos State; Lagos Island’s vacant houses, how the economic challenges are impacting the real estate sector and how to attract investment to real estate?

Are you worry about the long abandonment of the Federal Government’s properties in Lagos State?

Any sane man that comes to Lagos Island who doesn’t notice what you have said now needs to examine himself properly. I have noticed it and discussed the issue with my colleagues.

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This shows a country that is prone to waste and does not know how to use its available resources to create wealth.

There are two ways out: Government can give these properties to a private company to handle and run them as a commercial venture. Government can also sell them off.

The Independence Building and the Federal Secretariat Complex, Ikoyi. There is a conflict between the buyer who bought Federal Secretariat complex and the Federal Government over the years. The building is there lying waste. It’s an embarrassing situation. The Net Building is there. If you go to Marina, you see buildings in prime location. There is Customs Building that can be turned to a shopping plaza. I don’t know who is advising government, though politicians have a way of thinking. Things are changing all over the world but prudence is key.

The time for wastage has passed when we had excess and the then head of state would tell us that money wasn’t the problem but how to spend it.

It is important that the Federal Government looks at the issue of the abandoned properties, set up a technical committee and make a professional to look at it. This is not a political matter.

Government can also give it to the private sector to advise it and pay them off.

 

Can you put a value on the abandoned properties to know the amount of wastage?

Though you can put spot value, but the valuation is yet to take detailed information of the properties and the number of years of decay must be taken into consideration. If you look at all these properties wasting in Lagos, the value is more than N100 billion.

 

Let’s talk about the increase in Lagos Island’s vacant properties despite the huge housing deficit in the state. What is responsible?

In the 80, Broad Street and Martin Street were purely office area. It is only on Gbajumo and Balogun streets that you would see commercial activities and shops. Along the line, area boys, hoodlums disturbed people. If you closed late, they would rob you and people started moving away from that area towards CMS, later to Victoria Island and Ikoyi. Sooner, those places were taken over by shops. What drive value in Lagos Island starting from Tinubu Square towards Apongbon is trading activities. There is high demand for shops. Even Mandilas Building that was purely office space is now a shopping plaza. There is Union Bank’s abandoned buildings in that axis. There is also National Oil’s Head office – ConOil. There are so many abandoned buildings there. That’s the kind of country we are running.

 

Real estate sector is seriously impacted by the volatile forex, inflation and other economic challenges. Any hope of quick recovery?

When the economy is down, effective demand for real estate will go down. But in the residential property, in the middle income property market, demand is still high. This segment has not been affected so much by the economic activities . At the upper market, there is a lot of properties still vacant because of high rent. At a point when we have a lot of spaces in this area, some of these properties were dollarised. In that time, we had shopping malls coming in, people were ready and begging to pay for space in dollars. As of now, apart from Ikeja Shopping Mall and one other place, most of the malls have a lot of vacant spaces. They are now lobbying for people to come and pay unlike in the past when people lobbied to get space.

In property market, there is what we call property cycle and economic cycle. Others will call it business cycle and real estate cycle. When business cycle is bullish, it means people have money to spend. Property market is linked to economic cycle. If the economy starts going down, within a year, it will affect the property market because if I have a lease of two years running, and I’m to pay you a rent of N5 million every year, I am going to pay you N5 million until that lease expires, unless I am not able to pay and go away. That’s why, when there is a lull in the market, property market will stay a while stable before it starts being affected by economic decline.

 

Why are we not having more foreign investors interested in Nigerian real estate sector?

We called them foreign direct investors in real estate and they are sensitive to risk returns. They are more concerned about their return on investments. They are not coming because they like the name Nigeria, rather they are coming here because they want to diversify their investments into countries. A lot of factors will influence such investments. Factors such as political stability, economic stability and inflation, among others will influence such investment’s decision. Somebody came to Nigeria, there’s a property that somebody was paying $8 million per annum and he borrowed money from a bank in the United States of America and was ready to pay back the amount of dollar because of that. As the naira declined, the property went to $4.3 million. So the value of the investment declined in real term and cannot pay back the money he raised. So if you are into business and your investment is not giving you good returns, what would you do?

 

What is your take on the issue of Ease of Doing Business?

Talk is cheap, action is not cheap! Nigeria is a corrupt country. There is no transparency. Transparency is one of those things that attract foreign investors. Two, availability of information. Most of the things that happened here are shrouded in secrecy. Also, we have weak institutions. I will give you an example, Abuja and Lagos, between last year and now, there are lots of demolished properties. These properties are completed buildings. They had approval, either fake or real, but there is an institution for monitoring the development of illegal buildings in an area. Owners of these demolished buildings started from the foundation to lintel level, thereafter someone is now saying they are illegal developments. This action scares investors. I am not saying the agencies of government are not there, but this shows they are not doing their works. Or maybe, those working there are compromised to see what is going on there. Suddenly, a new sheriff came and says I can’t condone what is going on.

 

How do we change this narrative and attract investment to real estate?

In real estate investment, once your country is attractive, people will come. We must have sincere government. Let us be consistent in our desire to develop infrastructure. Let us develop power stations. There are kinds of buildings that require some levels of carbon emission, sound proof and low level of carbon emission.

 

What can you say about fraud in real estate?

Let me explain to you what is happening. When those people planned to build, maybe the estimate was N20 million and they sent N10 million. Half way into the development of the property, something happened to the economy, say inflation, and the cost of cement went up. At the end of the day, the N20 million cannot cover the cost of the property.

So what do they do unless you are a strong company? So what they needed do is to convey that to their customer, saying, in view of inflation, we cannot complete the property at the amount earlier stipulated. If you keep quiet, cost will grow higher.

I discussed the issue with one big estate developing company. In their own case, what they did was to make use of their reserve to develop the building in order to save their name. They ran into losses. What they did after they came out of losses was to stop building. The developer started site and services, developed infrastructure and began to sell.

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