Mr. Felix Modebe, is the Chairman/Chief Executive Officer, Century 21 Real Estate Group. In? this interview with John Oba and OMOTOLA OLORUNTOBI, he argues that? with the high cost of land and building materials, the housing-for-all policy of the Federal Government may just be? an illusion.
How would you assess the real estate sector in Nigeria?
The real estate sector in Nigeria is still very much underdeveloped.? This is basically because of lack of policy on the side of the government,especially in the area of financial planning. It is a tradition in Nigeria that before anybody buys a house, he has to pay the money in cash, and this is very? unfortunate.
Recently, a lawmaker said the government should not leave the sector to private investors alone. What is your take on this?
Whoever is saying that does not know what real estate is all about, Nigeria is a free enterprise economy and real estate is an arm of this enterprise. If they liberalise the economy for example, the? sector would contribute immensely to the growth of this economy. For example, because the government is controlling the mortgage sector through only one mortgage? institution, Federal Mortgage Bank,if you want to get a mortgage it has to be through? the? bank.The truth is this, leave the real estate sector alone, let those who know the sector manage? it, they would do it very well and let the politicians go and play their politics. Let them leave the sector alone.
Is that why the cost of?? building is so high in the country?
The cost of building is very contemptuous, the land, the rate of the brick, the mortars? and of course the infrastructure. Now,? note that? it is only? land that is not imported , every other thing is imported.If you are talking about cement produced in Nigeria, the imported? ones are even cheaper.The? steel rolling mill in Delta State is producing nothing. It still boils down to the old story; we? make a lot of? noise ,while nothing is p-roduced.
From what you just said , can we talk about the issue of affordability?
Affordability is not realisable, because even? land? is not for free. The politicians are selling the land that is meant for the developers to build affordable homes. We’ve done about five projects here in Abuja, we do not get any of those lands free. You are either paying one minister or one land speculator.For instance, if you buy ten hectares of land for N200 million, this is even on the lower scale, you get about hundred homes there, which means before you start, the cost of land is already? N2million? a plot, where is the affordability? But that land according to government policy, was supposed to be given to developers free, on paper it is free, but in practical terms , it is not so. Money most times, exchange hands.The scenerio? is that most times, the speculators would?? pay money to the politicians, the ministers and their? people and they may be asking you in turn? for N500 million. So where is the affordability. If you get Iron from the Delta State Steel Rolling Mill you are lucky, but you can never get it less than N120, 000 per ton. Cement, with all this noising making about Dangote, Boham, this and that, the cost of cement is N2000? per 50 kilogramme bag and you know how many bags you need to build a standard house.
If the government wants to make homes affordable, it would start with providing land free, the building materials, we need to have a duty-free regime for the importation of building materials into the country before we start thinking about affordable houses. I am aware that we need 16 million homes in Nigeria before we could say that Nigerians? own their? own homes.The right thing to do is that if any Nigerian gets a job, with his pay packet, he is supposed to buy a home through a bond company or through a mortgage bank, but how can you buy a home on mortgage when the interest rate on that mortgage is 25 per cent, how could? one pay? It is not possible, so the government is deceiving the people. Federal Mortgage Bank is giving their homes at 6 per cent interest rate, but how many people have they given? Some of the workers here have applied for two years and have not gotten anything, while some people applied and got it within a week, that is the more you look the less you see.
It means the mortgage system is not working in Nigeria?
Yes, it is not working, because? it is only one bank that does it for everybody, that is not right. The pain about? a mortgage institution like the Aso Savings, is? that their interest rate is 19.5 per cent plus management fee,so by? the time you finish, it is 22.5 per cent.How is one going to pay a loan of 22 per cent as a worker?
If the mortgage system is not working then the issue of houing for all is a mirage, what do you think can? be done?
First, the Central Bank of Nigeria(CBN)? has to cut down the interest rate. If they cut down the interest rate to one digit, even if it is 9 per cent, mortgage brokers could give out houses on mortgage. As I am here, I give out my own mortgage. If you buy from us, we say pay in five years time, 9 per cent interest and amortisation is also for a period? of five years.? Right now, it is just like the people are confused, even the civil servants who are entitled to all these mortgages do not know how to go about it. Some of them who are qualified could not? get it because they didn't know how to go about it. So the solution is to liberalise the real estate sector, allow the entrepreneurs who know what to do go into it, let the politicians hands off. For instance, the minister of FCT is not supposed to be giving out land to people. There should be a land committee in charge of allocation of lands and if this is not taken care of, what is happening in Niger Delta today will happen in Abuja. The Gbagi people would wake up one day and ask what has happened to their land. El Rufai? was the only minister who gave out land to developers without a dime if you qualify and if you are not, you won’t get it. And I give him 90 per cent pass mark. Somebody like Aliero, never gave any body land except to his people, then his people will turn the land back to the market. You see traders trading on land. If these issues of land and building materials are sorted out, one can build a house and sell at N2million, but with the high cost of land and high cost of building material, housing for all is an illusion.
Sometime ago, government came up with a? land reform agenda, are they carrying the estate developers along?
The problems are threefold,first? are? the? politicians who are heading all the? government parastatals,when? such places are supposed to be headed by professionals.It is always a case of trying to appease? them using these places .?? Until that is corrected, Nigeria will not be good, the second is the civil servant, they are very corrupt, they can never let the businessman do it the way it should be done. They would want to cut corners at every point in time and fill their wallets and they make it very difficult to get building approval.
If everything was working well, this is supposed to be done within two weeks to one month, but if you are not ready to throw money around, six months, you may not get the approval. The country is being stiffened to death, the masses has no place in this country. The reality is that there is nothing like housing for all. Because those ministers saying housing for all are there collecting money for land knowing well that if money is collected for land the housing for all is dead.
There are threat on revocation of some land in the FCT if not developed, what is you take on this?
They would not, they may use few ones as scape goats. I know I minister in the past, that in the very night he was going, he signed 200 allocation papers to his friends and accomplice. And most of them are still in the market because they are asking for as much as N200 to 500 million. So even if they would revoke few who are not playing ball with them.
Can you specify the challenges face with estate developers inNigeria?
Yes the challenges is the land, building materials, even to sell, because you can only sell to people who have the cash but property is not supposed to be so. Real estate ought to strive on mortgage, people buying houses and paying over the period of time, but because the financial system in Nigeria is not developed. Also it is not easy for developer to get money from banks to develop, if you get the loan, the interest rate is 25 per cent. If you put it into your cost, it mean passing it to the buyer and that make the property price to be high. So the market is very difficult. Those of us selling through the market, is because we have different strategies we use to navigate through the market. In real estate we take three things into consideration, land, labour and money.
Now how do you get funding, or is the allegation that some estate developers front for politicians true?
I don’t know about any other person, but what we do here is purely professional practice. The stages of real estate development is design, after designing, our marketing executives goes into the field, because of the credibility we have built over the time, people are ready to put down their money before we start. So what we do is marry our marketing department with the construction section, we hate to borrow money from the bank because their interest rate will drive out our buyers, and we make our buyers to understand that we do not want to borrow money from the bank because we want them to get the houses at moderate prices and for them to help us achieve that aim, they have to deposit some money. At foundation, they pay some money, at roofing they pay some money and by the time they are collecting their keys they pay the balance and it works, and we have our building across Nigeria. That 25 per cent we give to banks we will give it back to our buyers. For those fronting for politicians, I don’t know.
Do we have National Building code in Nigeria and what does it means?
National Building code is specifying types and standard of houses to be constructed at a particular area. In Nigeria we have national building code but no one is following it, that is why we have a lot of collapse building across the country. That is why the government must put professional at the helm of affair of the mortgage institutions and in the regulatory aspect of real estate and the mortgage market. These are not political appointment, they are to be manage by professional people and not those who are there to make returns to their godfather.