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Real Estate Investment in Nigeria ‖ Overview, Tips & Guide

Real Estate Investment in Nigeria is one of the chief means of creating steady income streams. It is an investment that has attracted both local and foreign investors. Although investing in real estate in Nigeria bids countless opportunities to financial stability and wealth, there are breaches that can limit what you make. To avoid these, it is necessary to make thorough research and learn about the legal aspects of real estate before you dive in.

Overview

Prior the British Colonization, Real Estate Investment in Nigeria was mainly in residential, agricultural and religious property. It was merely seen as a means to obtain security and regular income, so, investment decisions were made on the basis of intuition and past experience.

However, the revolution from traditional to modern form of real estate investment began with the colonial administration. This brought with it the establishment of administrative offices and other infrastructure that contributed for job opportunities for Nigerians in individual administrative headquarters.

The advent of colonialism coupled with rapid urbanization increased the ranks of urban dwellers and created a significant demand for residential and commercial real estate investments. With colonialism, large scale businesses in form of corporations, firms and related establishments attracted more natives and non-natives to administrative headquarters and increased demand for offices, shops, residential and industrial real estate investments; so, government, corporate and private individuals got interested in investing in real estate. Upon independence in 1960, real estate investment got a boost as the government in the Centre as well as respective regional governments embarked on diverse housing strategies to meet the needs of the crowded populace. The Federal Government major intervention in residential real estate investment commenced in the Second Development Plan Period (1970-74) with the provision of residential properties for Lagos and for each of the former 11 states. Investment in commercial properties like offices and shops also got a boost due to governments, corporate and private individual’s venture in real estate.

The dawn of the 21st century has witnessed a gush in Nigerian real estate market performance, with major institutional investors like UACN Property Development Company, Stallion Property Development Company and Kontinental Development Company dominating the real estate market. Within the same period, the intergration of real estate into the capital market began with the listing of UACN Property Development Company in the Nigerian Stock Exchange.

Nevertheless, with the recent happenings in the global and national economy and the globalization concept, needs be for thorough investigation of all forces that influence real estate performance. It is thus imperative that when taking investment decisions, investors and advisors must involve comprehensive analyses of real estate investment performance.

Tips & Guide for Investment

1. Do your Research - If you have an interest in the real market, there are many available platforms to source for information, be it the mass media, online and around you. Talk to family, friends, locals, Google information and relevant Nigerian property sites. Create Google alerts for search terms. With this, you will always be notified of any improvements. It is necessary that you know how to play the game before you play. Real Estate information in Nigeria is scarce and needs your much effort for thorough research, whether you are in the country or abroad.

2. Figure out a specific property market - Property sector may be chosen based on taste, but most importantly, depending on your present need, chose the sector that will be of great profit and benefit to you in the long run. A residential investment for example may not be the best idea for someone whose looking for a quick return in profit, as it may take many years to sell out. A plaza in Nigeria however, gets rented out way too quickly.

3. Location - When dealing with any sector in real estate, it is important to ask the 'where'? If you want a residential apartment close to your work place, go for an area with bubbling economic activity; if you want an affordable yet closer to work place, get a property in a not so much grown and developed area. It is wise also to consider price when figuring location. Places with improved amenities will no doubt attract higher housing costs compared to houses for a budget.

4. Identify booming real estate markets - With the rate of developing infrastructures and easy access of central business districts, real estate markets are getting on the high. A location where major roads and highways are constructed, it eases traffic burden and working class citizens desire to move to those areas, making it a worthful reason to build elevations and rent them out. If you are interested in residential real estate, you would want to target the middle class citizens who aim to buy goods or property for a better living in the long run.

5. Figure Out How You Will Get Funds - You could be sponsored by family, friends or even by financial institutions, depending on you state. Perhaps, you in fact have the money all by yourself. If you want to approach a financial institution for a loan, you must know what you want and have a plan worthy enough to cause them to give you money. It is intriguing to know that the Nigerian government secured a $300 million loan from the World Bank to establish Nigerian Mortgage Refinance Company (NMRC) at the beginning of 2014. Hopefully its effect in terms of liquidity and bank lending is being felt now. It could benefit you.

6. Get the Details Right - Making deals with untrustworthy people can be the worst experience one can ever have in the real market. Communicate with industry experts, a lawyer and make sure you get everything sorted right from the federal government requirements down to the owner’s issues. It is well known that property scammers are not a new thing in our big cities, they pretend to sell houses whose owners are away, complete with fake title deeds. Beware. Seek the advice of relevant professionals like surveyors who will check out the property and advise you accordingly. Up to the construction, enlist the services of architects and service engineers. Do not do things in a haste only to incur unnecessary costs or even loss. 

Read: Real Estate Company/Realtor. Scam or Legit?

7. Get acquainted with the Law - As a Nigerian, you have every right to own a property in Nigeria. Although, the 1978 Land Use Act gives state governments authority over land within their borders. They then avail it to you after going through some intricate and bureaucratic process. You will then receive a certificate of occupancy to actually use the land i.e. sell it or develop it. Your right may also be denied if you live in a place that is not your area of origin, which generate ethnic tension.

(More about Legal practices involving real estate below)

8. Insurance - Every investment comes with its own risks, same applies to real estate. To reduce risks that can come along, its best to properly insure the property you've just purchased. Consult an insurance agent about getting coverage for your new property, which will ensure that your investments are covered should in case anything go wrong, say a fire, flooding or theft. Owner’s coverage and liabilty are also involved. Ownere's coverage protects against damage to the building itself, while liability insurance covers lawsuits that may arise from slip-and-fall accidents or tenant injuries on your property

9. Invest in the future - The properties may not look all that or seem to even have any basic infrastructures, but as long as it is located in the always developing urban areas, cone few years, it would have appreciated greatly for you to sell it millions above what you bought initially.

Among these, there are other important factors to consider if you want to invest in real estate

10. Safe neighborhood - It is always safe for homebuyers to know they can experience control and serenity. As According to Maslow Hierarchy of Needs, Safety need is one of the basic needs of life. No one wants to get a home in a harzadous, crime domain neighborhood with no certainty of what might happen tomorrow. People are willing to pay extra for safety because everyone wants to be safe in their own homes.

11. Access to public transits: Its no news that homes or properties that are far from public transits are less valuable, because  when you are closer to public transit, you can get anywhere in no time.

12. Proximity to Industries - Noise from industries will affect the peace of residents and so, people always avoid living in such places and it will devalue the property.

13. Proximity to top-rated schools - Great for homebuyers with children.

14. Proximity to shopping centers and entertainment hubs.

Legal Guide for Investment

Before you dive into real investment, it is imperative to make thorough research about the legal aspects and factors to consider for investment.

  • Laws Governing Real Estate in Nigeria

There are several laws that regulate real estate in Nigeria. Federal statutes like the Land Use Act 1978 and Land Use Law of various states among others.

The Land Use Act 1978 is the principal law enacted to regulate ownership of the real estate in Nigeria. By the provisions of the Act, the power to control and administer all land situated within a geographical area of a state is vested in the State Governor for the benefit of the citizens. The Governor is accountable for granting a right of ownership for individuals and corporate bodies to hold and use the land for a limited-term, and such grant is evidenced by the issuance of a Certificate of Occupancy or Governor's Consent.

By the provision of the Land Use Act, it becomes unlawful to transfer any interest in land without first obtaining the consent of the governor of the state where the land is located, as provided under Section 22 of the Land Use Act. 

  • Acquisition of Real Estate

Acquisition of real estate begins with the pre-contract stage of conducting due diligence on the land to be acquired to discover issues such as the nature of the title of the vendor, pending ligation on the land (if any), interest to be alienated, the capacity of the vendor, the physical condition of the land, encumbrances on the land, land survey, or whether the land is under government acquisition. At this stage of land acquisition, it is advisable to engage the services of a property lawyer for proper advice and guidance.

After due diligence has been conducted and the acquisition of an interest in land has been completed, certain documentation will be required. Transactions for the transfer of land interest above three years are required to be evidenced in writing and by a deed duly executed between transacting parties.

Post completion stage of real estate transactions involves perfecting the title of interest acquired by a land purchaser. The purchaser of an interest in real estate is responsible for ensuring that all costs and taxes required for the perfection of the title are paid. The perfection of the title involves certain stages such as;

  • Governor's consent- The Land Use Act provides that a statutory holder of occupancy must obtain the Governor's consent of the State where the real estate is located for a valid transfer of an interest in real estate by way of assignment, mortgage, lease, sub-lease, or otherwise. The official fees payable for the grant is usually between 1% to 2% of the assessed value of the property.
  • Stamping of the document- Under the Stamp Duties Act, the stamping of transfer of an interest in real estate documents must be done within 30 days of execution of the deed of transfer instrument. Stamping of the document is a condition to be satisfied for registration of transfer of an interest in the land document.
  • Registration of document- Registration is a compulsory process for deed of transfer of interest which involves registering the holder of an interest in real estate as the owner to the exclusion of others. Registration of transfer of an interest in land must be done within 60 days of execution of the deed of transfer. The transfer instrument submitted for registration must have Governor's consent endorsed on it. An unregistered title document may lose priority against a subsequent instrument that is registered since registration governs priority. It is also important to state that an unregistered deed is not invalid; however, it is inadmissible in court as evidence of proof of title.

In Kwara State, the registration of title to land is a joint collaboration between certain MDAs in the State. MDAs like: Bureau of Lands (BOL), Office of the Surveyor’ General, Physical Planning Authority, Urban and Regional Planning Directorate

 The requirements for land titles include: The Application form, Current tax clearance, Survey plan, Valuation report, Environment Impact Statement Report, Certificate of Incorporation (for corporate bodies), Memorandum of Association (for corporate bodies), Stamp duty of Agreement of purchase price.

The process of land acquisition involves:

  • Apply to the Bureau of Lands 
  • BOL proceed to site selection in collaboration with Surveyor’s general office and Urban and Regional directorate 
  • BOL send the application to surveyor’s general office for charting; SGO carry out Plot by plot survey and perimeter survey
  • BOL send the application to Urban Regional Planning to determine the suitability of the land use.
  • Both Surveyor General Office and URP Directorate write a report back to BOL; BOL proceeds if and only if reports are positive
  • Submit a proposed construction plan to Physical planning authority to carry out a layout design
  • A committee of 6 professional is set up to sign the final approval
  • Foreign Investment in Nigerian Real Estate

Generally, under Nigerian law, foreigners are restricted from investing directly in real estate in Nigeria. The restrictions placed by the law are to limit or control foreign monopolization of land ownership in Nigeria. However, by the provisions of the Acquisition of Lands by Alien Laws, of the States of the Federation, foreigners may be allowed to acquire real estate from a Nigerian citizen in Nigeria, but such acquisition is subject to the prior approval of the state governor.

Foreigners can also invest in real estate by the acquisition of land through a corporate body incorporated in Nigeria. Hence, for foreigners looking to invest in real estate in Nigeria, they must ensure that the prior approval of the state governor is first had and obtained.

Contact us on 08061428304, 07032643110 or WhatsApp on https://wa.me/2348061428304 to have a glitch free experience with real estate transactions.

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