Cheap land alone won't make Lagos and Abuja homes affordable, developer says
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A Nigerian developer argues that cheap land on the outskirts of Lagos and Abuja cannot deliver affordable housing on its own, because developers still absorb infrastructure, construction and financing costs.
Cheap land on the outskirts of Lagos and Abuja will not necessarily translate into affordable homes because developers still have to absorb infrastructure, construction and financing costs, according to Michael Onyeachor, co-founder of Besitz Group Limited.
Onyeachor said during an exclusive chat with Nairametrics on the challenges private developers face in providing housing for low- and middle-income earners that lower land costs in emerging areas can be offset by spending on roads, drainage, electricity, water and other infrastructure. He added that high development costs also make luxury housing more commercially attractive to private developers.
He said the economics of affordable housing have become increasingly difficult, particularly in Lagos and Abuja, where land values and development costs are high. According to him, these costs also make luxury and upper-middle-income housing more attractive to developers because higher-value properties provide more room to recover development costs.
He said government support through concessionary land, infrastructure, tax incentives, cheaper long-term financing and public-private partnerships could help make affordable housing projects more viable.
Onyeachor said investors are increasingly assessing locations based on their potential over the next five to 10 years rather than their current level of development. In Abuja, he identified Kuje, Idu, Apo-Tafyi, Kabusa and Karsana as areas attracting interest, while Lagos investors are increasingly looking towards the Lekki-Epe axis and other expanding corridors. He cautioned, however, that cheap land can remain cheap if infrastructure and economic activity do not follow, pointing to roads, drainage, electricity, water, schools, healthcare, transport links and employment opportunities as what turns emerging areas into viable residential markets.
Lagos' housing affordability challenge comes against a relatively low homeownership rate. Fortren & Company found that 31 per cent of Lagos residents own homes, while 51 per cent live in rented accommodation, in an analysis covering Ikoyi, Victoria Island and Lekki Phase 1, where strong demand and limited land supply continue to support high land values. Temitope Runsewe, managing director of Sage Grey Group, also told Nairametrics that developers were increasingly seeking financing for prime projects in Ikoyi, Victoria Island and Lekki.