Lagos developers still prefer selling homes over build-to-rent, Fortren report finds
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High financing and construction costs are pushing Lagos developers to sell completed homes rather than hold them for rental income, even though renting remains the main tenure for most residents, a Fortren & Company report says.
Property developers in Lagos continue to favour selling completed homes over retaining them as rental properties, despite strong demand for rented accommodation, according to a report by real estate research firm Fortren & Company.
The report attributes the preference to high financing costs, rising construction expenses and the need to recover investments quickly. Selling completed homes allows developers to redeploy capital into other projects rather than wait years for rental income to accumulate, while rising land and construction costs increase the capital required to deliver residential properties and the rental income needed to generate viable returns.
Fortren's average land price estimates for 2022 to 2026 put the cost per square metre at N2.8 million in Ikoyi, N2.63 million on Victoria Island, N1.25 million in Lekki Phase 1, N950,000 in Ikeja and N500,000 in Yaba. Building materials have also become significantly more expensive, the report notes.
Off-plan sales provide a further financing advantage, as deposits and staged payments received before completion can help fund construction and reduce dependence on external borrowing, whereas build-to-rent developments do not generate the same upfront proceeds from selling individual units. Retaining completed properties also exposes developers to recurring costs and operational risks including vacancies, rent collection, repairs, security, water, electricity and the maintenance of facilities such as lifts.
The findings point to a mismatch in Lagos' housing market: a substantial housing deficit and a high proportion of renters have not been enough to make build-to-rent the preferred investment model. The report puts Lagos' housing deficit at 3.3 million units and estimates that only about 31 per cent of Lagos residents own their homes, indicating that renting remains the main housing arrangement for much of the population.
Affordability constraints extend beyond property prices, with household incomes and access to mortgage finance also limiting homeownership. The result, according to the report, is a market in which many households cannot afford to buy homes while developers face cost and financing pressures that encourage them to sell completed properties or target buyers with greater purchasing power.