Nigeria's property developers squeezed as bank lending tops N814bn at high interest rates

Banking industry credit to Nigeria's real estate sector rose from N792.708 billion at the end of last year to N814.996 billion in the first quarter of 2026, but developers say high interest rates are putting repayment under severe pressure, LEADERSHIP reports.

Commercial bank lending rates currently range between 23 and 38 per cent, depending on the lender, facility and borrower's risk profile, making the cost of credit a major impediment to new investment in residential real estate. Central Bank of Nigeria data shows the average maximum lending rate stood at 35.17 per cent in March 2026, compared with an average prime lending rate of 19.29 per cent, while the Monetary Policy Rate has been retained at 26.5 per cent.

The impact is increasingly reflected in project delays, abandoned financing arrangements and pressure to sell completed units quickly to repay bank facilities. John Beecroft, chief executive of Lagos-based property development firm Tetramanor Limited, said his company abandoned a bank financing arrangement after the proposed interest rate rose from about 17 per cent to 27 per cent during the documentation process. "You can't fund a project at 27 per cent. The interest for one year will wipe out your profit," he said.

Industry leaders also point to a mismatch between loan tenure and the long-term nature of real estate investment. Akin Opatola, president of the International Real Estate Federation's Nigeria chapter, said developers were increasingly using short-term bank funds for long-term projects, noting that banks offered about 25 to 28 per cent interest with no moratorium. Engr. Kola Idowu, president of the Nigerian Institution of Structural Engineers, said steep borrowing costs severely damage a project's return on investment and make standard financial planning nearly impossible.

Property developer Ambrose Iwu said his company had been forced to sell completed units to generate cash for loan repayment as construction costs rose. Chudi Ubosi, chairman of the Association of Capital Market Valuers, warned that financing constraints could worsen Nigeria's estimated 28 million-unit housing deficit, and cited scarce land, inconsistent housing policies and shortages of skilled artisans as additional challenges.

The high cost of financing is feeding directly into housing prices, with developers recovering financing costs through higher selling prices or rents. As a result, developers are increasingly exploring alternatives to commercial bank credit, including private equity, joint ventures, off-plan sales, increased equity contributions and institutional financing.