A recent report by Northcourt, titled “Nigeria Real Estate Market Review H1 2024,” has revealed that the demolition of the Landmark Beach front in Lagos is causing investors to reconsider their investment plans in Nigeria, with some even relocating to other jurisdictions.

The report states that the demolition, which was carried out due to the proposed Lagos-Calabar 700km coastal highway, has raised concerns among investors about Nigeria’s reputation for policy inconsistency and inadequate stakeholder consultation. The Landmark centre, estimated at $200 million, contributes significantly to tax revenue, with estimates suggesting $1.5 million.

The report also highlights the challenges posed by high inflation rates, which have increased construction costs and reduced the development of new real estate projects. Construction costs have spiked by over 78% YoY, while rents are rising across low-income areas, emphasizing the need for affordable housing.

Furthermore, the report notes that Nigeria’s real estate market has been impacted by unfavorable movements in foreign exchange rates and inflation, posing challenges for developers and investors. However, government intervention, such as tax rebates for construction companies and support for local production of building materials, could help lower construction costs.

Commenting on the report, Northcourt’s CEO, Ayo Ibaru, noted that the real estate sector contributed 5.20% to Nigeria’s GDP in Q1 2024, lower than the 5.31% it contributed in Q1 2023. He attributed this decline to poor economic performance, political gaffes, and limited Foreign Direct Investment (FDI).

Ibaru also stated that population growth continues to drive the demand for residential real estate, particularly in mid-market areas. However, he noted that the growing demand for affordable housing and sustainable building practices has led to a continual mismatch between supply and demand.

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The report projects that the real estate market in Nigeria could grow by 7.24% and reach a total estimated value of $2.14 trillion by the end of 2024. Residential real estate is expected to hold the largest share, with an estimated market volume of $1.77 trillion by the end of 2024.

Despite the challenges, the report notes that cooperative societies are making progress in raising funds for housing, albeit slowly. However, large-scale housing developments are largely between planning and early execution stages.

The report also highlights the challenges faced by the Nigerian real estate sector, including obtaining long-term financing on friendly terms, ownership complications stemming from the application of the Land Use Act of 1978, and limited mortgage availability due to high rates and lack of collateral.