Analysis: Nigeria's property boom: only for the brave

Sun Sep 15, 2013 4:24am EDT
 
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By Joe Brock

ABUJA (Reuters) - On one of the most exclusive streets in Nigeria's capital sits a crumbling mansion with an unwelcoming message painted at its entrance: "BEWARE! THIS HOUSE IS NOT FOR SALE".

The warning refers to a popular property scam. In the most elaborate version, robbers break into your house while you are away, change the locks, and then produce multiple copies of fake title deeds. Posing as estate agents, they show buyers around your house and sell as many copies of the deeds as possible. When you get back, your house belongs to six people.

This sort of deception epitomizes the tricky nature of Nigeria's real estate business, but despite the risks, there are huge returns to be had in a market where around 16 million homes are needed just to meet current demand.

Navigating through opaque land laws, corruption, a lack of development expertise and financing, a dearth of mortgages and high building costs will take courage and influential local partners.

"There are sizeable challenges to overcome but in many ways Nigeria represents the perfect storm for real estate investment; huge population, rapid urbanization and a growing middle-class," said Michael Chu'di Ejekam, Director of Nigerian Real Estate at Actis, a London-based private equity firm.

Actis has $5.2 billion under management, including two sub-Saharan Africa real estate equity funds totaling $434 million, which it says are attracting U.S. and European investors.

Nigeria's population of nearly 170 million is bigger than Russia's and its economy is growing at 6 percent, a combination which is producing a new wave of property buyers from bankers and airline staff to mobile phone and fast food shop owners.

"I see demand from the middle-class higher than ever before," said Deolu Dara, Associate Vice President at Nigeria-based Avante Property Asset Management, which manages several multi-million dollar residential projects in Lagos.   Continued...

 
A warning sign is seen on the boundary wall of a house in the Ikoyi district in Nigeria's commercial capital Lagos August 20, 2013. REUTERS/Akintunde Akinleye