November 23, 2017

Investors bank on buy-to-let properties for high returns

Investors bank on buy-to-let properties for high returns... NAIJA INVEST

Nigerian  developers are shying away from the otherwise promising build or buy-to-let segment of the property market,unlike in the United Kingdom, United States and South Africa, where that segment is delivering fabulous returns to investors.

However, mortgage operators in Nigeria are optimistic that a positive mortgage outlook arising from the on-going reform and recapitalisation of the primary mortgage banks (PMBs) as well as the on-going establishment of a Mortgage Refinance Company (MRC) by  government and the World Bank, will spur interest in that market.

Property market analysts explain that investment in build-to-let or buy-to-let property is not popular here, because it is driven by a functional mortgage system which is near-absent in Nigeria at the moment.

“Our basic problem is that we don’t have a functional mortgage system. In the western world, nobody builds his house with his own money. There, you have what is called OPM—other people’s money— which people use to build houses. Here, you either save or do some other things to raise money to build your house”, Alufohai Agele, president, Nigerian Institute of Quantity Surveyors (NIQS) explained to BusinessDay in an interview in Lagos.

Gbenga Olaniyan, CEO of Estate Links, affirms, adding that recouping investment in build-to-let property has enormous challenges, especially with some difficult tenants who typically default on payments after the first three to four years, and then resort to litigation in court, which can take several years to resolve.

Investors bank on buy-to-let properties for high returns... NAIJA INVEST

Investors bank on buy-to-let properties for high returns… NAIJA INVEST

Roland Igbinoba, president/CEO, Pison Housing  Company, told BusinessDay that the MRC which is to function as a secondary mortgage market, has gone beyond the level of ideas, assuring that barring  unforeseen hitches, the company would commence full operation from the first quarter of 2014.

Anya Duroha, Diamond Bank’s regional manager, Victoria Island, Lagos, also assured of his bank’s readiness to provide mortgage to prospective home owners, stressing that depending on the risks associated with a loan, they offer mortgage for between five and 10 years, at interest rates that are way below the industry minimum.

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