Nigeria’s housing market only cares for the rich ! – Osunsina

Chief Executive Officer, Megamound Investment Limited, Chief Olumide Osunsina

Chief Olumide Osunsina is the Chief Executive Officer of Megamound Investment Limited, a real estate development company. In this interview with MAUREEN AZUH, he says the government, which holds the key to housing provision in the country, is not doing enough

How would you rate the nation’s housing sector, having been a major player in it for several years?

The housing market is basically taking care of the rich; our market and the developers have not really addressed the basic needs of the people, who really need housing. In that light, I will say that we have not done much. What we have simply done is address the market towards the

very wealthy.

How then can the low-income earners tap into the various initiatives by private developers and the government?

The answer is simple; one of the major inputs of housing provision is land. Land, by its nature, is free until other things such as infrastructure are introduced. Infrastructure is then graded to what is being sold; a road can be N100m, the same road can be N50m, it is a function of planning, necessities and the needs you want to meet.

As an experienced builder, I can say to you that you can build houses for as little as N2m. I have seen an example before in Ogun State, which is about the only scheme that I have seen that has addressed the needs of those who really need it. It was done three or four years ago and was sold for N1m; all the civil servants had to pay to get into the scheme at the time was N100,000, and I believe everybody can find that kind of money.

We need that kind of scheme; when you are talking about housing, it is a basic need. You can improve on the houses over a period of time to increase the value, but in trying to meet a basic need, the only organ that can make that possible is the state by providing the land.

What we see is that states are actually selling land for a profit; they have turned it into a big business and forget that they are there to provide services to people who elected them; they are not there to do business. Government has no business in business, what they have to do is provide an environment that allows business to thrive and not turn themselves into merchants.

I cannot see any reason in the world why the government here in Lagos State or Ogun State cannot begin to do housing within the range of N3m to N5m, and they can do it by making land available. For instance, the Lagos State Government doesn’t have to build all the houses in the state, they can go to Ogun State and buy land; there are places that are only 20 kilometres from Lagos to Ogun. Land is cheap there, what stops Lagos from buying up to 500 or 1,000 hectares even using government money to an extent to put infrastructure and help to alleviate the sufferings of the people? I know that by the time they put the money into the cost of the houses, it will be a little bit expensive but they can do that, after all, the money belongs to the people.

The point is that the government is not doing enough, because it is historical and colonial for them to take care of themselves and their families to create Government Reserved Areas and leave the other places to become slums. That mentality is still with our government, that is why they don’t care; and when they provide it, it is not for those who need it.

When you provide homes for N25m in Ogun State, for instance, how many people can afford that? There is no civil servant, even middle level bankers, at the current rate of exchange that can lawfully buy a house for that amount from their legitimately earned income. It is not possible; so, who are the targets? These are questions the government should ask itself.

Some experts say the amendment to the Land Use Act is the way out of the housing problem in the country. What is your take on this?

You see, any system that puts the law in the hands of one person is creating a bottleneck. When you leave all the land assets in the hands of one man, call him a governor or any other name, you are creating problems; it means there will be a lot of corruption in the distribution of land, time wasting as well as a lot of bureaucracy; it just doesn’t work.

If you really want to privatise and encourage investment in the provision of homes, you must remove and reduce the influence of the state considerably in accessing the biggest input, which is land. It should be fully transacted like any other commodity; land should be like you are going to buy cement. It should be readily available so you can deal on it and then pay the state whatever it is entitled to.

Most of the land allocation done by the state is usually to the wrong people; people who have no need for it. I haven’t seen anyone here who has a large chunk of land who has the masses in mind. The more we reduce the effect of government in land allocation and distribution, the better it is for us in the long run.

There are reports of unoccupied houses, especially in the Lekki/Epe axis of Lagos and other parts of the country, while the housing deficit is also rising. As a developer, how can this be reconciled?

From the point of view of someone who is in the business, I have a lot of houses that are unoccupied. In building some of these houses, our target audience were the very rich because the rent range is from N3m, that is, around $20,000 per annum even in America and Europe; you have to be fairly well to do to afford these houses. Those who meet our terms in terms of the investment are few, because if the terms are not met, the developer will not meet his target.

There is also the fact that a lot of these homes are built with personal money, and if you had taken loans from banks, you must begin to earn money on them immediately you finish construction in order to meet the repayment schedule, or you lose the houses to the banks. Sometimes, there is no pressure to sell except the rental income they target is met, especially if the developer is not repaying the loan.

A lot of production in every sphere of life tends to cater for the needs of the rich; so, a lot of developers tend to build for the wealthy; that is why there are many vacant houses.

What is your take on the 20 per cent equity contribution for mortgage loans as set by the Nigerian Mortgage Refinance Company?

It is not bad; it is to hedge against inflation and housing bubbles. It is a safe margin so that they don’t incur losses if the prices of houses drop. If you are going to buy a house, it is good to have a savings habit. If you are not able to have that kind of equity, I don’t see any reason why you should be buying a house. The question is not the 20 per cent but the cost of the house, which we must bring down through the government making more land available.

What peculiar challenges have you encountered as a developer?

The biggest limitation to development anywhere in the country is the government and it is sad. It is unfortunate that while people are crying for where to live, the government is increasing its rent every single year; the officials see housing provision as a means of making money because they have met their housing needs and it is unfortunate.

The government has too many rules and regulations, some of which are very unnecessary. They make the approval process too long. The other limitation is the issue of sourcing proper materials; most materials in our market are substandard. The only genuine material in the local market is probably cement; every other thing is either fake or not properly done. Most of us import everything from the United Kingdom; the only things we don’t buy abroad are cement and sand. The most criminal is electrical materials; I don’t know why anyone would allow people to sell fake electrical products.

But even cement here is too expensive and there is absolutely no need for that. Electricity is the biggest input in cement production not the gypsum, which is locally produced here too; so, where are they getting the pricing from? The manufacturers are actually doing a lot and employing many people, but they are also engaged in profiteering and they know it. We are talking about a growing and developing economy, the demand is there because of the economy but we believe the government should do something about it because it will help reduce the cost of housing.

So, apart from funding, we have the government and lack of materials to work with. We also have a limited market because there are no mortgages to work with. The NMRC will help considerably; everywhere in the world, a special mechanism is put in place to help with housing finance because of its social nature. Because of that, the government has to interfere because the private sector cannot take care of the mechanism alone.

It is a big issue because the environment dictates what people turn out to be, but it is sad that we don’t look at the implication of these things in the long run; we tend to focus on short-term gains.

The government has a lot to do; the Lagos State Government, for instance, can create 20,000 millionaires every year if they wish, by allocating land.

Despite the challenges you talked about, you have been able to develop several estates. How have you been able to solve these problems?

Like every entrepreneur, we have challenges but the prayer is always that the challenges should not be more than the gains. We have been able to do some successful estates around the Lekki axis such as the Carlton Gate; we are also part of NICON Town, Lekki County Homes and we also contributed to what the Elegushi Estate looks like today as well as the Beach Resort. We are also working in Ibadan and Abeokuta, but I can say we can do a lot better, the environment is too hostile. The housing sector is supposed to be the highest employer of labour in every country for obvious reasons.

How do you reconcile the number of developers in the country and the huge housing deficit that Nigeria still has?

There are more people dropping out than coming in because of the nature of the business, which involves access to land. Land is a very serious contributing factor. A lot of developers don’t have capacity with little contribution to the market; that is why it is so. It is also a capital intensive project and if you get it wrong, you are out and under immediately.

The developers are not increasing the housing stock because they are not doing a lot; only a few developers are doing massive projects.