Blog

All over the world, mortgage is known to be a viable method to owning a home, but several factors have made it difficult for most Nigerians to access mortgages. In developed countries, effective mortgage systems have aided many people to become homeowners but in Nigeria, there have not been many success stories recorded. We looked closely at mortgage models in Europe and America and found that a major enabler of their effective mortgage system is lower interest rates and longer repayment period.  

Two months ago, the U.S. Census Bureau announced a homeownership rate of 65.5% for the year 2021; and in England, the House of Commons stated that 65% of its population were homeowners as at the end of 2020. This is contained in its “Extending home ownership: Government initiatives” report. These countries have single digit Mortgage interest rates – 6% in the United States and about 4% in England. Kosovo, Romania, Hungary, Singapore and Croatia all have home ownership rates above 90% with mortgage interest rates falling below 5%.

These mortgage systems have proven to be very effective, giving opportunities to more  young people; millennials below age 30 to own homes. This is very important to note when you consider that generally, millennials all over the world are finding avenues to increase their incomes, encouraging the “gig economy”, innovations in tech and the benefits of remote work. In 2020, especially during the worldwide lockdowns, we read stories on Twitter about the increase in home ownership rates amongst millennials in countries like the US.

According to McKinsey & Company’s ‘Post-pandemic economy: 12 Insights’, ‘…the biggest driver of rising net worth is real estate’. Investments in real estate is becoming more accessible across income levels as new services are springing up to ease the large capital requirement through milestone payments, co-investment and crowd funding. New platforms are also making it easier to invest globally with just a few clicks of the button but due to many factors, uptake of these services is still in its infancy and people still do inspections and due diligence physically before deciding on investing in a property. As your trusted real estate partner, we have listed the first 5 due diligence steps to take if you want to buy a land in Nigeria.

 Plan your cash flow realistically 

When choosing your investment financing options, you need to plan and critically assess your cash flow. Usually, credit facilities for real estate investments are packaged with relatively long tenures to be repaid monthly, quarterly or annually terms. While making investment in real estate is a good store of value, what most people fail to consider carefully is ‘‘how much they can afford to pay per time’’ that will not impact their buying power adversely. It is important for you to scrutinise your financial standing to know how much you can afford to pay for a piece of property even before making a commitment. This may be tricky with staggered payment options especially as fluctuations in inflation and interest rates have an impact on time value of money causing a devaluation to the value of your future cash flows. Essentially, they key is to plan your cash flow realistically and determine what you can afford after living expenses and emergency funds have been allocated.  

 Understand the Size and dimension of the Land 

As a prospective buyer, this is most likely the first thing you want to know. The size or dimension of a parcel of land is a major determinant of the cost/price of that land. There are different measuring units but the most common UoM for land are plots, acres, and hectares. To appreciate the size of a land, you should understand the scale of these units of measurement and make comparisons. For some context, plots of land can come in either 500 square metre or 600 square metres. 6 Plots of land make 1 Acre and 6 Acres make 1 Hectare. It will also add more value to your understanding to consult further with a Land Surveyor for further clarification and or documents that give deeper information and context.

Access the location of the Land 

In real estate sales transactions, documentation has been proven to be one of the discombobulating aspects for buyers in Nigeria. Land titles have remained a significant contributing factor to this bottle neck for years without end. The Nigerian legal system has seen an enormous number of cases on land disputes and fraud committed through manipulation of Land title documentation.  We have identified that one of major contributing factors is ignorance and not enough awareness on what constitutes proper and valid documentation in Nigeria. Our goal at BuyLetLive is to make your property acquisition journey easier and in this article we have provided some information on land ownership documentations within the Nigerian context. We will kickstart the conversation from the types of titles and their importance in terms of what the holder can do. For information purposes, the Land Use Act of 1978 provides the latest framework for land ownership in Nigeria and will be the most referenced document throughout this article.

Certificate of Occupancy (C of O)

One of the most criticized provisions of the Land Use Act is that it vests all land within the territory of each state in the State Governor, who is expected to hold it in trust and make it available to the citizens through the grant of a 99 years rights of occupancy. Technically, this means that every land holder in Nigeria is considered a leaseholder and a Certificate of Occupancy is a legal document issued by the government to convey occupancy rights to the person.

On any piece of land in Nigeria, only one Certificate of Occupancy can be granted. The implication of this is that when a property owner decides to sell, the Governor is not expected to issue another C of O on the same property. What is usually required is that the original title holder would secure the Governor's consent to sell. This consent document will then serve the purpose of transferring ownership to the new buyer and need to be documented with the state government authority.

Governor’s Consent

Because land is a property of the government, a transfer of such interest according to the Land Use Act is only permitted when the consent of the State Governor is sought and duly obtained. “Governor’s consent” is usually signed by the Governor as a proof that he has consented to the transfer of a right of occupancy on a landed property from one person to another. This document is very crucial and any title transfer that is not consented to by the Governor is considered invalid.

Deed of Assignment

A Deed of Assignment is a proof of transfer of title or the ownership in a property from one person to another. In this case, the original holder is known as the assignor, while the other party is known as the assignee. In Nigeria, where a party is buying from a holder of a certificate of occupancy, it is expected that the transaction should be followed with a deed of assignment. Deed of assignment is usually prepared by the buyer’s lawyer and then executed by both parties once properly vetted. Typically, a deed should contain information about the parties, and description of the subject property being sold. Additionally, a deed of assignment is only tenable in law if it has been duly registered with the consent of the Governor. Prior to the Land Use Act this was known as the Deed of Conveyance and some properties still have this title till date.

Registered Survey Plan

Every land is expected to have undergone a survey that will show the boundaries and geocode and its measurement, alongside other geoinformation. For a green parcel of land, especially if at the outskirts of town, this is usually the first document that developers offer to new subscribers before proper documentation is done and registered with the state. It is usually done by an estate surveyor and registered with the office of the Surveyor General in the state.

Deed of Mortgage

Real estate is one of the most tenable securities for loans all over the world. According to Allied Market Research, the global real estate loan market size was valued at $7,968 billion in 2020 and is projected to reach $23,121 billion by 2030. Typically, for every real estate secured credit, it is expected that the mortgagee (lender of a loan) should have an interest in the property. This additional interest would typically be conveyed through a Deed of Mortgagee and if the borrower of the loan defaults on loan payment, the holder of the document can take possession of the property. This document is usually prepared by a reputable lawyer and registered with the state. This is similar to the deed of Lease and/or Sublease that follows lease and sub-lease arrangements.

 Contract of Sale, Letter of Allocation, and Receipts of Payment

Contract of sale indicates that a property has been sold. It is a typical contract between the buyer and seller that documents the sales contract between the parties. The transaction can happen between an individual or company and the state or a private developer. Oftentimes, a contract of sale is followed by a letter of allocation that documents every detail of the subject property or plot. Payment receipt on the other hand shows the amount paid to the seller by the buyer, and authenticates that there was a monetary consideration for the sales transaction. It is noteworthy that these documents on their own are not legally tenable, and buyers are encouraged to properly document titles with the state after a land transaction.

The demand dynamics for residential real estate in Lagos has changed phenomenally over the past few years. In the early 2000’s, landlords demanded rent in advance of 2 years or more. With increased exposure into the global market, the topic around “what the ideal housing system in Nigeria should be'' is gaining traction. What we are seeing today, is a growing interest around the monthly rental system with a slow but steady adoption especially as private businesses are finding creative ways through financing services to achieve this.  With consistently rising inflation rates, the average Nigerian’s disposable income is heavily impacted and their cash flow is becoming incapable of sustaining these bulk payments. 

Outside the challenge of effective annual rent demand, another topic of concern which has gotten very little attention is the changing dynamics regarding how “the demand for houses in Lagos is changing by demographics and how developers should be responding. Data from the Lagos State Government estimates that more than 40% of Lagos population fall within the ages of 15 years to 45 years with forecasts that this number will grow to more than 50% over the decade[L1] . Our interaction with agents in Lagos shows a growing demand from this demographic (students, young professionals and mid-level executives) with a preference for smaller sized apartments. This opportunity in the market initially has not been captured but we are beginning to see property developments responding to capture this potential.

We conducted a survey in Q1 2022 sampling young people between the age of 20 to 45 years to understand their location and amenity preferences when renting an apartment in Lagos. Based on our findings, Lagos’ young population want to experience the hub of social activities, but the currently high rental rates at these locations have been a major barrier. The recurring question then is ‘how can developers with projects in the core business districts optimise for this market profitably?’ In this article, we will be discussing some of the survey findings with interesting insights for developers who may want to tap into this segment of the market.

Yaba, Ikoyi and Gbagada emerged as top 3 preferred residential locations by young professionals

45% of the survey respondents selected Yaba, Ikoyi and Gbagada as their preferred residential locations. We dug deeper to understand the rationale behind these choices and found that proximity to the workplace and other business districts alongside availability of amenities were top considerations.  Although the commercial footprint in Ikoyi is growing rapidly, the region remains one of the most serene residential neighbourhoods in Lagos. Ikoyi also provides easy access to Lagos Island, Victoria Island and Lekki Phase 1. Yaba and Gbagada, with their proximity to the 3rd Mainland and Eko-bridge, also provide easy access to the commercial and social hubs, with a number of amenities including restaurants, banks and recreational facilities.  While this presents an interesting insight on where Lagos’ young population would like to live, there is a mismatch with paying potential. 83% of the respondents earn less than N6m in gross revenue annually. Even though they would like to live in Ikoyi, their seemingly low-income level makes it difficult to live in this neighbourhood where 1 bedroom apartments rent around N6m or more per annum.

Well-built 1 bed and 2 beds apartments with good facility management has more allure for young people

From our survey, 65% of the respondents prefer renting 1 bed studio and 2 bed apartments. However, 80% of Lagos' existing property stock consists of more than 3 bedroom typologies. Historically, developers in Lagos have been more focused on larger sized apartments from 3 bedrooms and more. Based on our interaction with agents, demand is tilting more to smaller sized apartments and response to meet this demand is through remodelling of existing large sized apartments into smaller ones. Landlords are increasingly converting their old 4 bedrooms into units of 2 beds and 1 beds, and we have also seen that the adoption of co-living options among young people is also increasing. Although developers have identified this shift in demand, supply is still largely limited. Another interesting finding from our survey is that quality facility management is becoming a key consideration, and the young working population can trade large size apartments for smaller sized alternatives that are well managed and closer to their workplace.

Amidst nationwide power shortages, availability of 24-hours power and security remains the most important amenity for Lagos young working population

With the heightened security challenge across the country, and the recent hikes in power tariff, it is not surprising that 24 hours security and power are the two most important amenities among young people who are renting apartments in Lagos. Almost 75% of the people we surveyed preferred to have 24 hours power and security in their apartment as against other amenities including gym/sport facility, laundromat, internet connection and supermarket. Unfortunately, the cost of electricity has increased phenomenally over the past few months, making it almost impossible for most residential estates to meet their agreed service level. The price of diesel in Lagos for instance, grew by over 150% from ₦303 in January to over ₦800 per litre by the end of March. In response, the average power tariff in serviced estates grew to almost double from ₦83/KwH (kilowatt hours) to over  ₦140KwH.

Meeting the residential demands of Lagos' young population is a tough nut to crack, but also an opportunity for innovative developers.

Considering the high cost of land and other construction input, it is almost impossible to build a decent project in prime neighbourhoods in Lagos. The outcome of our survey presents the most important things in the checklist of Lagos’ young renters. For innovative developers, there is still value that can be created within this market. However, this will require a lot of creativity to find a balance between cost and paying potential of this market segment. 

For a long time now, the narrative of real estate has been the same in Nigeria, a traditional way of buying and selling. This method has brought us thus far, which means it has worked at least to some extent, but not without some downsides, like the stress of combing Lagos and inspecting houses, agents drama, imposters posing as developers/agents, and the popular ‘what you order versus what you get’ amongst so many other downsides. What if we told you that there could be more to real estate?

At BuyLetLive, we offer a new breath of fresh air to the real estate space in Nigeria, coming with a game-changing plan, poised for excellence, and made up of a professional team ready to make you fall in love with real estate all over again. We do not only offer an easy-to-use real estate platform where all you want is in one place, but we have also ensured that with the BLL platform your property search is made a lot easier.

We have available properties across Lagos, whether for buy, rent, or even shortlets. These properties are easily accessible on the BLL platform, with just an internet-accessible device you can search, book, buy and sell a property within a reasonably short time frame on the BLL platform. Our platform allows you to experience a virtual tour of various properties before choosing your dream home and connecting to the agent for onward negotiation, whether you want to rent or buy. Agents also get to experience their leads surge high as long as they consistently upload their properties for property searchers to find on the platform.

Our customer service is groomed for a friendly and speedy response, we are open to business conversations 24/7.

With BuyLetLive, you should start thinking of real estate in a more convenient, accessible, reliable, and trustworthy way because these and more are what we offer. Look no further, there is something different in town.

A new wave! BuyLetLive.

Connect with us on Facebook, Twitter, Instagram, and LinkedIn;