Insecurity: A major concern for house owners and real estate investors in Nigeria.
Nigeria is one can of the developing countries of the world located in West Africa and has become a big opportunity and enterprise for real estate investments. The level of real estate investments in Nigeria over the years has experienced a tremendous increase resulting into high per capital earnings and investment returns for both the Government and individuals/investors.
However, in the past few decades, the country has been faced with various insecurity issues and challenges which have increased sporadically since 2009 and presently still visible mostly in the northern part of Nigeria. Nigeria is being crippled by insecurity problem posed by criminals and not only is the incidence of violence becoming more frequent, the nature of the crime especially armed robbery, burglary and murder amongst others have become more heinous, bolder, sophisticated and in various forms. Insecurity threatens quality of life and social and economic stability of a country.
Notwithstanding the persistent rise in the insecurity level in Nigeria today, the quest and demand for shelter (real estate) is still on the increase. However, the importance of security in the provision of houses cannot be over-emphasized. In addition, the security of man’s habitat/neighborhood is of great importance because “Life has no duplicate” and the importance of safety of lives and properties is a major determinant in the choice of properties. Thus, without any doubt, the security of the real estate is especially important in the development of the real estate sector and in the overall growth and development of the economy in general.
Meanwhile, it must be stated that insecurity is a major source of social concern not only in developing countries but in the World today. Countries are increasingly faced with unacceptable levels of delinquency, crime and associated insecurities. Over the years, there have been questions raised about the effects of insecurity on the real estate sector property values.
The level of insecurity in different parts of Nigeria has left a bad taste in the mouth of the nation’s development journey and, more specifically, has negative effects on real estate development in Nigeria.
In line with the foregoing, it is important to note that real estate investors now see the high-risk level of insecurity in the country as one of the factors that possess a threat to their various investment options. In most cases, these investors when carrying out investment analysis, appraisals and study might end up selecting and exploiting other investment options/alternatives which would affect real estate development in areas prone to security challenges.
It has been asserted that secured environment has a positive and psychological effect on the lives of the citizens in a place. Hence, the security of lives and property is one of the vital duties of the Government as well as the individuals in any given estate or community.
Amidst this security challenges, are the persistent housing deficit currently witnessed in Nigeria. We at Wemabod Limited are of the view that with the perpetuation of these challenges, housing deficit may worsen as real estate investment will drop due to the security challenges.
Based on the foregoing, we shall now examine how these insecurities impact or affect real estate development in Nigeria.
Firstly, areas prone to security attacks from Boko Haram, Fulani herders, bandits, cultism, regular ethno-religious crisis, and other insecurity challenges in Nigeria are witnessing serious decrease as choice for home seekers. The reason is that the safety of the dwelling environment remains a key consideration when home seekers are making decisions on the purchase or leasing of dwelling places. No home seeker will rent or purchase a piece of property in an area where the earlier-mentioned atrocities are rampant for fear of being burgled or their homes invaded and killed. Therefore, most of the residents often flee these areas in search of more subtle places thus, resulting to filtration, which is a situation where houses are abandoned and occupied by lower income earners who cannot afford the maintenance. In essence this affects the level of real estate development in the area and reduce property values.
Invariably, this would lead to a hike in the cost of purchasing or leasing properties in areas considered “safe” and developers and or property owners will make more profit. However, the downside is that the pressure may result in sporadic construction of unsafe and unhygienic structures which may eventually collapse or lead to break-out of epidemics; an experience not befitting of ideal real estate development.
In addition to these is the incident collapse of infrastructures due to overcrowding of relatively safe areas.
From the commercial angle, real estate investors will be unwilling to buy or lease property to carry out their businesses in areas prone to looting by bandits, cultism, kidnapping, robbery, etc. for fear of the safety of their investments. The ripple effect of the above trend is a decrease in demand for existing residential and commercial property within the areas concerned and loss of investment for the developers who have spent personal and borrowed funds for such developments. This will surely put some real estate developers out of business except they can manage the situation properly.
From the developer’s angle, no real estate investor will invest funds in areas prone to insecurity when he or she is aware that there will be no patronage and the structure put up can be burnt or destroyed in few minutes of a raid by Fulani herders, ethnic bigots, cultists or bomb blast from Boko Haram or grenade from armed robbers.
Furthermore, financial institutions are not likely to grant investors credit facilities to put up commercial structures in some parts of Nigeria where the safety of the investment is an issue or where the project is not viable because of envisaged zero demand for such bankrolled structures when put up.
Possible Solutions in this regard can take many forms which may include the need to create an economy with appropriate social, economic, and physical infrastructure for business and industrial growth.
The Government should also boost people’s living standards by establishing more centers of entrepreneurship across the nation, most notably in the North and Northeastern areas where the level of insecurity is currently on the increase.
Finally, as real estate experts, we would continue to lend our voice in the mitigation and management of insecurity challenges as well as the enhancement of real estate development for the growth and development of our dear country, Nigeria.