With over twenty-five years in the real estate industry in Nigeria, Akin Olawore member of Nigerian Institute of Estate Surveyors and Valuers (NIESV) has become established as an icon in the industry.

NREH: When did you set up your firm? What was your dream and vision at the time you set up the firm? What led to you starting it up?

MR. OLAWORE:

This firm was set up in 1990, that’s about 23 years ago, but I’ve been practicing since 1982 (before graduation). I graduated in 1983, and for us, we used to have attachments, so I used my attachment as a practice period. We actually started in 1981, but I started it seriously in 1982, looking at how the career would be like for me. So we started here in 1990. The vision is also the kind I took into practice when I was going out there, and that is the fact that we wanted to add value and make our own impact. Of course, when you are first starting out in the 80s, the first thought is “What will the terrain be like?”. It is the way the terrain is that would determine the kind of impact we would have.

By the time I was going to start out I had left as a partner in Diya Fatimilehin and Co, so I had seen all that I needed to see at that time. What I just told my self was that well, because I am going out, I am going to be like a general practitioner; some people already know the kind of value I can add, so all I needed to do was to re-enforce that and add value as appropriate. And we thank God, to God be the glory that is what we have been able to do thus far.

I had never pretended that I wanted a very large practice, because my experience in Diya Fatimilehin and Co have taught me to rather prefer to have a smaller firm that I can control with ease, and then have other people grow within it organically, who can then now create the necessary environment for their own growth. As for me, I would give them the necessary encouragement, support and training that they require, and also mentorship to bring them up to the speed that they need to be. And so, that was what we set out to do, and God has helped us far to do that. We’ve been able to carve out our own niche in the market, we’ve actually shown the kind of things we have flair for and the kind of things we like to do, and the market has responded very well to us, and we give God the glory.

NREH: Sir, you have been in this industry for a long time. We would like to know, what make it interesting for you to come to the office and talk Real Estate all the time? What drives you?

MR. OLAWORE:

One thing that I’ve learned in my life, as I continue to develop and grow, is that there is nothing that you have that was not given to you by God. Now, He didn’t give it to you to hide it, He gave it to you for a purpose. So, the question I always ask myself is “What do you God want me to do today?”; He won’t ask me to do what He hasn’t prepared me for. Obviously, if He wants me to go out there and do what I can do in the Real Estate sector, I go. So, for every challenge that we face, I know that there will be a solution, and God always gives us a way to come up with solutions. That is what drives me everyday. When I wake up, I ask, “what do you want me to do?” I don’t look at the amount of money I want to make today. I believe it is God that provides, so, that is what drives me.

NREH: So does that form some kind of guiding principle, a benchmark?

MR. OLAWORE:

Yes, it is! It is, more especially because I believe that this profession is the first profession on earth. Yes. And when you look at every thing surrounding all what we do, there is nothing that you do in Real Estate that does not involve you blessing somebody. If it is an agency, and you find a house for somebody, you bless the person. It didn’t occur to me until 1985 or 1987, when a friend of mine that I just met was looking for accommodation. I was able to get him one, and he sent me a personal invitation to his wedding, and after the wedding he introduced me to his wife as the person who made it possible for their wedding to take place. I asked what that meant, and he said that his in-laws gave him an ultimatum that until he got his own house, he couldn’t go ahead with the wedding. I was just there to make it happen. That’s why I said that for every challenge, we look for solutions. There’s no endeavour that you pursue that doesn’t involve Real Estate.

If someone goes and carves his relevance, it means that God has positioned him there to make people’s dreams come true. So you must keep finding solutions. You must continue to think around issues, to try to get around challenges, and figure out how everybody involved will be happy, then you bless people.

NREH

So, what is the state of the real estate sector in Nigeria, at the moment?

MR. OLAWORE:

Well, what I will say is that it is maturing (not yet fully matured), because the country itself is still growing. What happens in real estate is that when it starts maturing, we are going to have the capital market intervention. We are still very far from the capital market intervention. We still have 16 to 20 million housing deficits, we have very few Grade A offices, then there is distortion in the value trend. In the reading of the market, there is distortion. So, by the time you get towards maturity, there will be a near-saturation situation where it will be easy to predict what will happen next in the market. The market is one-sided now, but which market? Because when we talk about market, we are now talking about market segments.

We have market segment by income, we have market segment by location, we also have market segment by use and other ones. But let’s look at income, location and use, and then we pick residential first. By location, the high end (which is also by income), in residential, they are still tottering? The prices of a number of them are outside the range of the locals. They realize that, but they also felt at that time that investment was coming into the country. Investors needed to come into the country; the Naira had lost some value. Some people where able to afford it then, which they did. But as soon as the global crises came, money dried up out there. So, coming into Nigeria to come and dwell became an issue. Now people had already invested, it was already on the ground. The prices were rising,
but people were still buying because they could afford it. The ‘Bigger Fool Theory’ came into play, until it got stuck in somebody’s hands at an expensive price and there was no way to get rid of it. At the high-end, there are some of the properties that some people will snap-up because it is really at the top for the few top people. There are also some of them that will be relatively newer that people will also buy at the same price as the previous category. But at the lower end and the middle end, those who have been displaced from the upper end now come there to displace the people at the lower and middle ends because they have more money, and then the displaced people move further down.

That is why we find out that prices are rising at the lower ends. So, the markets for the lower ends are active because of the demand and supply situation. When you go into the sale market, a similar situation occurs. That is why you will be amazed when you think of some suburbs. You wonder why their value is so high. Their value is high because the next suburb that is high-value is pushing people towards it. So there is a rise in demand, and therefore, the prices rise until people can’t afford the rent anymore. When this happens, people don’t even think again when they hear the land value.

They just want to get the cheap land and move on. So we keep having these kinds of distortions, because maturity has not set in. With maturity, there will be calmness. There will always be demand the demand for houses. Our demography is pyramidal in structure. There are more people at the bottom, and they will continue to move up the pyramid as their income increase. As a result of this, they will continue to need houses. We can’t satisfy that demand. It will take us some time to satisfy it, but the market will always be there.

Now, why are we far from maturity? We are far from maturity because of infrastructural challenges, financing engineering challenges for the Real Estate sector. In terms of infrastructural challenges, when you establish a Grade A property, it has to be completely mechanical, and that costs a lot of money. The running costs will be high, and as a result, it will affect the rent because there is a budget on how much is to be spent on the office. If about half of the budget goes into the service charge, how much will now be left for the land-lord. Of course the land-lord will be concerned about the full payment of his rent, so the client bears all the costs. The high cost of service charge could be off-set if there was adequate infrastructure. Because of this high cost, we now have quite a number of Grade A offices that are empty. The locals can’t afford them. Those coming in can’t also afford them, and that is why they go into virtual offices in order to cut costs.

For those who already have investments in the ground, we have to find ways to help them cut costs as well. One way to do that is to focus on power. A research showed that about 60% of the cost of running an office block was spent on power. If that area can be sorted out, there will be a large improvement. In the Hospitality sector, that is the hotels (5-star hotels); I don’t know whether they actually make money. Yes, they keep getting customers all the time, but you need to consider their rates, about $500 a night. When you check 5-star hotels outside the, you see that their rates are about $200 in the down-town area, and $100-$120 outside for a night. It is much less. So when people come to our 5-star hotels and see that the rate is $500 a night, they become very surprised because it is very expensive. People patronize them out of necessity, probably when they need to take care of some serious business, or when they can very much afford them. It’s all about power. The hotels have to keep their refrigerators running, they have to keep their air-conditioners running, their restaurants have to stay open for customers, therefore the generators have to stay running. At the end of the day, all these costs are factored into the pricing and it make the price to be less competitive. This is why we also have challenges in the area of Tourism, because Real Estate is important to Tourism.

We are talking of about 16million – 20million housing unit, there are two basic problems involved. Number one is the financing, in terms of mortgage, especially the secondary mortgage type. The primary mortgage is not really the issue; we already have measures in place to create it. The main problem is with the secondary mortgage, because the primary mortgage can only make so much money available. They cannot make it available annually. To make it available annually, we will need the secondary mortgage to come in. the secondary mortgage market will the mortgage from the primary mortgage providers. The secondary mortgage is a financial market instrument that we all buy as stocks, so, it is our money that goes back into the primary mortgage institutions. Say, for example, the primary mortgage institutions provided a mortgage of about N25 billion, the capital market could then come up with an amount of N25 billion to buy the mortgage from the primary mortgage institutions. So, as the primary mortgage institutions collect the repayment back from the people it provided the mortgage for, the repayment would then be channeled to the people that bought the mortgage from them. The interest gained on the mortgage will then be arranged, so that both parties can benefit from the deal. This is purely Capital Market intervention. Put the provision of an enabling environment in place; let someone take the lead and others will flow. So, we need that, because the people who need the housing are not those who already have their own houses that can pay a heavy interest. They need a single-digit interest, so they need long-term funds; funds which are not under pressure. In this regard, we have a number of opportunities: unclaimed dividends, dormant account funds etc that can be used for providing mortgage facilities.

The government has to take the prerogative to direct funds to projects like these and get things to move on. That is a challenge; that’s why we must come up with creative solutions. The private sector needs to come together, and agree there is this problem and find a solution for it. We need to help to direct the government to come up with policies that will be beneficial to us. Policies are also there to help us ameliorate risks, and it is the person who will bear the risk that will know what he is to expect. For instance, the prudential guidelines have helped the banks to reduce risks by determining who to collect collateral from, and from whom not to. Most times when we talk of Stake Holders’ Forum, conferences and the likes, we just talk, we don’t go straight to things we need.

NREH

What about Public Private Partnership?

MR. OLAWORE:

Most of us are still individualistic. That is why we still have micro-businesses, instead of SMEs. Until people start to sit down and talk together and discover their common interests and look at how they can address issues together, we won’t get the solutions. I believe REDAN is doing something now, in terms of making progress. I hear that they want to set up a bank, and they are also doing something on the technology front. We want to be practical. That is the most important thing. In terms of technology, I believe that the building technology of putting block on block cannot solve our problem. We need mechanized building in order to save time. There is a method that is being employed in Latin America that makes mass-housing a lot cheaper.

NREH:

Why have we not done something like this here in Nigeria?

MR. OLAWORE:

That is part of the problems we are talking about. Another problem is the issue of land. When government allocates a land to you, the challenges of getting it is also a big issue. Lagos state is embarking on PPP, but there are challenges when you want to go to the land and use it. The full assistance you are supposed to get from the government is not given to you. When a PPP arrangement is in place, the concerned parties are supposed to handle the areas that are within their control. The government is supposed to handle the planning, approval and the survey because it is in their control. In this situation the government will ask you to do it yourself and waste the time. When you are partners, everything should be straight forward and clear. Despite the frustration, I try to look for solutions because I’m an optimist, I don’t like people stopping me. So, why don’t we go to the communities and partner with them? We will still do the running around that we need to do, but this time, it will be with the communities. With the time it takes the government to get one through, we would have finished building what we wanted to build with the communities. Government, because of the people working in it, frustrates progress.

Read the rest of this incisive interview here: http://www.nigeriarealestatehub.com/exclusive-interview-with-estate-giant-mr-akin-olawore-3.html

[1][2][3][4] .... Next