Unbelievable as it may sound, Nigeria has one of the highest rates of returns on investment in real estate investment in the world with a caveat – if you get it right. The Nigerian real estate sector has proved very resilient and this came to the fore during the peak of the global economic recession. The real estate market in many areas has been enjoying over 10 per cent annual appreciation and in some cases over 25 per cent.

This is due to a combination of factors some of which we can only refer to briefly in this article. One of the reasons for its relative stability is the fact that transactions are usually cash-based rather than credit-based. Also, there is the rapid population growth that will keep pushing real estate prices up especially in major urban centres. And most recently, especially after the collapse of the financial system, most investors who lost money in shares and forex trading found solace in real estate investment.

The centrality of real estate investment as a benchmark of economic growth and stability is recognised globally. In a growing economy, companies will need land for industries and individuals will need buildings to live in. In addition, the construction works often associated with real estate investment positively affect many lives. From architects to builders and tradesmen, several lives, businesses and homes benefit from real estate investment. However, to speak of benefits without addressing the risk factors will be telling half of the story.

One of the primary issues that an investor has to address is that of title to any property he or she decides to buy. If you are new to investing in Nigeria, you definitely need a legal practitioner or estate surveyor/ valuer to assist with the initial process of searching for the land, verifying the title and perfection of your title. The possibility of buying from or through the wrong person or organisation is high without proper professional guidance.

You have to be more careful when dealing with traditional land owners, who sometimes start transactions with the intention of misleading a buyer or reversing the transaction later in future. You or your lawyer may have to become a sort of private investigator to identify the appropriate person(s) to deal with on behalf of the family. Buyers may have to take pictures and video of the entire transaction because of the slippery nature of some of the land owners. You should also get them to sign your documents at the time the transaction is being concluded else, they may refuse to sign later unless you are prepared to pay them additional fees. Also, you need to clarify from them any additional charges they normally collect as this varies from families to families. And they also vary the fees arbitrarily.

A real estate investor in Nigeria also needs to verify government policies and charges relating to land ownership and perfection. There are frequent changes in policies and charges. The land should not be under acquisition or have a limited use that may not be suited to your purpose. There are also annual government charges on land that you need to ensure have been paid by the seller. Some years ago, a friend nearly lost millions of naira when he wanted to buy a vacant land located within a government estate in Lagos State. Fortunately, he was asked to cross-check with the Lands Bureau if all government fees/charges on the land had been paid. It was discovered that the seller had not paid for some years, the government had revoked his allocation and re-allocated it to someone else and the seller did not know.

Another critical area you need to watch out for if you’re thinking of developing a vacant land is in the selection of the right builder or contractor. A mistake in this area has cost many to spend more than they bargained on property development and still end up with a poor quality job. Skilled and faithful workmen are few and are in high demand. Except you are knowledgeable in construction and you have the time to supervise your project yourself, you need to take all necessary precaution in making this decision.

In addition, if you are interested in accessing mortgage facility in Nigeria, you need to think carefully about this because technically, we do not have real estate finance in Nigeria. Our mortgage rates are one of the highest in the world and you need to ask questions before you have a fair idea of the cost of the financing you are trying to access. Interest rates are between 22 and 24 per cent when all the various charges and fees are added together. The term is also normally between 10 and 15 years unless you access the National Housing Fund, which is often through a long procedure and within a ceiling or limit on how much you can access.

The lack of an appropriate and efficient mortgage system that can be easily accessed by the majority of our citizenry is limiting the growth that we could experience in the real estate sector. The current regime calls for caution and a proper calculation by any person seeking to make use of it or else you could get your fingers burnt. You must ensure that you have your numbers right and that you have prepared for the repayment properly.

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