₦airaland Forum

THE JOINT VENTURE/DEVELOPER MONEY MYTH

One of the biggest misconceptions in Nigeria's property sector is this:

"Developers have plenty of money."

In reality, many developers are cash-constrained.

A typical developer may own land worth hundreds of millions of naira yet struggle to pay for excavation, reinforcement, or roofing. Why? Because land is an illiquid asset. Until it's sold, refinanced, or leveraged, it doesn't pay contractors or suppliers.

Many projects that appear "abandoned" are not abandoned because the developer ran away. They are stalled because of cash flow gaps.

On the other hand, not every contractor demanding an upfront mobilisation fee is trying to defraud the client. Contractors also face genuine cash flow pressures. Materials are usually purchased before they receive payment, labour is paid weekly, and prices can change without notice.

This is why many Joint Venture (JV) developments collapse—not because the land lacks value, but because the parties underestimate the amount of working capital needed after the agreement is signed.

Owning land is not the same as having development finance.

A successful JV requires three different things:

1. Land.
2. Working capital.
3. Competent project execution.

Missing any one of these can derail the entire project.

From your experience, what do you think is the biggest reason most Nigerian Joint Venture developments fail?

- Unrealistic expectations?
- Poor feasibility studies?
- Cash flow problems?
- Greed?
- Weak legal documentation?
- Something else?

I'd like to hear from developers, contractors, architects, engineers, lawyers, quantity surveyors, financiers, and anyone who has been involved in a JV project.

Let's have an honest discussion.

This is plenty talk, there's money in Properties, especially if you are a developer. It is one of the best ways to make money in Nigeria.

Its an illusion of money, the profits are marginal, thats why a lot of people run into efcc trouble.

One thing I have realised is that a lot of people don't much about real estate finance. They just see numbers and believe it's jackpot.

This is not an informed statement.

Djremiola:
This is plenty talk, there's money in Properties, especially if you are a developer. It is one of the best ways to make money in Nigeria.

People usually learn the hard way.

Proprtyguider:
This is not an informed statement.

You really have to be careful with joint venture thing, it's dicey. Yes there is money but if you are not careful in your analysis you may end up in debt.

There is an issue we are presently having. We entered a joint venture with a land owner to build a shopping complex in 2022.. When the BOQ of the project was done, iron was calculated to be 400k per ton then, cement was calculated with #7000 per bag, block was calculated at #400 each. The total project cost was calculated at about 1 billion Naira then. Sharing formulars were discussed and profit margins calculated by every stake holder. It was profitable for all parties.
The shops were sold off plan while the construction was initiated.

Just after the completion of the DPC of the complex, Tinubu shouted subsidy is gone. There in the disaster set in. Cost of continuing the project increased by over 300%. The financiers exhausted the budgeted funds yet project delivery level is just about 70%. A lot of people already bought the shops at off plan expecting their shops to be completed as they have paid. The project stalled. At a time the land owners told the developers to carry their structure and go as they are no longer interested. Since 2024 the project is abandoned. Developer crying he has lost his money. People that paid off plan crying they have not seen their shops since they paid. Land owner crying the structure on his land have made it impossible for him to do other things on his land.

That is the reality of some JVs in Nigeria today.

Thats serious wahala. Money gone down the drain.

Macphenson:
You really have to be careful with joint venture thing, it's dicey. Yes there is money but if you are not careful in your analysis you may end up in debt.

There is an issue we are presently having. We entered a joint venture with a land owner to build a shopping complex in 2022.. When the BOQ of the project was done, iron was calculated to be 400k per ton then, cement was calculated with #7000 per bag, block was calculated at #400 each. The total project cost was calculated at about 1 billion Naira then. Sharing formulars were discussed and profit margins calculated by every stake holder. It was profitable for all parties.
The shops were sold off plan while the construction was initiated.

Just after the completion of the DPC of the complex, Tinubu shouted subsidy is gone. There in the disaster set in. Cost of continuing the project increased by over 300%. The financiers exhausted the budgeted funds yet project delivery level is just about 70%. A lot of people already bought the shops at off plan expecting their shops to be completed as they have paid. The project stalled. At a time the land owners told the developers to carry their structure and go as they are no longer interested. Since 2024 the project is abandoned. Developer crying he has lost his money. People that paid off plan crying they have not seen their shops since they paid. Land owner crying the structure on his land have made it impossible for him to do other things on his land.

That is the reality of some JVs in Nigeria today.

One has to get his calculations and projections right if not, na EFCC straight.

https://www.eazybuild.ng/

Its useful to calculate JV percentages