CHALLENGES AND PROSPECTS OF REAL ESTATE MARKETING IN LAGOS STATE

BY: ESV OMOTOYOSI FADIPE

–In the past ten years, private equity firms have taken Africa’s real estate market by storm with millions of dollars in investments, especially in the commercial and hospitality sectors. The total investment in these sectors in recent past is about $652 million, and analysts believe the Nigerian market is one of the most sought after, due to the huge returns possible. http://www.lamudi.com.ng/journal/overview-nigerian-real-estate-market)

Real estate is “property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also, the business of real estate: the profession of buying, selling, or renting land, buildings or housing. (http://en.wikipedia.org/wiki/Real_estate)
The growing interest in the Nigerian real estate market is as a result of huge demand buoyed by increasing urban population and changing housing culture among the expanding middle class, especially in Lagos state which has resulted in the construction of numerous kinds of real estate across the nation.

There are 10.7 million houses in Nigeria ( Federal Ministry of Housing, Abuja Nigeria) and this statistics is regarded highly inadequate when compared to the size of the nation. To this end, the World Bank has estimated that it would cost as high as N59.50 trillion to bridge Nigeria’s 17 million housing deficit. This huge deficit figure may also be viewed as a vast and untapped investment potential of the country’s real estate sector. Although the industry experienced a major lull from the Q2 of 2009 to the Q2 2011, the sector is gradually on the rebound and has experienced notable growth and performance. This performance is largely driven by the re-emergence of the Nigerian middle-class and the release of initially suppressed demand for decent residential and commercial accommodation by high net-worth individuals, corporate organizations and key players in the retail merchandising sector.

Growth in the sector has also been enhanced by the entrance and expansion of new and existing multinational companies in sectors such as ICT, oil and gas, retail merchandising and finance. The upturn in real estate related economic activity experienced from Q4 2011 to Q1 2014, (as indicated by surge in real estate related transactions in major cities across the nation and verified by the Nigerian Institution of Estate Surveyors And Valuers) has led to an increase in demand and supply for commercial and high-end residential real estate development, particularly in the key cities of Abuja, Lagos and Port Harcourt.

Discerning developers have focused on the construction of high-end residential houses, commercial developments as effective demand has been strongest for these groups of developments. There has also been an encouraging increase in the construction of flats and condominium –type house, to aid affordability. In the light of the above optimism, it is pertinent that real estate marketing should be at the focus of this real estate revolution and growth. Any form of abundant supply of real estate without proper and effective marketing will result to a serious negative waste of investment and resources.

Marketing is the activity, conducted by organizations and individuals that operate through a set of institutions and processes for creating, communicating, delivering, and exchanging market offerings that have value for customers, clients, marketers, and society at large. ( American Marketing Association (AMA), 2007)

A critical look at the activities of many real estate companies within the state as shown that there is a serious gap existing in meeting clients demands of selling or leasing their properties due to problems and challenges being face by these companies.

This study will provide contributions to the area of identifying real estate marketing problems and challenges and also the provision of effective and modern ways of real estate marketing within Lagos State, being the case study area.

Many real estate companies have many problems as regards marketing of real estate and related services within the state. These problems include but are not limited to the following as discussed.
Customer profiling: many firms have not discovered that customer profiling (market to the right people) is an effective of marketing real estate and those who know have not identified effective means of doing so; thus they record low performance rate in effective real estate marketing.

Also Property stratification is another major problem. The lack of proper categorization of listings in the property portfolio of real estate firms/companies which should enable the firms’ direct appropriate efforts as regards manpower, location, price, highest and best use etc. has also been identified as a problem hindering effective real estate marketing within some firms.

There is also the Lack of enabling government laws and regulations /Industry regulations. Inadequate/ non-existent industry regulations and also that which is backed by existing, practicable and enforceable laws are major problems and challenges to the real estate sector and by extension marketing within the sector. This has led to the existence and thriving activities of quacks.

A major stronghold is the activities of quacks within the industry; quacks are like a cancer within any system they exist and if care is not taken they can cause the quick and sudden death of any industry or profession. They breed activities such as unprofessionalism, fraud, pain, unregulated activities, crime, etc which are all injurious to both the proper practioners of the industry and the public that is meant to be served. There is also the ever present economic situation. The dwindling economic atmosphere and condition of the economy and also the limitations on free use of foreign exchange has affected the performance of the real estate sector in terms of sales and other transactions. There is so little purchasing power which has caused too many real estate marketers chasing after the very little number of real and capable prospective buyers; and in the bid to win their hearts and pockets, many have resorted to the use of “extra-professional” means to do so and freely too, due to lack of regulation and penalty in the sector as earlier mentioned.

Last but not least is the problem of shyness towards Information technology by practioners/marketers and literacy. Many firms have not yet taken advantage of many effective information technology channels available in today’s world in marketing their listings. Many also are a bit not up to date in the use of IT resources and these and many related IT issues are challenges to real estate marketing in the case study area.
Research has shown that most real companies in Lagos are suffering from at least two of all of the above mentioned problems. The lack of solutions to these problems has resulted in many companies unable to sell or lease properties in their portfolios for a long period of time. Hence the need to visit this issue and take a good look at all these challenges, how to surmount them and proffer prospective, modern and effective ways of marketing real estate in the Nigeria, specifically Lagos state, the case study area.

The use of effective modern and more effective methods of real estate marketing has brought about significant improvement and performance of real estate companies in developed countries. It has caused many companies to record successive and graduating real estate transactions from time to time.

TECHNOLOGY AND MARKETING OF REAL ESTATE

Baen and Guttery in their 1997 paper “The Coming Downsizing of Real Estate- Applications of Technology” hypothesised that the growth of the Internet would significantly impact on the market for real estate brokerage services as well as other property related services. In relation to brokerage they predicted a reduction in the number of people involved in the industry and downward pressure on real estate commissions. Also predicted were an increase in fixed marketing fees per transaction and an increase in the support services provided by real estate brokers.

The rationale for these outcomes was in part because the brokerage industry exists because of inefficiencies of the traditional real estate market. In the absence of cheap reliable market information real estate brokers act as information intermediaries as well as negotiators. It was believed that the rapid growth of cheap and available information over the Internet would reduce the role of real estate brokers and other property professionals as sources of information. As the value of providing that information had become part of the transaction cost (around 6% of sale price in the United States at that time) reduction of information costs and alternative sources were predicted to drive sales commissions down to around 3% of sale price.
In conclusion Real estate firms and companies should:
incorporate the use of information technology in the marketing of their listings as it has a considerable effect on marketing of real estate in Lagos State.

Also, property owners should stop demanding unrealistic sales price and setting of unrealistic period of closing sale as it constitute a major problem/challenge to marketing of real estate in Lagos.

Since effective marketing influence prompt real estate transaction in Lagos state, real estate firms and companies should ensure they incorporate aggressive marketing in the marketing of their real estate.
Also, real estate firms and companies should have a business related website as it increases performance/productivity of marketing of real estate in Lagos state.

Management of real estate firms and companies (those who haven’t started) should also incorporate some marketing tools like: Bulk SMS, Email blast, Flyers and posters and Banners and boards since they are strong effective ways of marketing of real estate in Lagos.