Experts: Interest Rates Stability Vital to Real Estate Sector Growth

Ugo Aliogo

Experts and stakeholders in the real estate sector have stated that the stability of the interest rate is vital to strengthening growth in the sector.

The stakeholders made this known at the West Africa Property Investment Summit organised by Africa Property Investment Summit in Lagos.

Seaking, the Director, Capital Markets, Jones Lang LaSalle (JLL) for Sub-Saharan                               Africa, Mr Pepler Sandri, said that the stage of the commercial real estate cycle had hit a relatively low point. 

“You could say it is the bottom of the cycle and we may be seeing the green shoots of recovery in the sector,” he said.

He revealed that looking back a few years; the COVID-19 pandemic put a halt to the market globally adding that since then each country has had different rates of recovery. 

He noted that Nigeria has also had macro issues affecting that recovery and as such is really at a difficult stage in the cycle.

“I think looking forward as interest rates stabilise and JLL’s house view is that across most developed markets, interest rates should be coming down in the next six to 12 months in the global developed markets. Whether Nigeria will follow that trend is still up for debate, “ he added.

On his part, the Head, Real Estate Finance, Stanbic IBTC, Mr Tola Akinhanmi, said that the real estate sector had remained resilient in spite of the economic challenges.

Akinhanmi averred that the government could play a role in creating access to land and investing in infrastructure to support real estate development. 

“Land availability and infrastructure expansion are key factors in reducing the housing deficit and opening up new areas for development, “ he said.

In his remarks, the Head, Marketing and Corporate Communication, Knight Frank, Nigeria, a real estate company, Mr Lanre Sonubi, said that the acceptability of real estate investment trust (REIT) in Nigeria depended on trust being sold to investors.

Sonubi said also, there was the need for education about how trust works in managing investments. 

“Trust also goes hand in hand with sustainability and succession planning. Listing real estate businesses on the Nigerian Stock Exchange can be volatile, but it offers opportunities for raising funds and increasing the attractiveness of the business to investors. 

“The real estate sector cannot drive inflation, but it is affected by inflation through factors such as building materials and labour costs.  Stable interest rates are needed for the real estate sector to deliver properties at a reasonable rate and manage them effectively.  Unfortunately, the current inflation situation in Nigeria is expected to continue until at least the end of 2025, “Sonubi said.

Also speaking, the Chief Executive Officer, Mr Dutum Company Limited, Mr Temitope Runsewe, said that the real estate market was still in its early stages and needed time to fully accept the workings of a REIT. 

Runsewe said: “However, looking at other markets, it is clear that REIT can be successful if given time. Real estate is heavily affected by inflation, so developers must be creative in how they approach it. Methods such as pre-paying for materials, managing projects efficiently, and hiring the right contractors can help mitigate the impact of inflation.”