Key players in the real estate sector have forecast a bleak outlook for the all-important-segment of the economy in 2023, saying it will need government subsidy to perform creditably.
Economic activities in the construction and real estate sector contributed N20 trillion to Nigeria’s Gross Domestic Product (GDP) in the first three quarters of 2022, according to the National Bureau of Statistics(NBS).
The Chief Executive Officer (CEO) of Africa Housing Show, Barr Festus Adebayo, in an interview with Daily Trust, said inflation, high cost of building materials and double digit lending rates by mortgage banks impacted negatively on the sector in 2022 and that the trend will continue in 2023.
He said, “2023 is not going to be an easy road for the real estate sector unless we are going to have urgent government intervention in some critical areas.
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“The major obstacles to the excellent performance of the sector in 2022, were inflation, which affected it negatively, and then the high cost of building materials,” which he described as a terrible situation.
“High cost of building materials has raised the bar of affordability of housing in Nigeria,” he said.
He, therefore, called on the government to provide subsidies to the sector to ensure that it performs optimally to continue to create employment and boost the economy.
“We are heading into 2023 with a double-digit interest rate and that is why I said it may not be an easy road for the sector.
“However, for those who are building luxury homes for the rich, they can still make it. But building for the low-income earners will not be profitable in 2023,” he added.
He also predicted that some primary mortgage banks may convert to commercial banks in 2023 because of the tough economic environment in which they operate.
“In 2023, you will witness some primary mortgage banks changing to commercial banks where they can have more opportunities for survival,” Adebayo said.
He urged the private sector to collaborate and find alternatives to cement and other building materials that have made the production of houses very expensive.
The managing partner of Black Orchard Group, Nasiru Ibrahim, on his part said 2023 is going to be a milestone year for players in the sector.
He said inflation, Central Bank of Nigeria (CBN) policies, foreign exchange rates and the proposed removal of subsidy will all impact the performance of the real estate segment of the Nigerian economy.
Ibrahim also said the 2023 elections will impact the performance of the sector.
“A lot of things are going to change; we are hoping it’s for the best but the changes we come with a lot of pains. It is going to be similar to 2015 when there was change in government and a lot of real estate companies had to phase out because all the markets that were available pre-2015 disappeared. Some real estate companies folded up but some were resilient and they restrategised and continued.
“So I am predicting a similar trend in 2023. There will be changes as usual; some will fizzle out, some will soldier on and some will pop up but the business model is going to be a lot more responsive to the realities on the ground,” he said.
He said to survive the 2023 storm, investors need to take calculated risks and be able to hedge those things they can as early as possible.