THE IMPACT OF ESTATE INFRASTRUCTURE ON REAL ESTATE PROPERTIES IN NIGERIA.

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written by Deji Abisola

Worldwide, developing countries have experienced rapid growth in urban population as a result of sustained rural to urban drift, especially among the youth. This development is highlighted in Nigeria, as Africa’s most populous nation, with the tremendous expansion of metropolitan areas the country has witnessed over the decades to accommodate this global trend. Municipalities like Lagos, Kano, Benin City, Enugu and Port Harcourt have simply swallowed up outlying areas to become greater metropolitan areas – a continuing, seemingly irreversible, phenomenon.

In 1974, rural population in Nigeria was estimated at 75% of total population, but by 2001, urban population had reached 44% of the country’s population. This rapid urban growth portends serious implications for the environment and the wellbeing of the citizenry. Therefore, the situation demands a critical investigation of the state of affairs of the country and its dwellers (Okuneye et. al, 2015).

According to a report by the South African website www.pwc.co.za, the Nigerian real estate sector was valued at $40.66 billion in 2014. The report further states that the real estate sector is the fifth largest non-oil and gas sector in the economy, accounting for 7.78 per cent of the country’s GDP of $522.64 billion. Between 2015 and 2016, the three cities of Lagos, Abuja and Port Harcourt was expected to erect at least 10 skyscrapers valued at over N500 billion ($1 = N400). The report indicated that Lagos is the fastest growing city in terms of real estate value in emerging markets worldwide (Real Estate: Building the future, 2015).

The implication of this is the increasing land value of the entire land mass of major cities in Nigeria, especially Lagos and its environs. Erstwhile rural areas are rapidly becoming urbanized and commercialized through the activities of government and real estate developers, thereby attracting more investors to those areas. In such cases, it would be said that the area has “opened up”. Good planning and the provision of standard infrastructure in such opened up areas is important for smooth and sustainable growth.

Value Determination of Land in Nigeria

Real estate has no value if

(1) it has no infrastructure,

(2) it is not scarce, and

(3) it is not effectively demanded.

Real estate has significance only in as much as it satisfies human needs and desires. Real estate property value is determined by various factors, including the curb appeal, the neighborhood the property is located in, and the estate infrastructure built around or close to the property. The closer a real estate property is to, for instance, new infrastructural projects, the higher its value is likely to be.

A number of estates that are far from Lagos Mainland command a lot of value because of the infrastructure that are built in and around their axis. When an area is known to have good water supply network, 24 hour-electricity supply, paved roads, extremely tight security, good road layout, a central sewage system and treatment plant, good internet access, recreational facilities, clubs, laundry services etc., investors, business owners and other realtors will be attracted  to such a place, thereby creating better opportunities for residents.

The value of properties in the Ibeju-Lekki and Epe axis has increased since the introduction of the Lekki Free Trade Zone, which is an area designed for manufacturing and logistics and initiated by the government of Bola Ahmed Tinubu in 2003. The vision was expanded to accommodate a model city devoid of stress and accompanying social vices and the land area was increased to 16,500 hectares. The zone is located on the Lekki Peninsula, one of the fastest developing urban areas in Nigeria with an annual economic growth rate of 16.8% (http://uncova.com/free-trade-zone-in-lagos-a-good-dream-still-so-far ).

Amen Estates, Emperor Estate, Crown Estate, Mayfair Gardens and Friends Colony are just a few of the numerous luxury estates located in the Lekki Peninsula corridor. The average cost of purchasing a 3-bedroom luxury home at these locations is a whopping 65 million Naira.

At the Shiwama axis along the Lagos-Ibadan Expressway, there has been a sharp increase in price per plot of land due to its proximity to the Redemption Camp, which has built-in basic infrastructure. Estates like Treasure Parks and Garden and Glass Estate, which are also located near the Redemption Camp, have their own built-in infrastructure and the median cost of a plot of land in these estates is about N3.5 million.

It is worth noting that government did not provide the infrastructure found in these places; the relevant real estate developers have had to undertake this task themselves to build value into their projects. They include adequate water supply, electricity supply, paved roads, efficient security, good road layout and a central sewage system and treatment plant. Such infrastructure attracts investors and businesses like schools, health organizations, shopping malls, etc. to these locations, thereby ensuring steady development into the future.

Conversely, areas that are characterized by poor building quality, inadequate estate infrastructure and lack of government presence, e.g. some most areas of Ikorodu, like Ogijo,  Imota,  Iganke,  Agbowa,  Ijede,  Igbogbo,  Mowonla, Gberigbe, Igbo-olomu and  Isawo, land prices are markedly lower: between N500,000 to N1,500,000.

At other areas such as Magboro, Isheri-North, Parafa, Arepo, Ibafo, Mowe, and Ofada, all along the Lagos-Ibadan Expressway, land sells at the range of N700,000 to N10, 200,000 per plot depending on the location and available estate infrastructure. The values of plots of land in locations along this axis are influenced by the proposed Lagos/Ogun Mega City, the new Nestle factory at Sagamu interchange and the ongoing renovation and proposed expansion of Lagos-Ibadan Expressway into a six-lane expressway. Lagos state Government recently signed the 38 Km fourth mainland bridge project which will take off from Abraham Adesanya round-about to Ojodu Berger.  This significant infrastructure that is projected to cost close to N800 Billion will change the valuation of propertied along its path. (I will publish my report on this bridge and its impact soon).

Although property values in the aforementioned places seem to be cheaper, they are more expensive in the long run. When there is lack of basic infrastructure in an area, there is little to no investment attracted to that area, and consequently the place will experience very slow socioeconomic growth.

estates-without-instractructureExample of an estate without good infrastructure (source: googlemap)

In Northern Nigeria on the other hand, terrorism activities has devastated the real estate market. Residents of affected areas have fled en masse to relatively safer parts of the country, usually further south. The insurgency has affected the construction and real estate industry negatively. Property values have plummeted, since demand is quite low. In certain prime locations in Kano, for example, prices have decreased 30-40 percent to about US$36,000 per plot of land. Foreign investors who usually enter the market looking to buy choice properties and consequently lease or rent to willing tenants are now looking elsewhere because of the deteriorating state of security.

The property market remains a major victim of the insurgency up north. Vacancy rate is as high as 30% percent in Yobe, Adamawa, Borno, Katsina and Kano states. Similarly in Bauchi and Kaduna states, there are high vacancy rates in both commercial and residential properties, pointing to the continued frustration of private property developers in those states. Furthermore, the current state of affairs, marked by low investment, diminished commercial activity and constant insecurity exacerbates poverty in these communities, where development is unfortunately regressing rather than advancing.

How Little or No Infrastructures in Houses/Estates Affect Property Value and Residents

Infrastructural variables are positively and significantly correlated with growth and development. Lack of infrastructure limits investment and lack of investment limits infrastructure. This is evinced in the low level of investment usually experienced in places with little infrastructure.

Inappropriate infrastructure elevates poverty level, limits exposure and deprives many communities and residents of opportunities for economic growth, social progress and the competitiveness of the country in global markets. The quality of life to be experienced in any society depends to a large extent on the availability of social services, including health, education and urban infrastructure.

Benefits of the Estates Infrastructure on Property Value and Residents

The provision of infrastructure and the provision of housing are closely and irreducibly connected. To have housing that is sustainable, there is need for the provision of good infrastructure.

Investment in infrastructure in estates has benefits, as well as costs that are associated with the benefits. Public utilities such as electricity, water, sewage and roads and amenities such as schools and malls, adequate transportation, communication and power generation provide the potential to boost economy-wide productivity growth.

The aspects of infrastructure highlighted next are germane to real estate development in general and housing in particular:

  • Paved Roads: The construction of roadways is a major factor in making any area habitable, particularly areas farther away from the urban centre. For this reason, road construction can be a major boom for property values, both residential and commercial. At the same time, if a road construction excludes an area and benefits other nearby areas, it can lead to significantly diminished property values in the affected area as investment is directed to the other areas.
  • Access Roads: Roads that provide access to communities and business for ‘smart’ growth will increase property values. Roads that serve as barriers or redirect traffic away from particular areas will cause property values to fall.
  • Power: Living in an estate that boasts of 24-hour power supply like Amen Estate and Friends Colony, both in the Lekki axis, will significantly boost productivity and businesses, and investors will surely be attracted to such areas. Value of a semi-detached house in these estates is in excess of N60 Million despite the lull in the property market.
  • Security: Living in a secure environment ensures the safety of lives and property and the attendant peace of mind and increased productivity that entails.
  • Sewage Treatment: There are sewage treatment plants in some high profile estates. It is important to treat sewage because without treatment, it would remain a bio hazard, probably get into our water system (such as underground supplies) and become detrimental to health and even toxic to human, animal and plant life.
  • Recreational Facilities: Every estate should be equipped with world-class shopping plazas, clubs, supermarkets, pharmacies, fashion houses, boutiques and beauty salons among others. These facilities provide a good avenue for people to network.
  • Networking: Networking involves meeting and getting to know people whom you can befriend, assist or employ and who can potentially help you in return. This is easier and more convenient to achieve in an estate.

 

A Review of a Selection of Luxury Estates in Nigeria vis-à-vis Infrastructure

Amen Estate:  Amen Estate is located on Eleko Beach Road  in the Lekki Peninsula corridor of Lagos, often referred to as ‘New Lagos’, due to the proposed seaport, international airport and two Free Trade Zones to be located here eventually. The houses are built with red bricks; the homes are reassuringly solid and tastefully finished, with fitted kitchens and built-in wardrobes throughout the properties. Tarred roads, solar street lights, covered drains, street cleaning and maintenance, waste and sewage disposal services, treated water supply, armed security patrols and a fully equipped leisure centre are just some of the services to be enjoyed at Amen Estate.

amen-estate Homes with infrastructures at Amen Estate, Ibeju-Lekki, Lagos

Mayfair Gardens: Mayfair garden is unique estate located in Awoyaya, Ibeju-Lekki LGA of Lagos State, just fifteen minutes drive from Ajah. The estate is owned by HFP, who also the owners of Victoria Garden City (VGC). The estate is well organized, with infrastructure like children’s playground on every street, relaxation spot, and a football field. Other infrastructure includes good road network – all paved with paving stone, 24-hour security, constant water supply and water treatment plant. 

Lekki Phase 1: Lekki Phase 1 is considered one of the most expensive places to live in Lagos state. This is due to the state-of-the-art housing developments which are being created of late in this area. It has been predicted by many that the Lekki Peninsula vicinity will soon become the choicest place to live and work in Lagos. The homes in Lekki Phase 1 are typically quite spacious big and are in high demand. Lekki Phase I is situated in a fairly serene environment, with Five Cowrie Creek flowing past it and the vista of the Lagos Lagoon in the distance to savour. Homes here are typically
well-appointed and are attractive to expatriates due to their proximity to the business hubs of Victoria Island and Ikoyi.

lekki-phase-1A typical home in Lekki Phase 1

 lekki-phase-1-layoutArial View of Lekki Phase 1 Estate, Lagos

 Friends Colony: This is one choice estate in the Agungi area of Lekki where the well-to-do have chosen to make their abode. The estate is one of the most secure along the Lekki Peninsula corridor. It is within a few minutes’ drive from other estates like Pinnock Beach, Nicon Town, Femi Okunnu Estate, Victory Park and Northern Foreshore and from nearby facilities such as the new Shoprite mall at Jakande Roundabout. The estate boasts of a club house, lounge, restaurant, bar, gymnasium and children’s play area, including a swimming pool. It is a serene neighbourhood with good security. Before one can enter this estate, one must go through three gates for various security checks. The estate is a city on its own and you can virtually run your office from here due to the general availability of Wi-Fi internet connection. Friends Colony is served by 2 upstream internet providers – Vodacom backed up by a Main One fibre connection. The service has been up and running since 2012 and a large percentage of residents are on it.

friends-colonyArial View of Friends Colony, Agungi, Lekki, Lagos

Lakowe Lakes Golf and Country Estate: This estate is designed as an exclusive, secure and serene haven located some 25 minutes away from the bustling business centres in Lagos. Homeowners will enjoy the security and freedom that a gated community brings, as well as the luxury of living on a pristine 18-hole golf course, complete with clubhouse. There are sports facilities such as a swimming pool, squash, tennis and badminton courts. Lakowe Lakes Golf and Country Estate forms part of the larger “Lagos New Town” development project, which has been planned as a fully integrated, self-sustaining municipality that will incorporate first-class infrastructure. This new town has been modeled after other globally successful urban redevelopment projects.

lakowe-lakes-birds-eye-view      A villa style home at Lakowe Lakes Golf and Country Estate

REFERENCES

(1)  Ajayi M.T.A., Jimoh R.A. and Jimoh O.J. Effect of Infrastructural Development on Residential Property values in Minna. Department of Estate Management and Valuation, Federal University of Technology, Minna, Nigeria; Department of Building, Federal University of Technology, Minna, Nigeria.

(2)  Okuneye P. A., Adebayo K, Opeolu B. T. and Baddru F. I. (2015). Analysis of the Interplay of Migration and Urban Expansion on Health and the Environment: The Case of Lagos, Nigeria

(3)  Northern Nigeria Real Estate Market Suffers as Insurgency Escalates, accessed 8 September 2016, <http://afkinsider.com/57689/northern-nigeria-real-estate-market-suffers-insurgency-escalates/>.

(4)  Real Estate: Building the future of Africa, accessed 7 September 2016, <https://www.pwc.co.za/en/assets/pdf/real-building-the-future-of-africa-brochure-2-mar-2015.pdf>

(5)  Free Trade Zone In Lagos… A Good Dream Still So Far, accessed 8 September 2016, <http://uncova.com/free-trade-zone-in-lagos-a-good-dream-still-so-far>.

 

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