REAL ESTATE INVESTMENT AND ITS ASSOCIATED CHALLENGES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Real estate has continued to play a significant role in man’s evolution. It is not acoincidence that food, shelter and clothing believed to be the three essentialsthat sustain mankind, also have some linkage to land. Food grows out of landwhile shelter is affixed to it, and man’s clothing is made largely from what growsout of land. Indeed, whether in ancient times or today’s modern system, landconstitutes a significant index for man’s wealth, and as economic activities haveassumed more sophistication over time, land has continued to play a central rolein their development (Lewis , 1994). There is hardly any business venture that does not requireto be supported by some form of real estate: from the small business thatrequires real estate as offices from where its business can be organized, to themajor venture that needs it for its factory.

Consequently, through some very robust and well thought out land policiescomprehensively address challenges that are encounter in the real estate sector.This is not exactly the situation here in Nigeria and the result is that there is amyriad of problems in the real estate sector (Adewale, 2000). In the course of this study, the researcher will provide an overview of real estate investments in Nigeria and its associated challenges.

Real estate investment is intrinsically connected to the economicdevelopment and well being of any nation, thereby necessitating someintervention by prudent governments. Such interventions vary in degrees,depending on the nation. In Nigeria, individual could rarely lay claim to any part of it asowner and therefore could not alienate it without the consent of the head.

Proper financing is all-important to successfulproperty/real estate investment and development. Variousforms of finance on varying terms from diverseinvesting agencies are available to the property/real estate market. The principal field where various formsof investment finance are employed is that ofdevelopment where every loan has to be speciallytailored for an individual scheme and theparticular stages within the scheme.Since real estate and property development in particularinvolves huge capital expenditure, finance istherefore an essential input, the nature of whichis to provide capital to enable the enterpriseoperate commercially (Ratcliff, 1999). The cost and availabilityof finance for real estate development caninfluence the viability of such project. It is necessary to examine the nature of real estate investment in Nigeria with a view of finding solutions to the associated challenges.

1.2   STATEMENT OF THE PROBLEM

In recent times, research on real estate investment has been on the front burner has it is the major source of housing for man. In the hierarchy of man’s needs, housing hasbeen ranked second and as a result of this; housingprovision has become a paramount cornerstone ofthe policies of various governments both atfederal and state levels since independence inNigeria. The consequences of the rapid rate ofurbanization are most visible in the rapiddeterioration of urban housing resulting in urbanhousing poverty especially as there is noproportionate increase in the number of housingstocks.

During the period of economic boom in the 1970s in Nigeria, there was surplus capital, theeconomic climate then was favorable for thedevelopment of real estate and the prospect ofgain was over blown and so were the rate ofdevelopment. Due to the recent drop in the prices of crude oil world wide and corruption, government has not been able to invest in real estate. Overpopulation and urbanization has led to massive increase in property development.

Financial houses readilyobliged developers’ loans, as they perceivedminimum risks.

Since real estate developmentrequires huge capital outlay, there isalways the need for real estate developer to sourcefor fund. However, this study will examine the scope of real estate in Nigeria and its associated challenges with a view of making useful suggestions on the way forward for real estate in Nigeria.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To provide an overview of real estate investment in Nigeria.
2. To examine the challenges associated with real estate investment in Nigeria.
3. To identify the way forward for real estate in Nigeria.

1.4   RESEARCH QUESTIONS

1. What is the level of real estate investment in Nigeria?
2. What are the challenges associated with real estate investment in Nigeria?
3. What is the way forward for real estate in Nigeria?

1.5   HYPOTHESIS

HO: Real estate investment has no challenges in Nigeria.

HA: Real estate investment has several challenges in Nigeria.

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The findings from this study will educate the general public on the benefit of real estate investment and its associated challenges which will form the basis for guidance in decision making.
2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study on real estate investment and its associated challenges in Nigeria will cover the extent of real estate investment in Nigeria looking at the factors that has facilitated or hindered it. It will also cover the challenges associated with real estate investment in Nigeria.

LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8   DEFINITION OF TERMS

Investment: an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Real estate: property consisting of land or buildings.