Nigeria’s housing deficit has worsened as pension funds significantly reduced their investments in the real estate sector, dealing a major blow to efforts aimed at addressing the N21 trillion housing gap. Over the past five years, Pension Funds Administrators (PFAs) slashed real estate investments by a staggering 91.6%, citing economic uncertainties and regulatory challenges.
Key Factors Behind the Decline
Several issues have discouraged PFAs from investing in real estate, including the arbitrary revocation of Certificates of Occupancy (C of O) by state governments, complicated regulatory processes, naira depreciation, and macroeconomic headwinds. These factors have also stifled the creation of Real Estate Investment Trusts (REITs), which once served as a primary channel for pension funds to invest in the real estate market.
According to data from the Pension Fund Operators Association of Nigeria (PenOp), PFA investment in REITs rose steadily until 2020, peaking at N239.28 billion. However, between 2020 and 2024, investments plummeted to N20.06 billion, marking a sharp reversal of earlier gains.
Why REITs Are Struggling
Real estate and pension experts attribute the downturn to several factors, including a lack of available REITs in the market and difficulties obtaining regulatory approvals from the Securities and Exchange Commission (SEC).
Mr. Obinna Lewis-Asonye, Micro Pension Manager at Stanbic IBTC Pensions, noted that uncertainty in the real estate sector has made institutions hesitant to set up REITs. “Some companies couldn’t secure SEC approval, while others shifted focus to infrastructure funds as an alternative to residential mortgages, which come with significant risks,” he explained.
Urban Planner and environmentalist Michael Simire added that naira devaluation and Nigeria’s worsening economic situation have further complicated the real estate market. “Vacant properties are becoming more common, reducing demand and discouraging new investments,” he said.
Impact on the Housing Sector
The reduction in PFA investments has exacerbated Nigeria’s already dire housing crisis. The country produces about 600,000 fewer homes annually than it needs, leading to a 20 million-unit housing deficit. As financial constraints worsen, landowners are struggling to develop their properties, while others are holding onto land for future resale, slowing down the market even further.
According to industry experts, the government’s policy of revoking undeveloped land allocations—intended to encourage rapid development—has had the opposite effect, scaring off potential investors who fear losing their properties.
Path to Recovery
Despite the current challenges, experts believe the sector will recover in time. Chief Meckson Innocent Okoro, Principal Partner at M.I Okoro and Associates, acknowledged the harsh investment climate but expressed optimism about the future. “The sector is resilient and will eventually bounce back. Companies are reprioritizing their portfolios, and once the economy stabilizes, demand for real estate will rise again,” he said.
Mr. Ivor Takor, Director at the Centre for Pension Rights Advocacy, called on the government to improve access to affordable housing by providing moderate-interest loans and other financial assistance, such as tax concessions and subsidies. “With the right policies and investment-friendly regulations, Nigeria can revive its housing sector and attract more institutional investors,” he added.
While the road to recovery may be long, stakeholders agree that the future of Nigeria’s real estate sector depends on a combination of economic stability, regulatory reforms, and targeted investment strategies to boost the creation and success of REITs.
