… Calls for collaboration between government and real estate developers to tackle challenges
… As some experts see unique opportunities for real estate investment
The Housing Development Advocacy Network (HDAN) has raised concerns over the recent hike in petrol prices, warning that the increase, coupled with high-interest rates and fluctuating exchange rates, will have severe repercussions on Nigeria’s real estate sector.
In a statement released by HDAN’s Executive Director, Festus Adebayo, in Abuja, the advocacy group highlighted the cascading effects these economic challenges will have on developers and the housing market as a whole.
Adebayo noted, “The recent hike in the price of premium motor spirit (PMS) from N568 per litre to N855 will only compound the already rising costs in Nigeria’s real estate sector. This will inevitably lead to higher property costs as developers are left with no choice but to pass on these increases to consumers.”
He further emphasized that the real estate sector, like many others, is feeling the strain of the current economic environment. “The instability in exchange rates, high-interest rates, and now the petrol price hike are creating an unsustainable situation for developers. This will also push up the costs of building materials, house purchases, and rents at a time when the disposable income of the average Nigerian is dwindling,” Adebayo stated.
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The Nigeria National Petroleum Company Limited (NNPCL) recently reviewed petrol prices upwards amidst ongoing fuel scarcity across the country. HDAN warns that this development will exacerbate the challenges already facing the real estate sector, which has been grappling with inflationary pressures and a sharp decline in the naira’s value. “As Nigerians allocate more of their income to transportation and energy costs, they will have less to spend on other essentials, including housing,” Adebayo explained. “This scenario is likely to further increase inflation, adding even more pressure on developers.”
Interestingly, while HDAN and other stakeholders lament the negative impacts of the fuel price hike, some experts argue that this situation could present unique opportunities for real estate investment.
As transportation and manufacturing industries slow down due to rising fuel costs, investors might increasingly turn to real estate, which is seen as a stable and relatively low-risk option. Higher transportation costs could also drive demand for properties located closer to city centers and commercial hubs, potentially boosting property values in these areas.
However, HDAN maintains that the immediate impact of the fuel price hike on the real estate sector will be largely negative. The organization urged the government to engage with stakeholders, including the Real Estate Developers Association of Nigeria (REDAN), to find solutions to the sector’s challenges.
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While the petrol price hike presents significant challenges for Nigeria’s real estate sector, governments may introduce policies to promote economic stability, including incentives for real estate development. “Ultimately, the fuel price hike underscores the need for a comprehensive approach to address the challenges facing the real estate sector,” Adebayo concluded. “Collaboration between the government, developers, and other stakeholders will be crucial in navigating this difficult period and ensuring the sector’s long-term sustainability.”