By Maduka Nweke, [email protected]
The rise in fraudulent activities perpetrated by some dubious elements within the Nigerian property market is said to be responsible for the low level of investment by Nigerians in the disapora.
In this interview with Daily Sun, Managing Director and Chief Executive Officer of Metro Group of Companies, Mr. Abdul Adekunle Rasheed, said the lack of trust by Nigerians in the disapora is one of disincentive that the firm seeks to address in the Nigerian property market.
He added that Metro Castle was born out of the need to provide a community solution to the housing crises in the country.
He, however, decried the continuous rise in exchange rate, saying this has a corresponding effect on the cost of raw materials.
He urged the Government to create a window for cheap access to fund, especially for developers to bridge the country’s huge housing deficit and ultimately boost the economy.
Excerpts:
Meeting clients expectations amid harsh operating environment
The major hurdle that has created a bottleneck for the construction industry is foreign exchange. The Foreign exchange has increased astronomically with a far-reaching effect on cost of raw materials.
There is also the rising cost of energy As at today, diesel cost well over N1,000 per litre. The truck delivering to the site uses diesel, the truck bringing you granite from the quarry uses diesel and the dollar affects the sale of diesel. So for us, it has been a challenge which is why we said we have to adjust our strategy to build in smaller phases so we don’t incur unnecessary debt and then we can advise our clienteles appropriately on the price shift and price change.
Mortgage financing option
Ideally, there should be such a facility that enables customers to pay for their properties on installment without stress as it is done in advanced countries. That way, civil servants will be able to afford new homes. So, what we are saying is that if a developer is in Nigeria, the materials he is using will be 80 per cent made in Nigeria. Consumers should be strengthened to purchase things like that so that the Nigeria market can move.
Survival of local brands
This is the same thing we are canvassing in real estate. The local developer must be encouraged for have to have a boom in that sector.
That is how Bill Gates employs and that is how they generate tax and internally generated revenue. From workers salaries, you pay the FIRS and local taxes from there.
In our firm, we have the capacity to build 1000 houses in five years, scaling up to 2000. We are currently starting an estate of 150 units. So it is not the staff strength that is the issue. It is just the sensibility of the market that we are in. We are trying to be careful not to overdo and at the same time trying to be careful not to under do but just to remain in the market.
Operational setbacks
Our major setback like I said earlier is cost of funds. An average bank is doing between 28 to 30 per cent interest. It takes us about 18 months to complete one project site. In this regard, if you take a N1 billion loan you are already indebted to the tune of N400 million when you are done. How much is the profit, how much is your capital base? The price movements in relation to daily exchange rate differentials are a big problem confronting us as an industry.
My focus is cost engineering, so if I cost a project, I will like to go on but when I wake up tomorrow, there will be a price change in the cost of materials resulting in the project price jumping up by 20 or 30 per cent. SO at what price will yo end up selling. Remember you also have competitors to contend with. If you mark up too high, you lose your clients to other competitors which is not too good for some trying to service bank loan.
You will observe that the real estate business has slowed down because if you sell a house for N60 million now, in the next six months you wake up and calculate the cost of materials you find out that the cost of the building is no longer N60 million. That is why most of them run into trouble. So, it is better you build what you can with your money and put your mark up and sell it. If you don’t sell it on time the value of your property is still there than selling and being unable to meet the expectations of the market. That is usually what happens lately.
Establishing Metro Castle
Metro Castle was born out of the need to provide a community solution to instill trust, especially for Diasporans.
The company was conceived out of frustration as we hear stories like there is no house, the house is not ready and all that.
The idea was conceived in 2018 to provide the community with a conducive environment, good housing, affordable housing and good environment. We hear stories like you bought a house from one engineer, one developer and the house has not been ready for two years, you got duped and all that.
At Metro, our ultimate goal was to create good communities with good people with good infrastructure and facility in place and also bridge the gap between fraudulent engineers and developers.
When we hear about the Nigerian market in the diaspora when I was in school then, you don’t feel like sending money to anybody to do anything for you. But we wanted to bridge that gap to make people more comfortable to invest their money in Nigeria. We began the journey in 2018 and our first target was to provide 300 housing units and 3 retail outlets because we listen closely to the market to know what they need. We engaged developers to start putting up the houses based on the people’s needs.
We chose Atlantic nominee because the documents are very genuine and accessibility to the road was very close. We also knew that Lagos State Government was projecting the environment at that time as we were talking about the free trade zone, the international airport, the Dangote Refinery and many other critical industry. The cost of land was also attractive for community development.
Like I said, the cost of building a house in Lekki is the same as building a house in Abraham Adesanya, the plot of land is the same, the cement is the same. It is the cost of land that is the driving cost factor. But we want to be more cost conscious because we are providing these houses for the typical middle class. We therefore need to cut costs. We looked for where the land was cheap and that is why we found ourselves here. Behind the journey in 2018, 300 hundred houses were conceived.
We listened closely to the market to know what they wanted and not the random developer putting up structures and putting up housing units based on his ideas. From our research, we found out that people need smaller houses like two bed rooms, three or four bedroom terraces and fewer bedroom apartments. So we did some research and got the information and found their needs, and did our designs.
With our findings, we were able to deliver at least 80 per cent of our goals but we would have completed the100 per cent but we lagged behind due to COVID-19. We lost about a year and half during COVID-19.
Just to showcase one or two things, we bought our first land in 2018 at N12 million and that was for the first estate we built. Now the land costs N70 million within four and half years and we know development is the driving factor for land cost anywhere you go. That shows that investors really appreciate our development here.
We are equally very fortunate to have very prominent sportsmen to invest in MetroHomes. We have had a number of Footballers who have come and bought a sizable amount of investments. We have Footballers like Ahmed Musa, Layinka Peters, Leke James.
Recently Layinka Peters bought a whole mini-court for his daughter’s birthday in MetroHomes. Musa was one of our first buyers; he bought 21 units in 2019. Recently he acquired another 28 units again in 2021.
Growth
I can say as regards community development, we are still very young. We are only five years in the community development market and to build a community, one community can take you 10 years depending on the size of the community. However, our ultimate goal is to ensure that this first community is very prime and very attractive so that other regions or states in the country can replicate almost everything we have done here. We have had all kinds of invites but we are trying to take everything one after the other. But, yes we have openings in different other locations.
Eco-friendly environment
Yes, I can say Nigeria has the best weather for doing eco-friendly business. However, the cost of putting up the equipment will drive up the cost of the house. So imagine us doing a sort of entire solar generated estate. If you cost an average solar now you know what I am talking about. Even the one in the environment can’t power your A/C, it can’t carry everything. The inverter can’t carry it as well. So, first of all, it will drive up the cost. But I had to do one research in more advanced countries to realize how much the government is involved in carrying out environmental and ecofriendly homes.
In the US now, if you generate electricity with your solar panel they will buy it and pay you for it. There are so many incentives they are putting in place to ensure people have ecofriendly homes. It is not something an individual can decide to do, even some people are trying to look for ways around it, and they are mostly public private partnership (PPP) because the funds involved are huge.
However, we still preach the concpet of ecofriendly estate for simplicity where you have the inverter.