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Maduka Nweke, [email protected] 08034207864, 08118879331
Regulation is a critical aspect of activities in any project anyone embarks upon. Not regulating a project is like a doctor not prescribing right doses to his patient and leaving him if he chooses to take all the medicine at once. Regulations are an ever growing feature of modern life. For professionals working in certain industries – finance, real estate, health and nuclear power, regulations shape every decision. For the project management community, implementing or maintaining compliance with regulations is a major source of project success.
In general, regulations tend to increase the cost of doing business. In many instances, there are excellent benefits to regulation that outweigh the costs. For example, fire safety regulations prevent dangerous overcrowding of buildings and make it easier for firefighters to do their work in case of emergencies. Few people would advocate a wholesale cancellation of fire safety regulations. Comparing Dubai to Nigeria, you will come across a sector that is largely unregulated, leaving consumers with little recourse to fall back on in case a developer defaults on promises. However, with regulations coming into force, the creation of state-level RERAs in Nigeria will allow consumers to benefit from standardisation and protection, thus allowing for transparent functioning and growth in the sector.
Unfortunately, not all regulations have such clear benefits. The sheer complexity of regulations can have negative economic consequences. For example, the Sarbanes-Oxley Act has discouraged some American firms from going public on the stock market. As a result, investors lost a lot of investment opportunities. Certainly, there are many who have benefited from this increased regulation. Accountants, real estate practitioners, consultants and lawyers aided their clients in implementing Sarbanes-Oxley in the early 2000s. Did society as a whole benefit from this effort to suppress corruption? That remains an open question. But the answer, without being superstitious is on the positive because they now, know which to use and when to use what. The real estate sector in India is growing at a rate of about 20 per cent per annum and this sector has been contributing to about 6-7 per cent to India’s GDP but it is not able to balance the supply-demand problem. The demand for housing has been increasing exponentially for the last decade. In Spite of the government’s efforts through various schemes, it has not been able to cope up with increasing demands. The ensuing situation was the lack of a governing body or set of rules, which private players used to their advantage. The biggest problem homebuyers face is a delay of projects which may happen due to various reasons like court intervention in land issues, finance, approval etc. Due to this, homebuyer has to suffer as he is doing a dual duty paying rent where he presently resides and paying tax for the home loan at the same time due to the delay of projects.
This, results from poor regulation of the sector. Furthermore, there is little or no provision for necessary compensation from the side of government. Fraudulent advertisement to sell a product is also quite popular and frequent in real estate. The main reason for flourishing fraudulent methods is an absence of any regulator and standard guidelines. Also, builders pay only 2 to 3 per cent interest in case of default from their side but when customers default (like refuses to buy) then they have to pay around 16 to 18 per cent which is unfair.
Around the world, governments of emerging economies are beginning to establish controls in industries with significant potential for growth, real estate among them. For instance, in the UAE, a real estate bill was announced for the formation of a Real Estate Regulatory Authority (RERA) that will be responsible for overseeing transactions and providing clarity on what governs real estate projects. In addition, there is an ongoing discussion on creating a federal authority for real estate regulation. At present, only state-level authorities exist within the Emirates, such as the Real Estate Regulatory Agency in Dubai which is part of the Land Department. This is an established norms for administering the conduct and regulations in the real estate sector. Through RERA, the department sets legislations to regulate the relationship between all contracting parties and organises the exchange process of properties.
The department also provides other services in planning, organising and evaluating operations related to real estate licenses. They also handle the organisation and development of real estate activities and monitor projects from a financial and technical perspective to protect investors. Another regulation with unique peculiarities is the rent control scheme (2008) such as the one recently implemented in Lagos. Rent control is a residual matter under the 1999 Constitution. As a result, most of the states in Nigeria own their individual rent control laws which for the most part have similar provisions as the Rent Control Law of Lagos State. In Lagos State, the Rent Control & Recovery of Residential Premises Law, 1997 (Lagos Rent Control Law) is intended to mandatorily regulate the rentals that can be charged for residential apartments in certain areas of the state. The RERA model has been present in other countries in different forms. In the US, regulations exist at various levels, although there is no single regulatory body. Instead, there is a series of organisations that regulate different aspects of the industry.
The Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) is the regulatory body for controlling and setting standards for real estate and valuation practice in Nigeria. The profession gained limelight in the country when, in 1969, a group of qualified Chartered (General Practice) Surveyors formed what is known as the Nigeria Institution of Estate Surveyors and Valuers (NIESV), as a non-profit voluntary professional organization to cater for the interests of the Landed profession in Nigeria. Six years later, it was accorded Government recognition by the promulgation of the Estate Surveyors and Valuers (Registration, ETC) Decree No. 24 of 1975, now CAP III (Laws of the Federal Republic of Nigeria) 1990. By this legislation, Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON) came into being as the Regulatory Body for the profession. But whether the body lives up to its responsibilities in regulating the conduct of its members and not the profession itself, the general public is there to determine.
The events of recent times and incessant building collapse in the country cast doubts on the capabilities of the regulators to checkmate the activities of quacks probably tagged the purveyors of fake practices.
This Institute is involved in various practices such as valuation of interests in land and buildings for various purposes: sale, mortgage, insurance, acquisition, probate, stocks and shares, balance sheet, taxation etc.
, valuation of construction projects, building maintenance management, property management and development, infrastructure and facilities management, land reform, land registration, planning and analysis, construction/ project management, property inventory and audit and many more.
This is reason people feel that despite a pronounced responsibility and role, some of the regulators outside the ESVARBON are also not doing enough.
Regulators in the industry have the power to register and regulate real estate projects and real estate agents. To publish and maintain a website of records for public viewing of all real estate projects for registration has been given including information provided in the application for which registration has been granted. To maintain a database on its website for public viewing and enter the names & photograph of promoters as defaulters including the project details, the registration of which has been revoked or penalised under the Act with the reasons therefore. To maintain a database on its website for public viewing and enter the names & photograph of real estate agents who have applied and registered under this Act including those whose registration has been rejected or revoked. To fix regulations for each area under its jurisdiction, the fees to be levied on the allottees or the promoters or the real estate agent. To ensure the compliances of the obligations cast upon the promoters, the allottees and the real estate agents under this Act and rules and regulation made there under. To ensure the compliances of its regulations or orders or directions made in exercise of its powers given under this Act. To perform such other functions as may be entrusted to the Authority by the Govt. to carry out the provisions of this Act.
Regulations are, however, not uniform from country to country. This leads to challenges, especially when dealing with international investors seeking opportunities in countries such as Nigeria. For instance, the Land Use Act of 1978 stipulates that all land comprised in the territory of each State in the Federation are vested in the Governor of that State and such land shall be held in trust and administered for the use and common benefit of all Nigerians. This means that all freehold interest – which means that you do not own the building and the land it stands on outright, in perpetuity – rests with the Government. Nigerian citizens or investors are entitled only to long lease terms on properties from the government and cannot outright own the land. This policy also requires an individual or corporate to pay mandatory ground rent. To address the limitation passed by this Act, investors have determined a work-around solution for this challenge by focusing on the length of the lease term. When seeking to purchase a property (which in turn can offset the value of the property), buyers can either seek to extend the length of the lease on their own or ask potential sellers to do so, or negotiate lower prices depending on the lease term.
