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Innocent Okoro is the Principal Partner of MI Okoro and Associates. The captain, Ikoyi Gulf Club MI Okoro reckons prominently in the real estate business, management and consultancy in Nigeria. In this interview with PropertySmart, he discusses why Rent-to-Own is not possible in Nigeria and also ways of improving the practice of real estate business in the country. He opined that the salary increase by Federal Government cannot effect prices of properties. He talked about home-ownership, ‘Omoniles’, quacks in the industry, funding framework, building collapse, policies to encourage employers to create funding to support staffers through house ownership promotions to be promoted either by State or Federal Government. He said government should begin to moderate themselves and track down corrupt officials and make sure the right things are done as ways of stopping building collapse in the country. Excerpts:
By Maduka Nweke, [email protected]
How do you rate Rent-to-Own scheme as a way of reducing housing deficit in Nigeria?
The scheme is only possible where there is adequate job employment particularly in overseas countries where people have job security. But here in Nigeria, many people are not employed and those employed cannot even guarantee regular salary payment because they are not sure of regular income and cash-flow into the company. So the system of rent-to-own may be a good idea but is not tenable in Nigeria and cannot work. The impediment is because many people are not employed so may not sustain and maintain the payment structure. Even when they are employed, the salary they receive is so meager that it cannot support the scheme of rent-to-own system of buying houses.
Prices of property keep rising despite a lot of people leaving the country, what do you think is the cause?
Leaving the country has nothing to do with the price of properties because the age brackets of those leaving the country are not within the range of those buying or renting properties. Most of those leaving the country still fall within the dependent population so prices of properties cannot be dependent on the people leaving the country in this way. Prices of property will keep rising until government takes decisive measures that affect the factors of production. When you consider, the price of land, cost of processing the building papers, cost of building materials, cost of sand filling the area in the event of swamp areas not to talk of the excesses of those called ‘Omoniles’.
When you consider all these, you will see that prices of property will continue to rise.
BUA recently crashed the price of cement to N3, 500 per bag. Do you think such reduction can affect cost of construction in Nigeria?
Cost of construction in Nigeria cannot drop just because BUA reduced the price of cement. Remember cement is one out of the many other materials that go into construction. You have sand, wood, iron rods, stones or gravels and water. What of roofing sheets, power supply and other imported materials affected by dollar upsurge? All these without counting the cost of labour and other contingencies not mentioned here will help to make cost of construction in the country high. One of the ways of reducing the cost of construction in the country is by engineers leveraging on local content to do their construction. Again, government should encourage the manufacture and use of local building materials. By that way, not only that jobs will be created, the people will have access to the building materials.
Do you think the little increase in salary by government can affect the cost of renting and buying homes in Nigeria?
How much was the increase? It cannot affect it at all. If the price of renting a house is rising, it won’t be because of this little increase in the salary. In some people’s purse, there is nothing like salary increase. What is 10 per cent of N50, 000? What is 10 per cent of N100, 000 that can help to jerk up price of buying or renting a house? So, in short, prices of houses cannot be affected either positively or negatively by the little salary increase.
Why do you think there are no ‘orders’ from the FG for the housing sector to be workable?
There can’t be such laws because government does not control real estate. One cannot legislate on areas one does not control. If government controls real estate, it can make laws and even declare emergency in the sector. Government cannot jump into propagating laws that affect housing demand and supply because, if they do, they will run into murky waters because the price of housing is controlled by price mechanism. It is the price of building materials that determines the price of housing. If government start making laws that affect developers, architects, surveyors and other actors in the sector, start building and renting houses for people to rent and buy, then the law of demand and supply will suffer.
It’ll drag the sector into confusion that could affect it negatively. Government is being very careful in the way they control issues relating to laws in the real estate and I am not sure government will like to go into such confusion.
Laws relating to land and property in Lagos State like Land Use Act, seem not to be friendly with the residents especially in the area of Tenement Rate, difficulty is obtaining C of O. What do you think that portends for the residents?
The situation is not only in Lagos but everywhere. The land use act of 1978 imposes the position of trusteeship on governors to hold the lands of every state and everything about the land in trust for the people of that state and it is only the governor that can give the C of O for land bought or allocated to people. As usual, most governors will not want to delegate some power to commissioners, although, some do. Issuance of C of O in every state or country takes the same lag in time but mostly in states where constructions are regular and steady. That is why they delay and not that the governor has any reason to want his citizens to suffer.
It may be because the governor is very busy and most of them do not delegate the job of signing. Again, unless there is emergency, he will have to jump a lot of things to do that mostly when using it to appreciate patrons and benefactors. The governor may also use the delay as a tool to punish political opponents that are not in the same camp withhim.
Why are there so many estates and marketers marketing them, yet the pieces of houses are not going down?
The law of demand and supply is there but for the marketers, the higher the demand, the better. The reason why you have so many properties and marketers marketing them without them imparting on the price is because of construction costs and building materials. This will affect what the developers churn out to the public. The developers, unless they develop, there is nothing to supply.
So, if the supply is below the demand the price will go up and invariably, that will result in cost of housing. Every developer will like to cover the cost of funding and make his profits. So, the higher the demand, the better for them and because they are developers, unless they develop, there is nothing to supply. If supply does not outweigh the demand, the price will continue to go up and if many hands are chasing few properties the price must go up and that is the elementary economic law of demand and supply.
It is not their fault that prices are going up. It is not their fault that houses are very few but the fault of the government and the system that does not support the global access to easy and cheap funds. So, as much as they go to commercial banks and other open markets to access fund, it will affect the general price and irrespective of the law of demand and supply, the price must go up because the developer must cover the cost of interest and profit.
Building collapse has continued unabated despite policies by government to eradicate it. Why is it so?
Building collapse will continue to happen because there is no adequate government policy to checkmate standard of building construction and most government agencies compromise by taking bribe. If somebody is supposed to do three storey building, he will do five while they turn their eyes the other way. So, how do you now expect that the building will not collapse? There will continue to be building collapse until government comes up with stringent policy to deter people from building whatever they want to build.
A lot of construction companies, real estate companies are springing up everywhere without regulation, do you think quacks will stop?
There has never been a political will to regulate the real estate sector. Lagos State Government tried to do it but they are not succeeding and because most of the people are lacking on employment, most of these quacks jump into real estate whether they know anything about it or not. They just manage to get money and go into real estate and because government does not wield political will to control who enters with what qualification and making sure that those who are there maintain normal building codes, rules and standards, they on undisturbed. Unless they are checked, there will continue to be building collapse. It can be happening and government will say it will stop happening but it will continue to happen until we get to a level where before you build a house government will make you to go through certain processes. We are all there and we know what happens. Some will go to the local government physical planning and bribe them and they get away with some of these things. That is why building collapse is continuing.
Do you think government is doing enough to check the menace of flood encroachment on residential areas in Nigeria?
It boils down to what I was talking about the political will to control physical planning. If the physical planning officers are compromised, then there will not be any reason why flood will not continue to encroach on residential areas because you cannot build and block water ways and force water to stay. At times, landlords will convert residential areas to commercial areas, bribe his way and convert the area without minding the consequences of other users. It becomes undisciplined on the physical planning authority to enforce the building codes and the Land Use Act pattern and regulation of the state or the local government. I think it is a government failure for not controlling that area.
Do you think flood can be checked from residential areas and if yes, what could be done to check flood encroachment?
Again it is about building codes and regulations. You see, in most states, developers take laws into their hands by building on unauthorised areas like drainages. If government becomes slow in approving building plans, people go themselves to develop anything they like thereby blocking a major water way. There is no how flood can be controlled but if there is discipline on the part of developers and government making sure that they control the standard and regulations as it relates to building constructions, there is no how the place can be flooded. It is lack of solution on the government that can cause that and the only solution is for government to be more disciplined to ensure that people who develop properties do not go and build on drainages and water ways.
What advice do you have for the minister for Housing?
The problem is not whom the minister is, the problem is that federal or state government can appoint any novice to manage a profession he is not experienced in. in that regards, what do you expect? For instance, Lagos State just appoints anybody they like to hold any office just to compensate them for political patronage thereby not allowing the professionals have their way. This means putting square pegs in the round holes. That has always been the problem of Nigeria. So, we hope that the present Minister for Housing will think in that direction to understand the needs to use professionals to guide against making unprofessional policies and implementations.
