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By Simeon Mpamugoh
Adefarasin Alex is the Chief Executive Officer, Arkbridge Integrated Limited, a real estate development company. He believes that one should not have all the monies before taking up opportunities in the real estate sector.
He revealed that last year Arkbridge came out with the idea of alternative construction method, which aims at finding a way to crash price of an average house by at least 50 per cent through innovative packages.
“We don’t come up with an estate, community, environment or vicinity that does not command excellence in its own nature. As investors, we must have taken time through due diligence in crafting it. And the joy of owning a house is actually in the crafting and the satisfaction of the crafter or inventor is what Arkbridge represents. Some would call it the architect, builder or developer, which is all encompassing. He speaks more on the kind of ambience estates crafted by his company should have, the need for alternative construction technology, potential in the sector, importance of real estate investment education and sundry issues.
Excerpts:
Ambience in estates crafted by Arkbridge
For us, we look at ambience in certain areas based on what people want in such community. For instance, Lekki commands riches and wealth. When you go into Ikoyi, an average man there is seen as also commanding wealth. There are some ambiences in some areas that are just for basic housing for an average man to live.
We are careful in creating houses in such areas. There are some, when you come there, you feel premium kind of experience, meaning they are prudently done. However, they are all excellently created with premium wealth experience. It could be in the finishing of the house or services one gets in terms of security, traffic signs or any other conveniences within the vicinity we have such project. It is just to carefully impress it on our minds that there is somewhere one can call home because there is a difference between a home and house.
Mitigating pollution and depletion of ozone layer
Whether we like it or not, the sub-sector of the real estate is experiencing a new vibe. People are beginning to be more informed about the sector. We are in an informative age where Nigerians are more aware of the vicinity, exposed about the environment. When you ask someone to buy a typical house, he would tell you he wants something more comfortable. Ideally, a developer needs to come up with something more ecologically friendly and green in nature. We have looked at ways of making housing greener to people. In Nigeria, they use prefabricated construction technology. There are some that would use eco-beam housing technology. But what we are using is brick making technology. This means that we use clay, which is called laterite, and mold it. Recall there was a time in Nigeria our forefathers were living in mud houses. The reason they stayed in such homes, which are still there in most villages even though some of them have broken sideways, is because it is nature friendly, healthier and livelier. However, the reason it was breaking bit by bit and didn’t look presentable is in the axiom that beauty is in the eye of the beholder. And there were certain composites that were not mixed with it at that time, which is what the brick making technology has come to correct.
Sadly, not everybody is familiar with it but we still have social problem in accepting ecologically friendly construction methodology. Some would tell you, “give me my brick mortar type of house, I don’t want your prefabricated, eco-beam or laterite red brick technology.” The reason such happens is because some of them are cognizant. However, most people who are not used to it see it as foreign in nature. Meanwhile, it is actually healthier. Nigeria is rich in laterite unlike cement, which some of its components are imported, including sand. But how can we be importing sand and cement, major components of building projects? Thanks to the intervention of Aliko Dangote, even though he still imports some of the ingredients to produce cement in the country. It tells us something; that if major components of building a house are imported into the country, it means that if exchange rates plummet, it will affect cost of construction. However, if we begin to look for alternative construction methodology, which is what we discovered last year – the red bricks technology where we looked at the possibility of building the kind of house an average Nigerian wants that would give him or her comfort, which red bricks would give. What red bricks would bring is green in nature, which means that when the weather is cold, your house becomes warm, when the weather becomes hot, which we know is the case in this part of the world where we are always feeling hot, it becomes cold. And with the climate change, when the weather is hot, we know it is extremely hot and same when it is cold. And when rain falls, it falls cat and dog. And when it is dry, there is serious dryness. The good thing about it is that technologies like red brick make it easier because of the composites. And if one mixes it with the right composite, it makes it solidified and stands the test of time. We can guarantee a house that would stand 100 years. Check those houses that were built with mud those days, some of them are still strong even though some of them look tattered because erosion came and washed some parts away. But if there are things that would hold it together like cement and composites, it would stand more years. It doesn’t only protect one from weather but also beautiful in the eye of the beholder.
Imperatives of last real estate investment forum
We’ve had two of such forums earlier this year; one was at Raddison Blue and Anchorage Hotel, Victoria Island. The second one took place at the Sheraton Hotel and Towers, Ikeja. It was aimed at sensitising members of the public about real estate investment opportunities in Nigeria. There is a sub-sector of the investment industry we have not tapped into, which is the real estate sub-sector.
Most Nigerians believe that for them to be partakers in the sector, they must own a land, buy a house or own a land and build on it. Nobody thinks he can put his money in property investment and it’ll begin to work for him. Truth is, one doesn’t need to own a house for him to make money from it. The sub-sector is alien to many people. More so, nobody is tapping into it. Those who are tapping from it today are the multinationals and government who would ask the public to come buy treasury bills and they would use the money to do certain things. Everyone knows they have not built up to 100,000 houses since the inception of the administration. It tells you that people should begin to put money where their mouth is. If you want to be financially independent, you don’t have to wait until you build a house of your own. The age of building a house of your own and becoming financially independent is over.
What you need is to build real estate investment portfolio whereby you invest in one place. Lagos still seems to be one of the highly demanded cities when it comes to rent in Nigeria. The rate at which people move into the state is high. The last time I checked, it was revealed that about 300,000 people move into the state on regular basis, which poses problems for the sector. It means as people are moving in, they want accommodation, and if they are asking for it, and as an investor, you put in your money where your mouth is, somebody needs the accommodation and as they are paying, you are making money. Nobody says for you to tap into the real estate sector you must own a house, nobody says you cannot make money first and from the money you are making, you build your own house. There is nobody who says A must come before B. The most important thing is that you are taking advantage of the market.
About 60-70 per cent of Lagosians have a land in one place or another yet 99 per cent of them don’t have a house of their own. It is one thing to own a land, another thing to have a house and also a home. And three things are involved: owning a land, house and home. Owning a home is when you have moved into it with your family. A house can be such as the one at Lekki that is empty while a land is the one without a structure, yet it is not yielding any income. Meanwhile, they complain they need to move from tenancy to a house of their own. It is not rocket science. Why not use the money for buying land to invest in a portfolio that would bring returns, increase it and buy you a house of your own. It needs a lot of wisdom of the right decision but fact remains that the real estate sector has not been tapped and most people have been bamboozled to believe that all they need is to own a house.
Portfolio advocacy
For us, we are not saying there is a particular portfolio one should choose. What we are saying is that the real estate sub-sector is a fresh one and those who are smart should tap into it. In the sector, there is institutional investor’s side which multinational companies in Nigeria are already tapping into. It is a sector pension companies, banks and insurance companies put in their money and that is why if you see some of the housing developments the federal and Lagos State governments are building, sometimes it is not their money. They do it with facilities from banks.
The banks are comfortable with it because as people are moving in, they are getting their money back because the market is already there.
We also have retail investors comprising the public who do not need to be corporate citizens before they become investors in the sector. All that is needed is the amount of money one has that can increase in returns overtime, add it up and buy a house or build on a land already acquired somewhere. In most cases, people are moved to that area by their critical thinking. Sometimes when you mention real estate investment, what comes to the mind of some people is, “I need huge sums of money to embark on it.” But who says one must have all the monies to partake of the opportunities in the sector, when one can start with as little as N50,000, depending on ones class and what one wants to achieve with the money.
Is institutional investor what we need to reduce housing deficit?
We need both of them. The institutional investors are needed to bring in more funds into the sector while the retail investor is the man in the street that can put in his money overtime and earn returns. The good thing is that an institutional investor would not put a dime into any project if he does not see some off-takers or individual interest investors, usually the public. Even though one goes to bank, they would insist they need some off-takers on ground; people that would take it. Most people don’t know about that, all that should concern a prospective investor is how to pool his little fund together into a project and see it materialise. There is a big company that can say; because the project is ongoing, they would get involved. This is mainly because they are seeing it happen. So both institutional and retail investors are significant and its merit is that one does not need to wait for treasury bill and fixed deposits, which many people prefer to put their money. I wonder why they don’t look at real estate investment, which is more viable.
The housing deficit keeps increasing on daily basis. Currently, we have over 20 million housing deficits in Nigeria. In Lagos alone, it is far more and close to half of the figure because majority are in Lagos. And as long as there is demand, there would always be a supply unlike other sectors, which is dependent on exchange rate, government influence, spending factors or indicators. And it is easier to predict. For instance, the rent on two bedrooms flat three years ago is not what it is today. It shows that a retail investor who is willing to invest would always make money. And that alone is why financial institutions would always want to invest people’s money in the sector. It is one sector in the whole world that is still a virgin. We shave not even scratched the surface. Someone said the sector in 2016 was valued at $13.65 billion. I’m faulting it by saying that it is categorically worth over hundreds of zillions of dollars. The value of rent in Lagos alone annually commands over a trillion and that is only the rental sub-sector. What if we begin to look at the commercial, residential and steel sectors? You will begin to see that the potential of the market has not yet been tapped. It is vibrant to some but for me, we have not yet started because of certain reasons such as unforeseen circumstances, factors beyond control like government policies that affect fiscal planning. We are talking about cost of construction, which is supposed to be dropping but as exchange rate continues to increase, it equally affects the sector because its major composites are being imported. And that is why it is more difficult for an average Nigerian to own a house of his own. A lot of people who had set 10 years goal of building a house of their own have never met it and after one year, the cost keeps increasing and inflation caught up with it. And by the time it is calculated over 10 years, one would be looking at 200 per cent inflation rate.
Integration of construction and building sector into formal sector
There is need for such integrated approach so as to improve the economy. The reason the sector is not regulated is because there is no integrated approach. Everybody is running a solo race. We don’t really have government regulatory policies that work for the operators. Government has no business in real estate business. They should pay attention majorly to business of regulating various sectors of the economy; formulate policies and maintain law and order. In the private sector, there is what we call internal control, which holds that the person who makes mess of the corporate governance should be the one to clean it. However, if the man who is making the mess is actually the one correcting it, how is he sure he is sincerely purging himself of the mess. And that is the scenario in the real estate sector. The regulators who formulate polices have not been able to enforce them such that among themselves, they are major players in the same sector while in actual fact their role should be regulatory and of formulation of policies. Not after you regulate, you come back to play in the sector. One cannot have his cake and eat it. There is need to play one and leave the other. A good example of a sector well regulated is the telco industry. The sector has, since it came on stream during the time of former president Olusegun Obasanjo, become a perfect example of a regulated system under Nigeria Communications Commission (NCC). If operators break the Act establishing them, the commission would penalise them accordingly and when this is done, it ensures laws are obeyed, lives are being protected and properties are safe and the investors are valued. And it will attract more investments in the sector. The same thing with the Nigeria Deposit Insurance Corporation (NDIC) that takes care of the mess in the banking sector; it is a guarantee for investors. The truth is that one cannot be the one policing and at the same time playing. It can lead to one shooting himself in the leg.
