Thursday, May 8, 2014


There is a newly found over used word floating around the country at the moment which comes on the heels of our recently discovered very high GDP(Gross Domestic Product). It is called “Rebased”. In the Oxford dictionary the word “rebased” means “establishing a new base level” Since our GDP has found a new improved rebased level. I certainly hope our mortgage rates and housing finance structures can be also “rebased” in the near future. Mortgage rates and property prices at the moment are both too high to be affordable for the general population.

I have recently spotted two new Mortgage banks opening up in Lagos, which is hopefully a pointer that there is an interest in supporting the population in getting better mortgage rates to buy a roof over their heads. Mortgage interest rates still hover between 18% at the lowest and 22%, which is still much too high for comfortable payback on any loan, and does not make any real common sense! Why take a loan of N10million over 5 years, and have to pay back N2m in interest every year, without even paying off anything on the principal loan itself?  It is widely written how Nigeria now has the highest GDP in the whole of Africa surpassing South Africa for the first time even though we have also been internationally rated as one of the poorest countries in the world where over 70% of our population live in poverty conditions and can hardly afford one square meal a day. Between 1980 and 1996 the country’s poverty level rose from 28% to over 70%. High GDP anywhere else in the world usually translates into fair/good living conditions and access to housing and infrastructure, but as we can all see, this has not yet been passed on to the general population in Nigeria. It therefore appears that there is some sort of disconnect which needs to be rectified. Hopefully this will be done partly by recognising the need for affordable mortgage finance and homes. In Lagos state alone there is allegedly a housing shortage of over two million homes. I must in all fairness recognize the Lagos State Governor who is already doing something to rectify the shortage quite successfully under his administration with the HOMS scheme which provides low cost homes at affordable mortgage rates. We need many more of these schemes in the state and country as a whole. Most private developers now work out payment plans with buyers which suits both parties better due to the unaffordable high mortgage rates available from banks and private mortgage institutions

The recently concluded Lagos State Economic Summit Conference (Ehingbeti) covered the need for affordable housing, but agreed that this was not achievable without stable electricity supply! The Power Minister addressed the appalling power situation and stated that the country as a whole should not expect improved power supply anytime soon due to the ageing and decrepit power infrastructure that is currently in place and cannot adequately transmit the available power. The growing unstable power supply has slowed the country’s real estate growth enormously due to the inability for our industries to manufacture cheaper home grown building materials like tiles, plumbing and electric fittings, sanitary wares, light fittings etc. A lot of developers choose to buy materials from China and Europe, adding to the cost of the property which is already out of the reach of most people. As more and more developers are building apartments and multi storey units to maximise their costs, the Lagos State Government has put a limit on the number of floors for residential buildings outside of Ikoyi and VI at four floors only. Anything four floors and above will need lifts and the unstable power supply makes this unachievable for low cost to medium cost developments and buyers. Getting electricity alone right, would see an immediate improvement in all aspects of the economy including housing and standard of living. Housing provision is not just a private developer responsibility, but must involve all aspects of government, federal, state and local, to ensure quality affordable homes are provided under regulated standards. I know it is a lot to ask right now, but it is achievable if small steps are undertaken by all sectors to ensure that the next few years show some transformational growth in the much needed property market


A lot of people want to live on serviced estates but fail to realise that the estate needs extra funds apart from the rent in order to run the estate properly. Many conveniently forget to pay their charges after the first few times. Service charges can be expensive and can vary from N200,000 per year on medium income estates to N2.5million a year in highbrow areas like Ikoyi and Banana Island. The most common services can include general repairs and maintenance, cleaning of the communal areas like the roads, compounds and staircases, paying for the security, even if it is a mallam, also paying for the maintenance of the boreholes and water treatment. Residents can usually get away with paying minimal service charges for just the above mentioned services only. When residents expect swimming pools, gyms, tennis courts, club houses and 24 hours power, air-conditioners etc they must expect to pay heftily for these.The service charge is usually an estimate prepared each year of the running costs of the development. These could include for example Landscape Maintenance – from cutting the grass, maintaining communal gardens, watering and sweeping. This is particularly important in multi tenanted developments and those with commercial properties such as bars, restaurants or retail outlets that have communal areas accessible to non-residents. For high rise blocks of luxury flats, window cleaning would typically include all external windows as well as internal windows in communal areas. Lift Maintenance is another service that would require huge payments for servicing and repairs. Fire Equipment Maintenance in high rise blocks of apartments, offices and leisure facilities need to be installed and serviced regularly which adds to the charges. Buildings Insurance – in the case of apartments, full buildings insurance is required under the terms of the lease to cover the risks relevant to the development. Standard insurance risks might include fire, explosion, flood, sprinkler leakage, subsidence etc. Audit fees, management fee and salaries of all onsite staff must be factored into charges. Most estates in high brow areas are rented to multinational companies who pay rent and service charges three to five years in advance so it is easier to manage their services.

Service charges are typically paid monthly, but on some estates, commercial and leisure facilities; this is requested in six monthly intervals or yearly, to prevent nonpayment from residents. Even with these steps in place, it is common to get residents who will not pay or challenge the authenticity of the bills they are presented with. This can cause a breakdown in service provision as service provision must be continuous and if some do not pay the ones who pay will have to cover those that have not paid. It is therefore wise for the service providers to ensure a quarterly or bi yearly audit of service costs and present this to all residents individually and at Residents meetings. Services should as much as possible be collected in advance

Diesel amounts are best paid separately from service charges to prevent confusion with the two amounts. Diesel is usually on an as used basis and can vary from week to week depending on consumption and price, so auditing of diesel amounts needs to be accurate and detailed. Unless the estate provides prepaid meters that run on a fixed amount for both PHCN and generators power, it is usually a battle to get diesel payments from residents. A number of large estates have installed prepaid meters in individual home as a fixed amount per kilowatt hour. The residents are usually made aware of this when buying or signing up to their tenancy, so there is no dispute about the amounts later into the tenancy. On a particularly large estate in Victoria island, Service Charges has been a major source of dispute between the residents and the Management Company overseeing the provision of the services. Diesel and Service Charge amounts and have increased many times since inception, causing residents to challenge the amounts and services. This has become so bad that both parties have instituted legal action against one another. On another smaller estate in Lekki, service provision has broken down completely due to nonpayment of charges from some residents. The communal generator has stopped running and all the residents now have individual generators in their flats and terraces.  The borehole has not been serviced for months, a mallam now opens and closes the gates. Residents are not happy but realise that unless they all agree to pay collectively for the services and the staff, they will not enjoy living on the estate.

Service charges need to be factored into the rent and household budget in order to cope with the added costs of living on a serviced estate