In what looks like a win-win situation for both real estate investors and tenants if the rules of the game are strictly adhered to by all stakeholders, the Lagos State Government has mapped out strategies to kick-start monthly rental policy in the state.
To show the seriousness it attached to the new scheme aimed at easing the burdens of accommodation among citizens, especially the low-income earners, the state government said it has committed a N5 billion portfolio to kick start the policy as from next month – January 2022.
This new policy of monthly collection of rents is one of the outcomes of the just concluded second Lagos Real Estate Market Place Conference and Exhibitions, themed: “Lagos: 21st Century Real Estate Investment Hub.”
The two-day event was organised by the Lagos State Real Estate Regulatory Authority (LASRERA).
Other fallout of the forum also centered on ways to deepen real estate investment in the state, with the state Governor, Mr Babajide Sanwo-Olu, promising to further expand collaboration on the sector.
He promised to give 50 hectares of land to the Real Estate Developers Association of Nigeria (REDAN) for development.
Explaining details of the monthly rental payment scheme, which the state government said it has earmarked N5 billion for its kick-starting, Lagos State Commissioner for Finance, Dr Rabiu Olowo, said the initiative was part of the resilience policies of the current administration to ease the burden of yearly payment of rents on residents.
He disclosed that the scheme would commence with the residents in the formal sector, to be followed by those in the informal setting later in order to enable the state authority to the minimise risk.
Justifying the need for the policy, Olowo stated that the rental survey carried out by the state showed that 88 percent of tenants in the state would rather pay their rent monthly.
He said: “We had to pursue this by working with different relevant stakeholders and we now have a model that will work and enable Lagosians to pay their rent monthly. Landlords have nothing to lose because they will continue to receive their rent yearly and their default risk is zero.
“As government, we are already looking into the informal sector to involve them into this programme but we need to first begin with the formal sector to enable us to minimise the risk level. It is easier for us to verify how much those in the formal sector earn and for us to know what we will get and how we will get it. When we succeed on this, we will roll out to the informal sector.”
“There is an insurance pack that helps us manage all of the risks. We have a data plan that helps us fish out defaulters, “the finance commissioner added.
He said government is working with stakeholders especially financial institutions, noting that the platform is a social investment for the benefit of Lagos citizens and residents and not a money making investment.
Landlords, tenants react
One of the landlords in attendance, who identified himself simply as Abiodun, said the policy seemed to be protecting tenants, asking what would be the lots of landlords in the case of default in rent payment.
He alleged that he had a tenant, who owed him two years’ rent and had refused to pay despite all plea.
Another, Damilare Salami, wants to know what happens to people in the informal setting, pointing out that the new scheme as explained by the state authority and partners, seemed to be targeting people in the formal sector.
Another real estate practitioner and landlord in Lagos, Mr. Joseph, also shared the sentiment that the proposed monthly rental policy skewed toward the tenants; expressing fear that it might discourage investment in the real estate sector
He said “In our discussion, it appears all along that the scheme focuses on the tenants, which is good. But also in our discussion yesterday, we found out that we are looking for money for more investment in the real estate sector. Those of us who have made investments in the real estate sector are regretting today.
He added: “The reason is that when you buy a property and you give it out for rent, people don’t honour their rental agreement. I have a property on the mainland, nine flats, as I am talking today; only two of the tenants are paying correctly. We have those who have not paid their rents since 2019; and the legal process in the state prevents you from taking drastic actions.
“You go to the court; the first thing is that you have to give six months notice. After the expiration of the notice, you cannot do anything; you have to go to the court and it is adjournment upon adjournment. To get your property back is a problem. Then under this condition how do you encourage free flow of funds into the sector if those who are investing are being constrained of getting returns on their investment?”
While lauding the state government for the proposed monthly rental policy, the real estate developer noted that the N5 billion seed money was small compared to the volume of transactions in Lagos real estate’s market.
Joseph also seeks the intervention of the government for a major reform in the long processes of the court, which he said was frustrating and could discourage investment in the real estate sector.
He said: “Another thing, when you go through the process of the court, some someone like me, I have taken a decision that the money I invested on such properties, if I put it in buying land and leave it for 10 years, my returns will be 10 times. So how do we encourage investors in this scheme?”
Technical partner reacts
Managing Director / Chief Executive Officer, Nobleseeve Capital Management, Korede Adeyemi, described the initiative as ‘a market platform that speaks to social impact.’
“With what we are doing, every landlord will get their rent annually and tenants at the same will have the capacity to pay their rent on a monthly basis. This platform will be demand-driven because of the convenience of payment. People will able to log into the platform to search for houses.”
Government reactions
Shedding more light on the scheme, the Special Adviser to the Lagos State Governor on Housing, Mrs. Toke Benson-Awoyinka, said the state government has put together five components – insurance, financiers, landlords, tenants and legal apart from the administrative aspect, to midwife the policy and ensure it is easily acceptable by all citizens in the state.
She said: “For example, if you are in present tenancy and you want to get to this scheme, we have a process where we will unbind you from being a tenant and pay directly to the landlord. To a tenant coming under the scheme, the scheme goes ahead and pays that yearly rent to the landlord but gives you the option of paying that rent monthly after prequalification.
“The scheme will benefit the landlords as they have their rent guarantee and they have assurance of payment upfront, while tenants will also no longer have that burden of yearly payment of a huge amount of money.
“Tenants can therefore use their huge money for other forms of investments or for payment of school fees as the burden of payment of yearly rent is taken away from them completely. So it is a win-win social investment scheme, it is a good one and it is commendable.”
To come on board, Benson-Awoyinka explained that tenants must meet the qualification which includes ensuring that they have the capacity to make the payments on a monthly basis, assuring that the scheme has come to stay and that it would be sustainable.
Governor Sanwo-Olu remarked that the conference has given credence to the administration’s commitment to sanitise the built sector and reinstate investors/ investees confidence in Lagos’ real estate, adding that it also underscored its belief in public private sector collaboration as an effective strategy to build a real sector economy that gives no room for fraudulent and unprofessional practices.
He said: “The ultimate goal of my administration is to make the real estate sector attractive to investors and provide decent and affordable shelter on a sustainable basis for all Lagosians. The reason for this annual conference and exhibition is to facilitate the process of attaining this objective by identifying and removing all the obstacles through pragmatic actions and innovative ideas.”
Lagos State Attorney General and Commissioner for Justice, Mr Moyosore Onigbanjo, addressed the issue of land grabbers in the state, saying government knows it has become a burning issue for many people who acquired property. He advised any one faced with such challenge to report and file a petition to the relevant authority, noting that appropriate measures have been put in place to protect citizens’ right.
Member of the Technical Committee (Mortgage Sector) of the Financial Systems Strategy 2020 (FSS 202), Dr Ronald Igbinoba, stressed the need for regulations to protect buyers and sellers in the real estate sector. (Nigerian Tribune)