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Real Estate Developers: Exciting Promises Amid False Realities
Published Jan 21, 2023 IN Column, SATURDAY COVER,
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OUR cities and towns are constantly evolving. Whether people are moving from small towns to cities or vice versa, these areas must be able to accommodate the influx of people. This implies that adequate housing must exist alongside shops, eateries, hospitals, schools and other establishments, hence the need for estate developers because the government cannot do it all. Through real estate, developers boost local economies in small towns and big cities to meet the needs of the populace so that with the availability of more homes, businesses and other necessary facilities, towns can grow and their citizens can prosper.

Nigeria’s real estate industry has struggled for years, contributing less than 7 per cent on average to the GDP and less than 1 per cent to employment, according to a Price Waterhouse Cooper (PWC) report and according to the Nigerian Bureau of Statistics, which was cited in the PwC report, Nigeria needed 700,000 new homes annually but was only building less than 100,000 of them as of August 2012.

 As a result, affordable housing remains a pipe dream for the majority of Nigerian workers, the report said. “This means even when there is a supply of housing units, the price tag whether self-built or off the shelf purchase, is out of reach of Nigerian workers.”

Despite the fact that rent in rural areas are relatively low, people flock to urban areas in search of greener pastures due to a lack of investment opportunities, thus contributing to the reported 17 million housing deficit in Nigeria which some fraudulent real estate managers and agents have capitalised on, exploiting their sometimes desperate and gullible clients in their bid to obtain the basic necessity, shelter.

Real estate is one of the riskiest investment types in Nigeria, especially given the hazy regulatory landscape of the country and in just Lagos and Ogun state, about 500,000 cases of real estate fraud has reportedly occurred.

In order to defraud victims, con artists take advantage of their desperate need for a roof over their heads and affordable housing and since the introduction of online platforms and money transfers in the banking industry, fraud schemes have increased. The social media has also taken a big hit because various groups have been formed to defraud their members. The majority of victims were duped into wiring down payments to an account for upcoming real estate deals.

One of such is a clever property scam that has claimed 100 Lagos residents as its latest victims. The victims backtracked their story of being conned by a “silver tongued” property developer who stole the total of about N52 million they (the petitioners) paid him in their petition to the Inspector-General of Police, EFCC, and others. The victims claim that one Mr. Sameul Adeniyi Ogundana, also known as Prince, and his accomplice, Mr. Adetayo Olatunbosin, defrauded them of the aforementioned sum under the guise of renting them apartments at No. 8, Igbesa Street, off Ashimowu Bakare Street, Itire, Lagos State, in a petition signed by the trio of Uche Arinze, Innocent Odenga and Victor Odiete, on behalf of the other petitioners.

In their petition, the victims claimed that the so-called estate developers later traded the deposit slips they had used to transfer funds to the “developer’s” bank account for a receipt bearing the name of the Company, Alpha Enterprises.

When the victims tried to move into the apartment they had paid for but were unable to, they realized they might have been conned. At that point, the landlord of that property suddenly appeared, claiming to be unaware of the transactions between the petitioners and the “developer.” The victims called the “developer” frantically, but his phone was off.

In Nigeria, fake developers operate in a variety of ways, making it challenging to distinguish between a real estate developer and a con artist. However, there are only a few signs that could suggest to a potential tenant that the person they are dealing with is dishonest.

A few of these red flags could be the developer’s inability to provide the necessary documentation or a practice licence to support his claims, his insistence on having payments made through personal bank accounts, his inability to respond to some basic inquiries about the property, among others.

However, real estate fraud is not just limited to the monetary kind. Some Estate developers have become famous for erecting substandard buildings and contracting inexperienced workers on their construction sites.

In Nigeria, there is a severe lack of qualified and experienced contractors. This is another problem affecting the real estate market in Nigeria. The majority of Nigerian builders and contractors are charlatans who prioritize money and the initial mobilisation fee over hiring the best team of experts to complete the project.

When this happens, hiring decisions are made based more on availability than competence or having the right skills. One of the main causes of building collapse, according to experts, is due to incompetent crafts people and poor worker supervision.

Buildings that have collapsed in various locations of the country are also a result of subpar construction materials being used by some contractors. To put it simply, some of these building contractors in Nigeria lack the required training and work experience.

Currently, some structures in specific industrial areas of the nation do not adhere to construction standards, largely as a result of the negligence of the accountable building contractors. The majority of Nigerians appear to be concerned about this ongoing issue as well, and if it is not addressed, it could harm the country’s real estate industry’s reputation.

While avoiding these shady charlatans’ snares isn’t always an precise science, Mr. Emmanuel Obinna, a real estate agent in Abuja stated that people fall victim to property scams because they are negligent of the fact an opportunity that seems too good to be true is oftentimes just that- too good to be true.

He started: “A warning sign for this kind of real estate fraud is when the property is offered at a price that is below market value. However, if the victim decides to get carried away with the thrill of buying a property at a price well below his or her means, they won’t be able to see the warning signs. This type of real estate fraud is also carried out by real estate agents, albeit in the rental sector. While the resident is out of town for a few weeks or months, they rent an apartment that is currently occupied to unwary tenement seekers.”

Mr Obinna revealed that, typically, these agents present themselves as the tenant occupying the space because the apartment can occasionally be well-furnished and they tell the prospective client a story that the current occupant wants to move out and needs to get rid of everything, which is why the price is absurdly low. The unwary person pays and learns at the end of the day that “he just got played” because they are unable to refuse such a juicy offer, which is typical of Nigerians.

“Agents have also been known to rent out properties that have been listed for sale to potential tenants. People are constantly trying to move or find a new place to start a family, and it is a fact that there is a greater demand for homes than there are available homes.”

“These agents understand that so it is common for two or three agents to show the same house even though they are not the primary agent for the home because they network and are acquainted. A home that has been lawfully sold to another agent by a different agent may be rented out by that agent. By the time the real owners show up, the alleged tenants have been abandoned,” he explained.

In a bid to create awareness on the real estate scam, Mr. Obinna advised the general public to perform a thorough investigation of desired properties before making any form of payment.

“If they say it’s too good to pass up, check to make sure and if you have any doubt, clarify them. There will always be fantastic, legal deals. They might not come frequently, but they will come, so be thorough in your investigation. Ask questions and examine their track record. If they get irritated from your probings, then they are likely illegitimate” he advised.

Mr. Obinna pressed on online payment/ cheques over cash transactions. He said: “When making a payment, use a method that can be tracked. Demand to pay with a cheque or any other mode that keeps you informed if anything goes wrong. When things are not as they seem, you want to be able to hold someone accountable.”

Mr. Joseph Umeh, a realtor and the director of Pentland Realties Limited, noted that estate developers have contributed a lot to the provision of adequate housing and other facilities especially considering the fact that the government at various levels has abdicated their responsibilities to Nigerians with respect to providing shelter.

Umeh indicated that there is a 17 million housing deficit in Nigeria which has created a hike in property prices and a huge gap in the real estate sector and until the government does more for developers, the issue may remain insurmountable.

“Of all the people that require housing, the excess of 17 million do not have access to housing so there is a huge gap in this sector and until government does more it will be difficult to bridge this gap. This is one of the reasons why accommodation is becoming more expensive; there is an increase in demand and a shortfall in supply. Houses are not being built as much as it is demanded.”

Mr. Umeh asserted that for real estate to thrive in Nigeria, there should be proper regulation, ease and speed in obtaining proper documentation and reasonable funding.

“Funding is one of the biggest challenges in the real estate sector. If the Government can make arrangement for a housing fund and domicile it with either commercial banks or other development banks so that for instance if a developer has a hundred million naira and the government could match it with the same amount, life will be easier for the developer.”

He advocated for grants and loans at a reasonable interest rate, that if the government cound make it possible for developers to get funding at subsidized rates, it would go a long way in facilitating the real estate sector.

“Today if you approach a bank for a loan, the interest rate ranges from 25- 35% depending on the bank. In other climes, even in other African countries unlike South Africa and Egypt not to talk of Europe and America, the interest rate is in the single digit; 3-5% and not more than 9%. So imagine the business conditions of developers under these distinct interest rates.”

Reacting to the promises vs reality issue in house/land purchase from estate developers, Mr. Umeh stated that it was a major problem faced in the industry being that it is not properly regulated and just like in every other sector, several unscrupulous players abound amidst authentic businessmen.

“Some of these fraudulent developers carry out oversubscription. If for instance they have ten plots of land to sell, they may sell to fifteen people and end up being unable to satisfy all their subscribers.”

He stated that these estate developers may also sell properties under false pretenses, making false claims about having documents that they actually don’t.

“Some may promise to give you a certain number of blocks when you start building but at the end of the day they are unable to do that. Others may pledge to put certain infrastructures in place within a certain period maybe like road networks or power but when the time comes, they fail to deliver.”

He advised prospective customers to seek out tested and trusted real estate companies with a proper office location and registration from the Federal and State government as well as necessary certified developers association like REDAN (Real Estate Developers Association of Nigeria).

“It is wise to deal with realtors that are registered and have a reputation to protect. The client should only deal with companies that have over time maintained a track record of delivering to their promises. Of course do your own due diligence, and independent verification, if a company tells you that they have a certain title, ask them to give you a copy of that document so that you go to the issuing authority and confirm its authenticity.”

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