Experts seek tax exemption for infrastructure in housing projects

AMID rising apathy by financial institutions on the provision of long- term funds for private real estate developers to increase the nation’s housing stock, experts have canvassed for policy changes that will give tax exemptions to investors into infrastructure in real estate development projects.

They also sought appropriate regulatory changes, especially modification of tax regulations, to truly harness the benefits of Real Estate Investment Trusts (REITs) and increase its positively impact in Nigerian property market as well as ensure government becomes major drivers of the real estate sector in the country.
The experts met at the 3Invests Limited’s Real Estate Unite conference staged in Lagos, last week that provided a platform for global real estate leaders to discuss opportunities ad issues in Africa’s real estate market.

According to a recent PWC report, the global investible real estate universe will expand substantially, leading to a huge expansion in opportunity, especially in emerging economies like Nigeria. PwC projected an increase in real estate’s contribution to the gross domestic product (GDP) of Nigeria from $9.16 billion to $13.65 billion in 2016 if the right environment is created

The Chief Executive Officer, 3Invest Limited who set the tune of the conference noted that the programme, “ unites real estate professionals from all aspects of the built environment sector, offering immeasurably potentials in the region’s real estate market.
“For long term viability of the sector, we believe the drivers are harnessed to create opportunities, resulting in transformation that must be hinged on the principles of sustainability for it to be effective.”

Specifically, the Managing Director, UACN Property Development Company Plc (UPDC), Hakeem Ogunniran lamented the dearth of clean land titles and proper legislation on REITS in Nigeria. “What we do now, we try to apply the law on collective investment scheme, and the right framework has not been created for it. Why we have not seen more REITS in the market is the regulatory process is still very challenging.
“What they have done in South Africa has helped to leapfrog that process. Up to 2013, they had two systems, they streamline the process by creating a unified system, which brings them inline with international best practice in terms of capital gains tax and structure of the companies.
“In the largest market for REITS in the United States, they have 250 listed REITS it is largely because there is framework that recognizes REITS as flow through investment vehicle. If you run a law where you’re applying the law of mutual funds and collective investment schemes to REITS, you cannot create the right opportunities, which REITS intend to put on the table.”

For Olumayowa Ogunwemimo, the managing Director, FSDH Asset Management Limited, the inability of developers to raise long-term funds have hindered production of houses and many developers have gone into the developments using bank loans, which come with short finance and high interest rates. “The high interests significantly increase the cost of houses and units, which are passed to the end users.”

The Managing Director, FHA Mortgage Bank Limited, Mr. Roland Igbinoba noted that unprecedented shifts in population would drive changes in demand for real estate. Africa is becoming much more populated, creating more demands for assets; and real estate assets constitute 54 per cent of the world’s wealth.

According to him, policy response framework must be formulated with the consideration of sustainability principles, with particular attention to population growth, urbanization limits and the use of natural resources.
“Increased political stability in Nigeria and increased participation in local partnerships will continue to ease investors’ concerns relating to investing across Nigeria,” he said.

The principal and West African Specialist at Stanlib, Nnema Byrd, who predicted that construction activity in Nigeria will remain resilient, said that transformational infrastructure is essential to opening up new markets and promoting middle class growth as connections to road, rail and public transport vital for urban success as well as new infrastructural links between countries, towns and cities.

She said: “Low oil prices have led to suppressed growth in commodity-exporting countries, as the weak oil sector put downward pressure on growth and activity in non-oil sectors. Nigeria’s declining GDP growth to impact SSA 2015 GDP growth forecast, down from previous expectations at 4.2per cent, but picking up in the next two years.”

An executive of the Stanbic IBTC Bank Plc, Tola Akinhanmi revealed that emerging trends and opportunities in real estate development will include a shift from luxury to middle income housing, potential to bridge housing gap with new residential development when mortgage reforms become effective and increasing influx of international brands and retailers from Middle East, America and Europe.