AN APPRAISAL OF INVESTORS CONFIDENCE AND PERFORMANCE OF THE REAL ESTATE SECTOR IN ABUJA, NIGERIA

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AN APPRAISAL OF INVESTORS CONFIDENCE AND PERFORMANCE OF THE REAL ESTATE SECTOR IN ABUJA, NIGERIA

ABSTRACT

The aim of this study is to appraise the level of investors’ confidence and performance of the Nigerian real estate sector. In attaining the aforementioned aim, this study is set to achieve the following objectives: identify the predominant types of investments/investors in Nigeria; identify investors preference factors for other dominant investments in comparison with real estate; ascertain the behaviour/attitude of investors towards the Nigerian real estate sector; measure the level of confidence of investors to real estate investment in Gwarimpa, Abuja and to assess the performance of the Nigeria real estate sector. The study makes use of the survey design which enables the researcher to take close-ended study of the research population and obtain all the relevant information needed from respondent through the use of questionnaire, interview, and personal observation. Statistical tools such as tables, percentage and descriptive methods was used to presents and analyzed the data gathered from the field survey which was considered appropriate for the research. A total of one hundred questionnaires were distributed while 93 were duly filled and returned forming 91% response rate. The study revealed that the common types of real estate investment in Gwarimpa are residential properties in different categories such as bungalow (detached / Semi-detached), block of flats and duplex with the mean value of 3.50 and above and that the Nigeria real estate sector is performing well, however, a lot still desired to done by all stakeholders involved to ensure and more fabourable environment. Finally, the study recommends that Nigeria government should create incentives for the real estate sector so as to encourage more investors into the sector for the development of affordable housing for Nigerians.

            Key words: Investors, Confidence, Performance, Real Estate Sector

CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

Investment is the laying down of capital in the present to enjoy future benefits or monetary returns, either as a lump sum or in a stream of installments (MCO Real Estate, 2016). It means different things to different sectors. Investment in real estate can be defined as the current input of financial capital into property and any form of improvement on land, in order to redeem future monetary benefits from the asset in question (Barbara & Jing, 2012).

Investments can come in various forms. The various classifications of investment include: real estate; a commodity that entails a building being traded at a certain price, shares; a part ownership of a publicly quoted company, bonds; a document stating a debt payment with interest to the creditor, pension funds; a pool of funds gathered from actively employed individuals and then reinvested by the pension managers, and a host of other investment media. According to a report by National Association Of Insurance And Financial Advisors (NAIFA, 2011), the investment pattern in Nigeria can be deemed an intensive one. The level of risk attached to shares and stocks quoted in the Nigerian Stock Exchange has forced investors to carry out deep analysis before investing. In the event that a stock is anticipated to perform well on “the floor”, an investor will likely lay down a large amount of capital seeing as most stocks are currently not performing relatively well on the stock exchange (NAIFA, 2011). Furthermore, a report by Estate Intel (2017) states that the current economic downturn in the country has created a scenario where the risk-prone investor shies away from stocks and bonds due to the unavailability of funds and uncertainty attached to the investment medium. The tendency is for investors to take the safest route and invest in real estate which is tangible and also bears the characteristic of hedging against inflation (increases in value overtime irrespective of inflation) (Estate Intel, 2017).

Real estate continues to be in high demand indicative of investor’s confidence since it meets the need of the public consumer (Estate Intel, 2017). A hotel, commercial office, residential estate or retail park will continue to perform well, whether on the basis of sales or rents as long as the product meets the needs of the consumer in terms of location, price and quality (Estate Intel, 2017). The author explains further that a look at the Retail Shopping Mall submarket, shows that the level of performance of this class of real estate investment is very profitable to the average investor. Investment powerhouses (such as RMB Westport, Actis, Argentil and Primrose) continuously invest in this asset class, proving that the outcome of real estate investments in Nigeria is still very positive (Estate Intel, 2017).

Investment performance is an examination of annual total returns produced by an investment; it is basis of making comparative analysis among investment options. Return on capital investment is a good measure of performance of investment portfolio, in that, it represents success or otherwise of the investment and the return on investment is referred to the amount of money earned or produced over the property investment period per the amount invested (Kalu, 2001).The most fundamental unit of evaluation of performance is the returns, and portfolio manager refers to this unit of measurement as holding period of return (HPR) (Baum, 2002).Holding period of return is important in calculating the rate of return on investment. Udobi, (2013) referred to this return as capital appreciation in addition to net rental income over a given period of consideration as expressed as the value of original purchase price. Real property return as a measure of performance is a constituent of two elements, income and capital appreciation (Hargitay & Yu, 1993).

The performance of the property investment has greatly increased in popularity over recent years and property itself has long fascinated investors. Unlike many other investments, such as shares bonds, property is a tangible asset. Property investment otherwise also called the real estate is also a medium where bundle of rights in landed properties are being exchanged. It is an avenue where transaction in land and property owners, building users, estate agents and lawyers is created. The property market is the sum total of all the smaller and larger markets operating in different types of interest in land (Ajayi 2006). It is therefore the aim of this study to not only appraise the confidence investors and performance have in the Nigerian real estate market, but to also identify the factors which may have caused such confidence levels, and to also come up with probable solutions in the event that investor confidence in Nigeria is low.

1.2       Statement of Problems

The amount of risk associated with real estate investments can be termed as long-term and also volatile in nature. It is long term due to the fact that real estate can only come into existence after a development is completed. Inherent in these procedures are various forms of risk such as statutory/institutional risk. This comes in the form of planning approval and zoning laws which the subject property must conform-to before further construction can take place. All these inherent forms of risk are deterrents to real estate investments by investors and thus reduces their level of confidence and trust in the real estate sector regardless of the amount of potential derivable from such an investment. While in terms of volatility, the real estate sector tends to be affected gravely due to changes in other external factors. A common problem faced by investors in Nigeria during the course of developing a property is the risk of inflation. This is exclusive of the internal characteristics of a subject property being invested in, as it concerns the value of a loan taken for the actualisation of a real estate project. In the event that the initial value of the loan taken by a developer drops overtime due to inflation, the interest rate charged over such a loan will be too high and hence not beneficial to the developer. The Nigerian real estate sector faces a lot of challenges, and it’s improvement is imminent to not just improving the local and foreign investor’s confidence, but also the Nigerian economy. Regardless of the above mentioned problems, this study will appraise investors’ confidence and performance of the Nigerian real estate sector.

1.3 Aim And Objectives

The aim of this study is to appraise the level of investors’ confidence and performance of the Nigerian real estate sector.

In attaining the aforementioned aim, this study is set to achieve the following objectives:

1. To identify the predominant types of investments/investors in Nigeria.
2. To identify investors preference factors for other dominant investments in comparison with real estate.
3. To ascertain the behaviour/attitude of investors towards the Nigerian real estate sector.
4. To measure the level of confidence of investors to real estate investment in Gwarimpa, Abuja
5. To assess the performance of the Nigeria real estate sector

      1.4 Research Questions

This study will aim to answer the following questions:

1. What are the predominant types of investments/investors in Nigeria?
2. What are an investor’s preference factors for other dominant investments in comparison with real estate?
3. What is the behaviour/attitude of investors towards the Nigerian real estate sector?
4. What is the level of confidence of investors to real estate investment in Gwarimpa, Abuja?
5. How is the performance of the Nigerian real estate sector?

1.5 Scope of the Study

This study focuses mainly on the various types of versatile investors who invest in real estate and other types of investments. Mainly the study focused on the level of confidence and the predominant class of investors in Nigeria has in the Nigerian real estate sector. Geographically, this study will look at the Investor confidence in Gwarimpa district of Abuja.

1.6 Significance of the Research

Real estate thrives in Nigeria due to its high demand, which is as a result of the rapid increase in population (NAIFA, 2011). This population includes families, traders and investors that view Nigeria as the commercial hub of not just west Africa but the entire African continent (NAIFA, 2011).

There is a need to have documented information on the performance and current level of confidence of these investors and this research will provide that information and will be beneficial to stakeholders in real estate such as real estate practitioners as it would bring to their awareness the state of local and foreign real estate investments in Nigeria.

It would also benefit the Government so as to enable them determine what sectors of the economy to invest in with priority being given to infrastructural development. It can also enable them determine if foreign investors are making the real estate market unfavourable for indigenes of Nigeria. As for the academia that would carry out research in this area, there would be data for the researcher and also for those who wish to further this research.

1.7       Operational Definition of Terms

Investor: This is an individual or group of individuals who presently put in financial capital into an asset, in order to receive returns; monetary or otherwise, from the asset in the future.

Performance: Performance is defined as the accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.

Real Estate Market: This is any form of interaction that exists between a willing buyer and a willing seller of real property, in an arm’s length transaction, after adequate marketing of the property, and after both parties have acted prudently and without compulsion.

Confidence: This is the level of trust an investor has in the future performance of the Nigerian real estate market with respect to the financial benefits that investor will receive from the market.

Real estate investment: Thisinvolves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development.

Investment: An investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future.

Real Estate: Real estate is the property, land, buildings, air rights above the land and underground rights below the land. The term real estate means real, or physical, property.

Property: In common law, real property (immovable property) is the combination of interests in land and improvements thereto, and personal property is interest in movable property. Real property rights are rights relating to the land.

1.8       The Study Area

Gwarinpa District is in phase 3 development plan of Abuja. It became popular when Gwarinpa Housing Estate in the district said to be the biggest housing estate in West Africa was built. There is also another residential area called Life-Camp in the Gwarinpa district. Most Construction companies in Abuja have staff quarters in Life-Camp.

Gwarinpa is about 15 minutes drive to the Central business district. It can be accessed through Murtala Mohammed Expressway (to Kubwa, Suleja& Kaduna) or from Ahmadu Bello way (Through Wuse 2). It is about 20Km from the Abuja Airport. Gwarinpa is mainly a residential area though recently some businesses especially service oriented businesses like banks and eateries are springing up very rapidly. Most of these businesses are located on the three major roads in Gwarinpa. The roads are 1st avenue, 2nd avenue and 3rd Avenue.

Within Gwarinpa Estate there are also some small estates. These include Federal ministry of works and housing Estate, War College Estate, FHA Estate, Citec villas, Abuja Model City etc. There are Real Estate opportunities in Gwarinpa. Some areas in the district are still developing; there are still some undeveloped plots in the area. Also within the Gwarinpa estate, some of the original beneficiaries of the houses built by government occasionally offer their houses for sale.

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SOLD BY: Enems Project|ATTRIBUTES: Title, Abstract, Chapter 1-5 and Appendices|FORMAT: Microsoft Word| PRICE: N2000|BUY NOW| DELIVERY TIME: Within 24hrs.