With real estate accounting for about 4.22 per cent of the gross domestic product, there are calls for governments to develop a code of governance for real estate developers, estate agency practices that put end users and investors at the forefront to ensure healthy, transparent, and sustainable sector, writes CHINEDUM UWAEGBULAM.

There are indications that lack of proper regulatory framework in the building and construction sectors may be denying the country direct foreign investments and significant growth in the real estate market.

Nigeria has been facing huge challenges in the sector due to the inefficiency of the system and lack of a central governance structure to interface with the professional regulatory organs to manage developments and estate agencies.

In other climes, governments strengthen real estate market transparency, governance and resilience, linking it to the country’s vision and future, as well as creating and enforcing high-quality governance practices for the industry, while still leaving room for creativity and innovation.

The World Economic Forum revealed that credible, and access to performance indices or accurate information on supply, demand, property sales prices, ownership records and other important market variables reflect on the quality of Foreign Direct Investment (FDI) in the real estate market.

According to the forum, when the sector is not properly governed, there will be more individual investors, rather than high-quality institutional investors. In turn, this lack of quality investors affects everything from affordable sales and rent prices to disregard for laws protecting tenants’ rights.

However, experts have variant views of the regulation of the sector. While some agree that the sector is largely unregulated, leaving consumers with little recourse to fall back on in case a developer defaults on promises, others believe that professional regulatory bodies have powers to oversee various and emerging issues in the sector.

For the Managing Partner, Catalyst Realty Solutions, Chinwe Ajene-Sagna, the creation of a state-level Real Estate Regulatory Authority (RERA) in Nigeria will allow consumers to benefit from standardisation and protection, thus allowing for transparent functioning and growth in the sector.

The RERA model has been present in other countries in different forms. In the United States, regulations exist at various levels, although there is no single regulatory body. Instead, there is a series of organisations that regulate different aspects of the industry, while in the United Arab Emirate; a real estate bill was announced for the formation of a Real Estate Regulatory Authority (RERA) that will be responsible for overseeing transactions and providing clarity on who will govern real estate projects.

She explained that countries with an existing regulatory framework in the real estate sector are better able to attract investors. “Not only does it allow a transparent and effective functioning of the sector, it gives the authorities financial and administrative independence to aid in regulations, which reassures investors.

Ajene-Sagna said the rise of regulations is expected to benefit the Nigerian real estate sector once the state-level RERAs are in place and the necessary processes have been laid out. “Eventually, by integrating the necessary information via an online medium, regulations help further develop not only the real estate sector, but also support related segments of the market such as banks, insurance companies, and law firms in their dealings with the sector. This exchange of public and private information can help build a seamless platform for the sector, benefiting customers, agents, developers, investors and the public at large.”

A past president, the Nigerian Institute of Town Planners (NITP), Mr Toyin Ayinde, told The Guardian that the real estate sector is largely unregulated because it seems to be an all-comers affair. “A lot has been left to informality, and when any activity is dominated by informality, there are always too many players compared to the number of regulators,” he said.

According to him, the land management system appears weak as governments and families struggle over who owns what. He added that the land management system that promotes the allocation of land in plots to individuals is a weak system that negates the principles of sustainability in physical planning and human settlement development.

Ayinde said the housing sector is one of those areas badly affected. “We have an unsubstantiated deficit of housing, but the present system cannot even satisfy needs in any way. The city system becomes weaker as it spreads, making incursions into other lands that should have been available for agriculture, conservation and preservation for future development. The cost of infrastructure is on the rise, yet the available infrastructure is incapable of meeting current needs.

“The growth of urban slums is on the increase. You will observe that those estates that were thought to be the dream of many have begun to decline in value. ⁠Government must take leadership and interest in how human settlements are built. When settlements are functional, there is interconnectivity and harmony between the various sectors. This increases the efficiency of the system and boosts productivity, which results in greater wealth. The wellness of such settlements is guaranteed because urban planning is employed to achieve a sustainable land management system,” he said.

Ayinde said professionals should be at the forefront of providing relevant information to policymakers and giving sufficient enlightenment to other stakeholders to empower them to contribute to the development of their respective communities.

A Professor of Estate Management, University of Lagos, Austin Otegbulu, said the most unregulated groups are the estate agents, who are not professional estate surveyors. “Their number is growing, and they are mostly unprofessional and bring a bad name to the Nigerian Institution of Estate Surveyors and Valuers (NIESV). They are called quacks by estate surveyors and constitute a nuisance to the real estate profession. They may be professionals such as lawyers, architects, and bankers.

“These groups of unregulated estate agents are neither guided by professional nor ethical standards. They charge all sorts of fees, including tampering with clients’ money. Most of them lack the skills or knowledge to offer professional advice to their clients. Their standard of practice is low, unethical, and a source of embarrassment to the real profession. Their activity erodes public trust in the real profession. He called for certification of all practitioners engaged in estate agency by the Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON).

“This will ensure that all registered members have the requisite knowledge, skill and professional expertise to carry out their practice. The professional body should set standards, while practitioners should offer exemplary services, and possess good conduct. It is a necessity in the regulation of estate agency,” Otegbulu said.

An estate surveyor and valuer, and visiting lecturer at the College of Environment Sciences, The Bells University of Technology, Mr Biodun Olapade, noted that the poor regulation is a societal problem.

“There are laws to regulate the practice but members of the public are not ready to take it seriously, as no one has been punished for not following the rules or orders of regulations. This makes it an all-comers industry for production or development, and professionals responsible for distribution chain or consultancy.

“Real estate delivery as a product has many professionals, not only those in the built environment and engineering but those in law, accounting, marketing and banking, as well as sociology and psychology.

Professionals who are team players at each stage of development at public and private levels need to distinguish themselves as team leaders with a positive mind to make an impact aimed at paradigm shift and quality job delivery. The professional bodies and regulatory levels have roles to play,” he said.

Olapade urged the government to create easier access to land for developers at less cost, while approval costs and land charges should be properly regulated and made affordable. He also suggested that building materials need to be subsidised, and quality control measures made a priority, while government mandates commercial banks to plough a certain percentage of profits into long-term mortgage loans at an affordable rate.