Can Prop-techs solve the issue of affordable housing in Nigeria?
For the uninitiated, Prop-tech is the use of information technology (IT) to help individuals and companies research, buy, sell, and manage real estate [1]. Simply put, it is the use of technology to develop innovative solutions in the property industry.
The property technology (Prop-tech) market interjects with other technology-enabled markets such as construction, financials, collaborative economy, and others, to cover every aspect of the housing industry.
Currently, Prop-tech companies such as Compass, Kodit.io, Pi Labs, Fundrise, and others are making news headlines for raising millions of venture capital dollars. A notable mention is the on-going Initial Public Offering (IPO) roadshow by WeWork and the controversy surrounding its founder, Adam Neumann.
In 2018, the global venture funding was $255billion in which Prop-tech came in at $14.85billion (5.8%) according to Unisuu.
On the African landscape, despite the funding size being small relative to other markets and concentration of the companies in Nigeria, Kenya, and South Africa, more venture capital investments in prop-tech startups have been made this year in comparison with the previous year.
Prop-tech startups like Flow, HouseMe, and Cofundie (A MEST Africa Portfolio Company) raising significant funding is a pointer to the fact that the real estate industry is ripe for disruption by emerging technologies, innovative thinking, and collaboration.
Nigeria’s Prop-tech Market
The Prop-tech market in Nigeria is really not new as companies like PropertyPro.ng (formerly Tolet.com.ng), Hutbay, Nigerian Property Centre, Castle Lifestyle and others have been in existence long before new entrants.
In order to fully understand the recent Prop-tech landscape in Nigeria, Estate Intel visualized a property matrix to identify and segment the various Prop-tech startups into several sub-sectors of the housing industry such as investment & finance, listings, data analytics, building & construction, community management, etc.
The Nigerian Situation
According to the World Bank, the housing deficit has been estimated at up to 17million and is growing at about 20 percent a year requiring about 1million units to be built every year so as to bridge the gap.
With Nigeria’s population growing at the rate of 2.7% annually and an increasing number of people migrating to urban areas in search of better opportunities, there is a corresponding increase in substandard housing infrastructure needed to effectively accommodate the influx.
Although the Nigerian real estate sector is the 6th largest sector in the economy, the country has a homeownership rate of about 25 percent, lower than that of Indonesia (84 percent), Kenya (73 percent), and South Africa (56 percent). [1]
The major issues that continue to affect affordable housing in Nigeria include inadequate access to finance (development & mortgage), access to land, lack of skilled labor, the duplicity of sale, lack of disposable housing income, high construction costs, rapid urban migration and more.
Affordable Housing
Affordability means different things to different people, especially in the real estate industry. Housing expert and founder of Northcourt Real Estate, Tayo Odunsi opines in his best-selling book titled, Affordable, that there are five essential participants in delivering affordable housing i.e. government, private sector, professionals, community and individual. Each role plays a pivotal part in ensuring that affordable and sustainable housing is delivered.
The key to unlocking affordable housing in Nigeria requires collaborative efforts by stakeholders especially Prop-tech companies who mostly operate in isolation due to perceived competition creating a fragmented ecosystem.
“Nobody wins when the family feuds” – Jay Z, Music Mogul & Rapper
More value can be unlocked in the real estate market if there is a form of partnership. Imagine an exchange platform where real estate crowdfunding platforms such as HouseAfrica, Coreum, Cobuildit, OneSqm, and others can agree on a unified token for the trade of real estate value among its investors similar to the Stock or Bitcoin Exchange. This will allow investors to own a diversified portfolio of assets in high growth areas and accumulate disposable housing income which can be channeled into homeownership.
Another form of collaborative effort involves equity investments. Say, for example, large traditional real estate companies like Mixta Africa, NedcomOaks Limited, Brains & Hammers, etc. invest in Prop-tech startups to expand their offerings vertically using technology. Notable mention is the recent investment in the VistaFront crowdfunding platform by LandWey. More forms of investments are encouraged for the ecosystem to thrive.
Mergers and acquisitions are another way in which stakeholders can collaborate towards the growth of the ecosystem. An example of this is PropertyPro.ng(formerly Tolet.com.ng) acquiring Jumia House to increase its property listing offerings.
The Federal Government has a major role to play in ensuring the provision of affordable housing for its citizens. It goes without saying that collaborative efforts have been made in recent times with the introduction of the Family Homes Funds, a $3billion public-private partnership geared towards providing 500,000 low-cost housing projects across Nigeria over 4years.
The introduction of zero equity contribution for the provision of housing loans of up to N5million and 10% equity contribution for housing loans from N5million to N15million for members of the National Housing Fund scheme will go a long way providing access to credit towards homeownership.
In conclusion, despite the laudable initiatives designed to provide affordable housing by the government and other stakeholders; several challenges such as bureaucracy, high rental costs, high markup costs, misguided policies, lack of mortgage sensitization, and data fragmentation are some of the major roadblocks deterring such efforts.
This presents opportunities for private companies to leverage upon using technology as a tool, but ultimately the industry will need collaborative efforts to achieve affordable housing for all.
