By Maduka Nweke,
[email protected] 08034207864
Chudi Kalu is the founder and Chairman of Africa Property Investment Group (AFPING). Kalu, after his career in journalism, delved into property investment and quickly built a successful portfolio as a real estate investor. An experienced entrepreneur and property investor, he inspired the creation of RORI Africa and AFPING, combining his comprehensive understanding of property and ability to deliver projects to multi-stakeholders. With 15 years of experience in real estate and finance, Kalu acquired, developed and financed more than $100 million of property in his time as Managing Director of Arkbridge Integrated Limited.
Currently the Chief Editor for RE-Invest, a property investment magazine, he was part of the founding members of Young Entrepreneurs of Nigeria (YEN), a progressive investment and business collaborative that saw the rise of over 204 successful young entrepreneurs within one year.
In this interview with Daily Sun, Kalu urges the Federal Government to, as a matter of urgency, review Land Use Act as it has remained a clog in the wheel of Nigeria’s housing delivery.
Excerpts:
Brain behind AFPING
I am privileged to be the founder of Africa Property Investment Group, which you know as AFPING. The initiative of AFPING is to make people invest in real estate because of cash flow. It is very critical for everyone because everyone needs money, everybody wants money to make life better. They want to achieve their dream of financial freedom but the dream of financial freedom cannot be accidental, rather, a deliberate effort that comes through a systemic approach. And so that systemic approach will determine whether the person will succeed or not in whatever he is doing. So what AFPING does is giving people opportunity to understand how the real estate works and how each one can position himself for cash flow or for the opportunities that are there.
Property development in Nigeria
Property development in Nigeria has come a long way even though the surface has not been scratched yet. Nigeria is still very far from property development in terms of property and development. Now, there is this issue of 17 million housing deficits in housing alone but there are deficits in tourism. Can we talk of deficits in event structure management? What of deficits in infrastructure? So it is a real challenge and it is confronting us on a daily basis. We have not tackled all these bearing in mind that home ownership in Nigeria is below 5 per cent compared to South Africa, Kenya, Singapore, USA and the UK. If we are to take advantage of that market, we will find out that we are very far from achieving the dreams of many Nigerians. The problem with government is that we have not even scratched the surface and for us, it is an opportunity because as long as there is a problem, it creates opportunity because it is problems that make opportunities valuable. Now, it is an avenue for certain people to convert that problem into an opportunity. What it simply means is that the housing deficits show that you have 17 million markets to take advantage of. That is what it possibly means. Then who will make money from these 17 million housing deficits other than those who invest in real estate for cash flow?
Authenticity of 17 million housing deficit
The authenticity of the 17 million housing deficits depends on who you are talking to. If you are talking to government officials, they will tell you 17 million but if you are talking to a property developer, who understands how it works, he will know that it is more than 17 million housing deficit. Currently, while some people say it is over 25 million housing deficits, others say it is 20 million. Whichever it is, whether we got the statistics correct or not, it boils down to the fact that there is housing deficits that is overwhelming that we can take advantage of or solve. It also means that population is increasing on a daily basis despite that houses are built on a daily basis. For example, the population of Lagos increases every year by 4 per cent. So if people are migrating towards Lagos or towards urban communities, it means they will be exerting pressure on those communities in terms of housing and accommodation. Remember, what we have in Nigeria as accommodation majorly are slums. So for us to deliver decent and affordable housing, we must be able to take advantage of that market. It is a peculiar market but it is unfortunate that the mortgage system is not working effectively. However, it is also an opportunity for the mortgage system to start working well so that people can take advantage of the number. Real estate has nothing to do with location majorly, rather, it has something to do with population because it is population that will determine who will bail me when it comes to investing in real estate.
Lekki project and opportunities for the public
People look at Lekki as one highbrow area that people cannot invest in and take advantage of. But the reality is that it is not so. We are beginning to experience some trends in Lekki. Are you not noticing it that people are no longer building mansions in Lekki. Those mansions built are not occupied. What that means is that you are beginning to see a particular kind of building structure, you are beginning to see apartment houses, you are beginning to see influx of terrace houses that are joined together. Now, one plot can take about four houses, three houses, six houses. We are beginning to see trends. It means that people at the bottom of the pyramid are being considered and are now migrating towards Lekki. But what do they want to do if not to enjoy life? They want to live within a place that is lucrative and has good potential for growth. Now, what is also happening to Lekki is that it is going to generate 70 per cent of Lagos’ wealth whether we like it or not. I say it with much emphasis and I am going to give reasons for that.
There is a project called Lekki Free Trade Zone (LFTZ) powered by Lagos State Government, the Chinese Government and some other persons. That project on its own will generate more than N7 trillion on a yearly basis starting from when I don’t know. Dangote is also constructing the Dangote Refinery and billions have been pumped into that project. Now, what it means is that, that area will employ so many people. There is the largest seaport currently going on along that axis and when I mean the largest, currently now, the whole of this country produces 2 million tonnes of containers in terms of what we produce. But this one port coming into that area will produce about 2.8 million tonnes.
There is also another project, the international airport. What made real estate in Lagos is that it is motivated by trade. All the real estate market in Nigeria is in Lagos. Currently, if you look at the trend, for example, the greater value of Lagos Island is much more expensive than Ikeja. But which one looks more lucrative? It is Ikeja. Now, rental value in Mushin is much more than Ikeja. But what is happening in Mushin? Mushin is just one local area but it is motivated by commerce. Even when we have the insecurity threats, people are not bothered. It is not about infrastructure, it is majorly about trade. What made areas like Sango-Ota and all the environs thrive is trade. What is making Oshodi thrive? It is trade. What makes anywhere in Lagos thrive is trade and so wherever trade is moving to in Lagos, that is where people move to.
Particular project going on there
Because of the advantage that area presents, it is better for people to position themselves for wealth. There is an estimation that eight out of every 10 persons working in Nigeria will not have anything to fund their lives. Just imagine if we have one million people currently working now, that means that out of one million people, 800,000 people will be broke, depending on debt support from outsiders to help themselves. Now, what real estate does to people is that it gives them cover during that period. So people invest in real estate to be protected in the future and I will rather say that real estate is about generating cash flow on a regular basis over time. Now, you can easily monitor your wealth.
So what this area gives to people is that it is already a migrating area. People are making money on a daily basis on that axis and at the same time it protects you for the future. It is just majorly about people building cash flow for themselves because real estate is a major leverage that anybody can take advantage of. I always tell people that real estate is not for the rich, rather, it is to be rich. So for me to take advantage of it, maybe I want to change my financial status, then I need to look at real estate as a vehicle for me to achieve my financial dream. The question I always ask people is this, will I be the same age as I am now next year? The answer is no. Will I look older than I am now in the next 10 years? The answer is emphatically yes.
Land Use Act and reduction in housing deficits
That is the greatest problem facing most developers and I think we need to review it so that we take it out from government for it to play more of a regulatory role so that developers will take advantage of the market. What we currently have is a situation where government and developers are competing among themselves. Developers are restrained by this current Land Use Act and so they are not able to achieve their own objectives. So it needs to be changed for us to move forward.
Laws regulating property and environment in Nigeria
Oh, as a property investor, I am not satisfied with the regulation of property and environment. I will rather prefer to look at the environment we want to work in because I am not a government official. So what are the opportunities available now that I can take advantage of? It is about me taking advantage of the environment because it has to do with the laws. But what we can do now is within the confines we are able to work in, so are there opportunities for us to take advantage of? That we can truly engage so that at the end of the day we break even. Those are the things I will be bothered about. And if I, as an individual, as a young chap who started investing with almost nothing and have been able to create something out of it, then there is no law that says anybody cannot generate cash flow if he is really ready to invest in real estate.
Role of mortgage facility in reducing housing deficits
Mortgage has several institutions on ground at the moment. We have initiatives being created in collaboration with the Federal Government. We have the Nigerian Mortgage Refinancing Company (NMRC) but they are also working within their own level of creativity and knowledge base. But I want us to take the discussion further. I think that for any project to attract investors, the onus is on the developer to make his project attractive. Our problem is not money, our problem currently is investment. Is your project investment driven? Have we created a project that an investor will look at and just smile that his money is safe, his investment is secured?
So, it is not just that mortgage is not working, it is just about the fact that nobody wants to put his money or engage in anything that will fail. The problem is not with the investor neither is it with the mortgage system. The problem is with the developers. What kind of development are we creating? Now, we currently have a problem as developers because there is this wave of land sales all over the country and that is what people call estate. Our problem is not land deficit but housing deficit, so if we can’t make the project attractive, investors will not come. If they are attractive, investors will come from different corners. What it means is that owing to the boom in technology, people are now investing in the technological sector. One must do a business in technology that is driven by cash flow so that when I put out my business, people will rush out and take advantage of that project. So it is not majorly about investors coming in, it is about positioning myself so that investors can take advantage of my project.
High price of building materials
I think the high price of building materials won’t go away because of the fact that we have enormous deficit. Until we are able to do housing on mass level, that is when we will be able to crash the price of building materials. Currently, we are doing less than 120,000 houses per year and that is very poor. We need to do at least one million housing per year. Until we are able to come to that level, we will continue to have it so. Imagine you are a plumber who is supplying materials to just a few persons, that means you can only supply to about 100 houses and how many people do we have to supply? So we need to do volumes in terms of mass housing so that a lot of people can now take advantage of that market. That is when cost of building materials and cost of housing can come down.
Effect of recession in the built environment
Recession has nothing to do with housing because if you pay your rent where you are living currently and the landlord receives the rent, it means he is not going through recession. This is because the landlord will not say that since there is recession let me postpone my rent for one year. If that never occurs, the landlord has nothing to do with recession. What is recession? It means that money is not in the hands of a large number of people. Let us look at history. Currently, Fords released details that 2,000 people in this world are the ones controlling the earth in terms of their finances. What it means is that the world is also going through recession whether we like it or not. But does it mean that there is no economic benefit in this country? There are; we only need to take advantage of it. It is the government that last year told us we are going through recession but we have always been in recession because we have poverty pervading the country everyday.
Insuring of buildings against losses
Since you can’t rule out issues of negligence, what smart companies do is, they take advantage of available insurance packages. We have a lot of insurance companies in Nigeria with various products to avail ourselves of. How many businesses have real estate and how many of them are taking insurance? So you have a situation where somebody invested in real estate and the property is lost, which means the investor is at risk. So for investors not to be at risk, one of the things we are doing as an organisation is that we are securing people’s investment. What people do is that they invest in a project, for example, the Lekki axis and we are able to guarantee that they are going to get returns within the next 18 months. Maybe about 50 per cent for some people depending on what they are investing on and some others 100 per cent while some others will get 30 per cent depending on the volume of their investment. Now, what the insurance company does is that in case of any negligence on the part of the developer, the investment is not lost. The investment is paid to whatever the capital is, to the investor. But what the company, which is the developer, now does is that it pays you premiums for insuring the investment. So what people need to do in order to squat, in the popular parlance, is to shine the eyes because there are certain dos that are not doable there, not televised and cannot be documented. So for this, people rid themselves of such exerting dos because they don’t know what is happening in that region.
It doesn’t take rocket science to invest in real estate. It is only for one to take advantage of the opportunity available. I think the knowledge base of everybody needs to be increased. For that, there are certain information available on the website that people can take advantage of.