Olajide Abiola is the co-founder and CEO of Smart Residences Limited which operates as Gidanka and HomeAway. In this interview with Abiola Odutola, he outlines what must be done to grow Nigeria’s real estate sector. He also examined factors hindering the growth of the sector and how technology can aid the desired growth.
The real estate sector in Nigeria has been deemed the next growth industry. However, it appears to be largely untapped. What are the factors hindering the growth of Nigeria’s real estate sector?
All the players within the sector have a role to play. The developers, Government, financial institutions and buyers. One must give credit to the Federal Government for its many mortgage policies and incentives. The Federal Government through the Federal Mortgage bank has made several commendable strides concerning making affordable housing possible for the average Nigerian.
One or Two States have also passed bill housing mortgage bill to give mass housing a boost. Unfortunately, the majority of the developers aren’t developing affordable housing. Also, financial institutions do not have the patient and long-term capital required for the sector to optimize its inherent potential.
The participation of more developers with credibility, who deliver quality homes on schedule and focused on mass housing is required in the industry. They can leverage the low-cost loans provided by the Federal Mortgage Bank. Prospective home buyers who also contribute to the National Housing Fund should also be well-informed and acquainted with the process of accessing the mortgage services available through the FMBN and mortgage banks.
Building for a rapidly growing population like ours is a task that requires all hands on deck. At the moment, none of our commercial banks can fund mass housing due to their interest rate and their credit tenure.
One would expect the industry to adopt more tech to spur growth and housing more people in the country. Why has this expectation not been met?
Technology is simply an enabler and not a solution. The building of Estates, Hospitality accommodations, Office buildings e.t.c must precede the use or application of facility management software, mortgage finance software and hotel management software.
Brick and Mortar businesses create the necessity for technology application. Of course, technology is not peculiar to software alone. Technology will simply create efficiency in service delivery. When it comes to real estate, it is the old testament approach. Brick and Mortar.
There have been reports of people being swindled through real estate funding or crowdfunding programme. What can the government do to ameliorate this and what should individuals be looking out for to avoid being at a loss?
The antecedents and reputation of a developer should be prioritized by any discerning real-estate buyer or investor. We have a lot of self-acclaimed developers with no track record of initiating and completing any project promoting bogus real estate projects.
For instance, how does a real-estate developer simply present 30 or 40 units of flats when they haven’t previously successfully delivered 5 or 10 units? You don’t just go from 0 to 100. Building and delivering quality real estate is not for get-rich-quick charlatans.
You have a lot of developers who have multiple open-ended real-estate projects with no delivery dates in sight because they’ve spread themselves too thin to complete or deliver. For them, it is growth by all means, which is the philosophy of cancer, and not healthy.
Investors should pay attention to the credibility and antecedents of the promoters and also ensure there are verifiable track records of performances.
Government cannot legislate nor enact policies against folly or greed. Individuals just need to be informed, discerning and eschew greed. As I earlier stated, reputation and track records are there for people to help filter their decision-making when investing or handing their monies over as investments.
There are a lot of credible entrepreneurs and investment vehicles but it appears that the majority of Nigerians with an appetite for investing have a warped understanding of investment as Get- Rich-Quick-Syndrom.
How would you describe the accommodation industry in the country capital, Abuja and what informed your choice of designs?
Abuja remains the fastest-growing city in the world according to the United Nations. This growth requires to be catered for, particularly in terms of housing (Homes and Hospitality accommodation). Mass housing gaps within the FCT are still very huge, and this is responsible for the high costs of house rental and ownership. Our strategy at Smart Residences Limited was to enter the housing/accommodation industry/market by identifying existing but largely unnoticed gaps in the market. To design and develop unique residential and hospitality spaces for Middle Class, Upper-Middle Class and Upper-class transit and temporary visitors to the city for business, work, holiday and leisure.
We wanted this set of visitors from all over the country and the world to leave the comfort, privacy, safety and functionalities of their homes and be welcomed into another without feeling like they ever left home. And we have been able to achieve just that.
We want every accommodation seeker to experience comfort, convenience, efficient services, security, privacy and functionality, and we have been able to deliver that through our residences across the fantastic neighbourhoods within Abuja.
We have read about Smart Residences Limited. Can you kindly explain what the company seeks to solve in the Nigerian housing industry and what it is doing differently?
This is well captured in our mission statement to be the leading developer and provider of prestigious residential and hospitality accommodations that deliver the values of comfort, aesthetics, functionality, privacy, accessibility and safety in the choicest neighbourhoods across cityscapes.
Our uniqueness is in our business model and the financial efficiency of our approach to development and service delivery. We deliver more with less in very sustainable ways.
What prospects do you see for real estate in Nigeria?
The prospects are huge for those who will set aside their jaded sights. Nigeria is a developing economy and frontier market requiring a lot of entrepreneurial initiatives by intrepid and disciplined entrepreneurs to create immense value. Entrepreneurs build economies and markets, not governments. Entrepreneurs set the tone for government policy-making.
There are still lots of underexplored, unexplored and poorly explored areas of opportunities within the real-estate sector. Financing options must also be fluid and dynamic enough to ignite and catalyze these opportunities. One of the unfortunate realities in Nigeria is that there is too much idle cash amid limitless investible opportunities.
How does the Nigerian real estate sector fare compare with other developing markets in Africa?
Let me simply reference an excerpt from Agusto’s report. It says the housing deficit in Nigeria remains high at about 22 million, compared less favourably to other African countries like South Africa, Kenya, Angola and Ghana with housing deficits of 2.3 million, 2 million, 1.9 million and 1.7 million respectively.
The huge gap between Nigeria and its peers is due to the large and increasing population in Nigeria coupled with other factors such as considerable rural-urban migration, high-interest rates on mortgages and weak capacity building in the industry. These deficits and issues make the sector rife with unimaginable opportunities. Problems are the motivation for innovation and solution exploration.
What are the biggest challenges facing your business(es)?
Indigenous financial institutions and financial professionals with a limited market and business model scope to shrewdly analyze and identify real and sustainable market opportunities and potentials. It is not only our Governments in Africa that play catch up to their Western counterparts as it relates to proactivity in exploring and charting new ideas and frontiers of development, our private institutions also indulge and lag in this regard.
Gidanka is designed to redefine the concept of serviced rental accommodation in Africa. How well have you achieved this goal
Gidanka’s mission is to be the leading developer and provider of prestigious residential and hospitality accommodations in Africa that deliver the values of comfort, aesthetics, functionality, privacy, accessibility and safety in the choicest neighbourhoods across cityscapes.
As of today, we are number one in the Nigerian market even while operating within Abuja alone for now. We have The Residence, The Glass Residence and now The Destination. The Destination is the most prestigious hospitality-focused residential accommodation in Abuja.
The Destination is a 110-unit luxury apartment located in the heart of WUSE II, Abuja with more than 5 unique features that no other hospitality or residential outfit boasts of. It is the only building in the entire Abuja with 5 external elevators. We have a presence in 3 of Abuja’s upscale neighbourhoods. We also have a thriving hospitality management company.
Our position in the Nigerian market speaks for us. We understand market dynamics and the fluidity of consumer preferences, hence the act of equilibrium in our investment decisions. We neither over nor under-invest. We also do not believe that Data is an accurate predictor of opportunity.
For instance, there was no data on vehicle users predating the invention of the motor vehicle. No one does it as excellently as we do it at what we do because our motivation is right. We strive to deliver excellence and value.
Where do you see Gikanda in the next five to ten years?
We hope the be the better version of Sonder for Africa. If the financial institutions and HNIs sitting on Idle cash sit with us, we will create an international market phenomenon within the next 5 years, becoming the biggest private company in the market segment.
I still remember when Dangote was building Obajana, many pundits were wondering which market would consume the cement. Just look at the cement market today. That same market has seen the entrance of BUA while Lafarge remains. It has also recently seen the entrance of mangal.
Our ability to raise money will go a long way in how reasonably fast we travel towards achieving our goals.