HARNESSING PUBLIC PRIVATE PARTNERSHIP POLICY IN MASS HOUSING DELIVERY: THE ROLE OF ESTATE SURVEYORS AND VALUERS ~ CHUDI UBOSI, FNIVS

ESV. Chudi Ubosi, FNIVS

INTRODUCTION

The National Council for Public Private Sector Partnership defines a public–private partnership (P3) “as a contractual agreement between a public agency (Federal State or Local) and a private sector entity. Through this agreement, the skills and asset of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility”

The question maybe asked, why do we need PPPs or P3s? It is very simple. In our political and economic setting where the demands on government and governance far outweigh its available expendable resources, it involves the private sector in helping it meet many of the expectations and objectives set by the populace. P3s as a tool of effective governance cannot be downplayed, especially in the area of achieving the provision of infrastructural facilities and other developmental projects.

Many developed countries have achieved so much in this regard in the area of transportation, road construction, airports schools, housing etc. Because of limited resources, the governments at various levels team up with the private sector to undertake P3s which has worked extremely very well and been beneficial to all stakeholders.

Our focus today, is however on P3s in the area of mass housing delivery and its challenges in the Nigeria setting. Whilst examining this, we shall also review how as Estate Surveyors and Valeurs, we can make the P3s work successfully – again to the benefit of all concerned.

WHAT IS MASS HOUSING?

Mass housing is basically describing affordable, functional housing available to the low and low-middle income group of the citizenry. Mass housing offers all the facilities of housing but at a base and lightly upper level. Mass housing as the name implies is housing to be produced at minimum cost and in huge numbers to meet the needs of the Nigerian populace.

STATUS OF P3S IN NIGERIA

P3s are getting increasingly popular in Nigeria in many facets of our economic and infrastructural development. Many state governments are using P3s to up the tempo in their various localities. Two states stand our – Lagos and the Federal Capital Abuja. It has been heavily used in the provision of housing estates in the FCT and Lagos to accelerate the housing development to meet the huge demand and continuous influx of the people into the cities.

However, the story has not been very good. As a result of poor supervision, and a lack of clear objectives many of the housing estates are poorly built with low quality materials and even poorer low quality finishing. The facilities provided work for a limited time before falling apart. Many times the process of choosing the private sector partner is shrouded in secrecy and very opaque and this invariably tells on the project. Professional participation is at a minimum as both parties cut corners unnecessarily and uncaring about the comfort of end users. Finally more often than not, housing projects are delivered overpriced due to high costs and high profit expectations.

STATE OF HOUSING IN NIGERIA

Before we go further to appraise the P3s and the role of the Estate Surveyors and Valuers, it is important to give an overview of the state of housing in Nigeria. According to Marslows hierarchy of needs, housing is one of the most important of mans needs. Given its population of about 180 million, Nigeria is the most populous nation on the African continent. It is interestingly one of the most rapidly urbanizing countries in Africa. Over 48% of Nigeria’s population lives in urban areas. This approximates to less than 10% of the habitable land areas.

The National Population Commission (NPC) estimates that Nigeria’s annual population growth rate of slightly over 2% and an annual urban population bulge rate of about 4% skews population distribution towards the urban areas, towns and cities. The largest economy of Africa, Nigeria, currently faces a national housing deficit of about 17 million units. Let us paint a little picture here, in 1991; the housing deficit was at 7 million units, rose to 12 million units in 2007, spiked to 14 million units in 2010 and it is now 17 million units.

The current housing production in Nigeria hovers around 100,000 units per annum, barely scratching the surface of the housing needs for a country of about 180 million. To meet this national housing deficit, at least 700,000 additional units would be needed each year. According to a World Bank report, bridging this 17 million national housing deficit would gulp approximately N59.9 trillion. The flip side of this is that there are gargantuan and untouched investment opportunities in Nigeria’s real estate sector, which contributes an abysmal 1.3% of Nigeria’s rebased Gross Domestic Product (GDP).

Lagos currently has the most vibrant property market in Nigeria; however home ownership is still at less than 20%. Statistics show that Lagos receives a net figure of approximately 1,500 new settlers daily, but the housing supply has failed to keep up with the rapid urbanization and population expansion, especially in the low income market. The housing demand estimate is put approximately at 4.4 million units while the estimated current supply of housing in the state is 1.42 million units; leaving a gap between housing demand and supply at roughly three million units.

CHALLENGES OF MASS HOUSING DELIVERY IN NIGERIA

To start with and most critical of all is the need for the government to fund a proper census of the various types of accommodation currently available nationwide. Following this, an up to date population census should also be undertaken with a proper stratification of the various age groups and their numbers. With these in hand, it will then be simple to undertake an analysis of the housing needs of the populace. How many school leavers do we have? What kind of accommodation is needed for them? The logic there is that a fresh school leaver is out to start life and so may only need a flatlet or one bedroom flat. It also follows that when the 25–35 years age bracket is taken, this is the age where most people are getting married and as such at this period of their life, they would be requiring 2–3 bedroom flats. With these statistics, the government and other property developers will be able to plan developments vis-à-vis what is available and what is needed. Projection even for the housing needs of the future will then be easy to forecast.

Following this, the various state governments can initiate housing developments projects in their respective local governments within their states. This option is most advisable for states where housing accommodation is most acute i.e., Lagos, Rivers, etc. In each of these local governments, 500 – 1000 units of accommodation, 2 - 3 bedroom flats, will be constructed depending of course on the results of the census and what is needed to satisfy the present accommodation needs. These estates will be provided with all the basic infrastructural facilities to make them habitable including security. The road upgraded or rehabilitated to ensure that access and exit is not impeded by excessive traffic hold-ups, which in itself could serve as a disincentive to the effective occupation of the estates.

To ensure that the housing developments are within the reach of the masses, pricing is very important. Housing being one of the basic needs of man, government should not see investments in this sector from the profit motive only. Governments should view the returns more from the positive social impact of the developments. Assuming that indeed housing estates comprising 1000 units of mixed developments are undertaken in a certain local government area, the impact of same on the life of the precinct would be tremendous. Apart from the fact that a new catchment area would have opened up, subsidiary and support activities will be introduced. Plumbers, welders, mechanics, artisans of all trades will spring up to provide support services to the residents of the estate. In doing this, employment is generated, income taxes will be paid, tenement and ground rents will be collected resulting in increased revenue to the various authorities. Pricing must be very realistic and competitive taking into consideration the income levels of the proposed occupiers of these developments.

It must be pointed out that what helps and drives real estate housing development and marketing in any country is a dynamic mortgage financing industry. In Nigeria today, there is really not a mortgage finance industry. Where they exist, their effect has been minimally felt with the few remaining mortgage institutions undertaking almost purely commercial banking activities. This unfortunate situation has been aggravated by the fact that financial institutions operating in Nigeria do not have access to long term funds. Recently, statistics of the United Bank of Africa Plc one of the biggest financial institutions in the country indicated that of its loanable funds less than 5% of it was available beyond 12 months. Most of the funds were liabilities that had 30, 60 and 90 day maturity periods. Property investments have a payback period of sometimes up to 15 years and so matching these funds with real estate developments will be impossible.

Despite the collapse of the mortgage banks in the mid 90's efforts must be to re-introduce a vibrant system no matter how crude whereby housing acquisition can be eased for prospective purchasers as obtains in the developed countries. In fact, a dynamic mortgage industry is one of the major keys for successfully housing the masses. There is nowhere in the world where housing of the citizenry is the sole responsibility of the government. Private developers are always involved and this being the case in Nigeria, they should be encouraged. There are many ways to achieve this by removing impediments and bottlenecks to the entrance of these investors into this sector. The Land Use Decree should be reviewed to make it in consonance with the times. Unless this decree is reviewed, access to land by both government and private developers would continue to be hampered.

For example Section 29 states that when land is acquired compensation is paid only for cash crops n the land and if there is a structure(s) then the compensation to be paid is calculated based on the depreciated replacement cost of such a structure. No compensation is paid for the land because Section 1 of the decree has ostensibly vested all the land nationwide in the governments. This in itself is unfair because most communities whose lands are acquired have owned those lands for decades and the land itself has become of their greatest assets. It therefore follows that any attempt to divest them of this land without adequate compensation can only spell trouble.

Coupled with this is the bureaucratic bottleneck and untimely delay in paying compensation for acquired lands, which can take anything from years to forever.

The lopsided nature of legislation in favour of the tenants and mortgagors has become a serious disincentive to investment in real estate by private developers. A large number of Nigerians own properties in Europe and the United States, and we are very aware that it is unlikely that a tenant can live in any property without meeting his rental obligation without being evicted from such a property. In Nigeria it is indeed possible for periods upwards of 5 years, and unfortunately this will be done with the full cover of the law. Landlords are not properly protected by this legislation.

In the case of mortgages, we are also all familiar with the endless litigation which mortgagors engage mortgagees in when the latter forecloses on a real estate that has been used to secure a facility which goes bad or becomes non-performing. This is despite the fact that the mortgagee will have a registered and legal interest (mortgage) over the asset. With the connivance of the law, injunctions, endless motions are brought to the courts of law all in a bid to frustrate the financial institutions from realizing its money.

The result of all this is that the banks are not willing to finance housing transactions nor use real estate to collaterise facilities. They would rather settle for more easily realizable securities i.e. stocks, fixed deposits etc. All these invariably end up acting as a disincentive to private developers, who pay a laudable role in the mass housing of the citizens. Again, the government should ease the access to land for private developers. Theoretically, the process to acquire land for development is by way of an application to the Governor who will then process same and allocate a plot of land where it is desired or where available. On paper, it is a straightforward easy process but in reality it is a nightmare that could last ad infinitum. Also to be eased are the huge costs fees and levies, which the government charges developers on real estate transactions.

For example in Lagos State when a transaction is concluded, to obtain the governors consent to the sale an individual has to undergo a long process of inspections etc. where all kinds of levies and fees are paid; consent fees, capital gains tax, development levies, stamp duties etc. These governments have indeed discovered that this is a money yielding venture and have hung on tenaciously to this process especially in states where land values are quite high, despite the disservice this plays to property development and mass housing.

It is an opinion that government should focus intensely on the provision of housing for the low and middle income groups. The impact of government would be felt greater at this level.

Finally it must be agreed that the economic base of the nation is still very narrow. Housing provision is capital intensive and the governments with several other priority projects in view can only allocate so much of its resources to housing development. This implies that foreign investment into this sector must be encouraged. The only way that foreign investment can come in is by providing the enabling environment. This enabling environment will include a stable polity, provision of infrastructural facilities i.e. electricity, water, road etc, safe and secure environment, as well as stable and consistent government policies.

With these in place, investors and P3s would have no fears about bringing their hard earned income into our economy for good returns. In conclusion it can be very easily discerned that the challenges of housing the citizens in the new millennium is indeed a huge one. The process should not be one that lip services are paid to. It must be a planned process that will survive from administration to administration if any level of success will be achieved. The foregoing issues raised though not exhaustive will help a great deal if well implemented towards achieving these laudable objectives and making our society an easier on in which to live.

THE ROLE OF THE ESTATE SURVEYORS AND VLAUERS IN OVERCOMING THESE CHALLENGES

The Estate Surveyor and Valuer has a major role to play in overcoming the challenges associated with mass housing delivery in Nigeria. The Estate Surveyor and Valuer has a role that spans across many professions, town planning, architecture, quantity and land surveying, etc. Sometimes, he is known as a jack of all trades, and master of all.

LAND ACQUISITION AND COMPENSATION
The Estate Surveyors and Valuers will assist the public sector in the acquisition of land to be used for the mass housing delivery. This acquisition will include sending out notices and receiving objections or notices from people whose land has been included in the acquisition. Following the acquisition, the Estate Surveyor and Valuer will also assist all stakeholders in arriving at adequate compensation to be paid to those affected by the acquisition. This payment of adequate compensation will pave the way for a peaceful development of the land especially in a setting such as Nigeria where land is a very contentious subject.

PROJECT DESIGN AND LAYOUT 
The Estate Surveyor and Valuer in conjunction with the Architect, Town Planners etc will layout the acquired site. This layout will ensure the incorporation of all that is necessary to ensure that the project is livable by future inhabitants – roads, drainages, provision for areas to site services, electricity, water, schools, shopping areas, places of worship, etc.

LAND VALUATION
In the area of mass housing delivery in Nigeria using P3s, the norm is for the public sector to provide the land whilst the private sector provides funding and other resources needed.

To arrive at a sharing formula of future profits etc, each party’s contribution has to be valued. This role is strictly that of the Estate Surveyor and Valuers.

FINANCE
Many times, it is the Estate Surveyor and Valuer who has a very clear understanding of the project – facilitates the raising of finance for the P3’s, especially for the private sector stakeholder whose responsibility it is to source the financing for the project.

SALES/LEASING OF THE HOUSING DEVELOPMENT
The Estate Surveyor and Valuer would assist in the sale or leasing of the developed houses. This is a core competence of the Estate Surveyor and Valuer. Apart from sale or leasing the Estate Surveyor and Valuer acts as a domicillator of the proceeds and then disburses same to the various stakeholders based on the agreed sharing formula.

FACILITY MANAGEMENT 
Upon completion of the project, the Estate Surveyor and Valuer, plays the role of a Facility Manager in ensuring the growth and efficient running of the estate facilities, including the various housing units that have been developed. This provides for a quiet enjoyment of the estate.

PROJECT MANAGEMENT
Most significant of all roles of the Estate Surveyor and Valuer in mass housing delivery in Nigeria is that he acts as a Project Manager, providing the link between all the various professionals and their services and ensuring that they all sing and work in harmony.

GOING FORWARD

In conclusion, the P3s is a veritable tool in the area of achieving and accelerating government impact on its citizenry particularly with infrastructure and housing.

The mass housing delivery with P3s which has been the focus of this paper still leaves a lot to be desired. However, the challenges of have been thoroughly addressed and the solutions equally proffered by the use of the Estate Surveyor and Valuer. It is hoped that going forward, the parties involved will review the process and hopefully ensure that more valued is obtained from the P3s projects.