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.
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.
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.
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.
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.
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.
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.
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.
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