Stalking the real estate

BY GREGORY AUSTIN NWAKUNOR
AS an expert, what would you say is responsible for the frequent collapse of buildings in the country? The question was instantly met with warm stares, the kind that normally precedes excitement. Perhaps, on another day the questioner wouldn’t have met with the same exciting response. Probably not, but maybe yes. Dr. Victor Onukwugha, the executive chairman of Bauhaus International Limited, a firm that is into real estate, project development and development finance, cast an exciting glare and he began to voice out his wishes for real estate in the country. A chat this afternoon seemed proper. The whole atmosphere is serene. He looks at his wristwatch, draws a deep breath and heaves, “you’re early… you can sit down and enjoy our journal, while I get myself prepared”. His phone rings. He reaches for it. “Yeah,” he retorts. After some minutes, he joins me. To him, the best thing that could happen to the industry is to roast quacks, drive fake importers out; and implement sound and safe policies for the common man to enjoy his ‘small’ money. An uncharacteristic thought, so to say. “The problems are numerous, but I will categorise them into two: one has to do with the professionals and next, breakdown of values. For the latter, Nigeria has become a dumping ground for all sorts of rubbish from every part of the world; especially, for substandard goods and materials from China,” he says. “Nigerians go abroad to tell them what they want in order to make money, so, they come with substandard materials such as reinforcement rods and cements, all with poor quality. Also, it has to do with cutting corners. People engage quacks in place of professionals. We are not talking about real estate developers alone; some individuals will even go for draughtmen to draw their buildings for them and not using engineers to supervise the building projects. So, a lot of things come into place that is why we have a lot of buildings collapsing.” So, is the government doing anything to curb the menace? “Government has a great role to play. The Standard Organisation of Nigeria, for example, has responsibility of ensuring that standards are maintained: Materials and equipment brought into the country are inspected at the point of importation and that of entry. Also, that all government agencies ensure that the consumers get the best of quality. But beyond that, the professional regulatory bodies are mostly lame-duck in ensuring that they stop people using quacks to embark on construction,” he says. Is there any other investment risk associated with the real estate development sector? He looks up and casts a sympathetic response, “in this country, the problem has to do with capital because our banks are not doing banking, they are not financing the real estate sector, they are simply trading.” For real estate industry to thrive, the Bauhaus boss said, banks have to make available construction loans to developers, and this should be for a minimum of five years. He also says there should be mortgage loan to buyers that will last for between 20 and 30 years. “So, there should be a good mortgage and construction loan in place. That is how we can finance the real estate sector and you will find out people will be interested in the products in the market and the products will not remain, it will be bought,” he reflects. While answering the question on collapsed buildings, you made mention of professionals, so, how professionalised is your outfit? “We see real estate as a knowledge business; we are not here to just make a living; therefore, we have three core departments and all headed by professionals, we ensure that we get the right professionals from architects, engineers, quantity surveyors, planners, economists and others. Our site supervisors are usually from these professionals. I’m the Executive Chairman, and I am an architect, an engineer and a construction manager. I don’t know whether I am jack of all trade, I have a PhD. And all our heads of departments have a minimum of Master’s degree in their fields. I am not talking about academic qualification, though we try to look through your academic certificates, we also insist that you must also be proven to be good in your area or field professionally.” When did your company start business? “We started as a consulting firm in 1988, before we got involved in real estate development in 1992, and till date we have been doing just that. So, the company is about 21 years old. “We are essentially interested in both residential and commercial real estate development, in addition, we are involved in tourism development. Under the residential we have been partnering with Federal Housing Authority to develop upper scale housing estate such as Trans Amadi Garden in Port Harcourt, which we did and it was commissioned by the immediate past president, Chief Olusegun Obasanjo, in 2004, which comprises 471 housing units of upper, medium and low income. We are partnership with Federal Housing Authority to develop Arugo Gardens in Owerri for the high and medium income earners. We have some other proposed projects for Abuja in the latter part of the year. Under commercial real estate development, we are developing first, a shopping mall in the south; in fact that should be about the first of its kind in the country. It has shopping and banking facilities, departmental stores and so many other things.” ONUKWUGHA reveals that his company has been trying to initiate the Real Estate Investment Trust (REIT) idea. He believes it will help this country when established, as it has capability to help mop-up funds for investment in the real estate sector. REIT started in the United States of America and has caught up in most developed economies such as Japan. In Africa, it is South Africa that is on it. “It is simple, when you are talking about investment as an investor, people think about stocks and of cause real estate as the best investment vehicles in this country or in the world, but the draw back is inequality, you cannot get cash as at when you want it because you cannot put your house in the market today and get the money tomorrow, whereas in the case of stock, if you are broke today, you can just make a phone call to your stockbroker, the next morning he comes up with money. “In order to make investment in real estate very attractive, a kind of civilization that will make it possible to trade on the asset class of the stock exchange will come-up and that is what REIT is all about. It means that rather than having a building that you can only sell the hard, you can sell it on the floor of the stock exchange. It has a lot of implications, which means you can invest in any part of the world in real estate by just booking any property that is under it and them try to buy a share and wherever you are broke, you can place your unit on the floor of the stock exchange and get money.” On the suitability of Nigerian legislation to attract foreign investment, he says the greatest way to bring foreign investments is through REIT. “But we are not sincere at all because there are so many legislations that we are talking about, which are vehicle for us to get foreign investment. Before it can take place, the land use act has to be reformed. Until it is reformed, it cannot work.” Explaining the 400,000 housing units promised by Real Estate Development Association of Nigeria (REDAN) before the end of 2009,he says it is very realistic. “If you divide 400,000 by 36, you are talking about 10,000 or 15,000 houses maximally per state and if the Federal Mortgage Bank is there and alive to its responsibilities and funds are made available, we will realise it, but again, what kind of houses are we talking about?” he says. “Federal Mortgage Bank said they are going to sponsor only projects not worth more than selling price of N5million and if you are talking about houses of N5 million and definitely, it is not going to be story buildings so that is the problem we have but it not a question of figures, it is a question of what is on ground. Are the banks ready to fund construction loan? Are the mortgage banks willing to do mortgage financing?”