Estate developers are increasingly facing challenges in meeting their project delivery timelines due to surging exchange rates.
This situation is exacerbated for those who had previously entered contracts with variation clauses, as they now confront significant losses owing to rising cost in building materials, cements etc.
The ripple effect of this economic strain is felt across the nation’s real estate development sector, where the cost of building materials has seen an unprecedented surge. For instance, the price of cement has soared to over N9,000 per bag in the past few months.
According to sources, under the condition of anonymity, one developer shared the dire impact of the rising cost of building materials on their project.
- “I’ve had no choice but to abandon the project because the costs are just too high to bear. Although my contract includes variation clauses, the financial strain on buyers is so severe that many are unable to meet the increased prices. As a result, I’ve had to halt the project indefinitely,” the developer lamented.
Homeowners Facing Challenges Completing Their Properties
The fallout from these economic conditions is not limited to unfinished projects. In estates where construction has been completed, new homeowners are struggling with the additional costs of finishing and furnishing their properties.
One homeowner, Mr. Wale, expressed his distress to Nairametrics, revealing that he has decided to sell his newly acquired property.
- “The cost to furnish the house is nearly half of what I paid to acquire it. Selling seems like a more viable option at this point, especially when renting is comparatively more affordable,” he explained.
Property sellers are also adapting to the changing economic landscape by dollarizing their assets, essentially pegging their property values to the fluctuating price of the dollar. However, this strategy has not necessarily facilitated sales, as potential buyers are scarce.
- “With no other viable options, I’m forced to wait patiently and not sell at a loss. My strategy has been to adjust my prices in accordance with the dollar rate and sell whenever a willing buyer comes along. But for the time being, price adjustments are a constant,” a property developer, who wished to remain unnamed, stated.
The exchange rate crisis has significantly dampened the enthusiasm of Nigerians living abroad for investing in their homeland. Traditionally seen as a lucrative opportunity for capital growth, the current economic climate has shifted perceptions, making such investments less appealing.
For many diaspora Nigerians, the depreciating exchange rate has rendered the prospect of investing in anything other than passion projects, where financial returns are not the primary objective, unattractive.
Mike Uzoma, a Nigerian residing abroad, shared his disillusionment with the diminishing returns on his investment.
- “Last year, converting $50,000 gave me about N42 million, which I invested in a short-let apartment, generating roughly N3 million monthly. However, today, that same investment yields only $2,000, a stark decline from the $3,500 I initially projected. Given the worsening situation, I’ve decided to sell the asset,” he explained to Nairametrics.
The allure of more stable economies with predictable investment returns, such as Dubai, is attracting another segment of diaspora Nigerians. The stability and predictability of the Dubai market stand in contrast to the volatility and uncertainty currently characterizing the Nigerian investment landscape.
The challenges extend beyond investment returns to affect the quality of life within estate developments, particularly those offering serviced arrangements.
For instance, MIGB Gardens, an estate in Lekki, has encountered difficulties in maintaining a steady power supply due to the surging prices of diesel.
The estate’s WhatsApp forum was abuzz with complaints from residents, who had not anticipated such a predicament and, consequently, did not possess personal generators, leaving many to endure prolonged power outages.
Moreover, the situation has exacerbated security concerns across many estates. The correlation between rising poverty and hunger with increased insecurity is well-documented, and as these socio-economic conditions worsen, so does the safety of residents.
This has led to a rise in estate dues and service charges, creating tension between residents and service providers. Some estate residents have met resistance to a raise in estate dues citing economic hardships.
The situation is likely to continue to be challenging for most Nigerians if the rising cost of goods and services persists in the coming weeks and months. There is also a potential threat to the quality and standards of building materials sold as more developers look for options to deliver their projects on time and at cost.
