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PROPERTY NEWS
Mixed reactions trail govt, Lagos proposed housing, land reforms
By Emmanuel Badejo
Published:Guardian, 16th January, 2012
THE plan by President Goodluck Jonathan to expend the sum of N180 billion and N26 billion respectively on works and housing in the present fiscal year has continued to elicit mixed reactions from professionals within the built sector.
Similarly, professionals have continued to examine the recent reforms carried out by the Lagos State Government on Land Use Charge (LUC). While some said that the development was welcome and good for encouraging business within the industry, others said that the metropolis was not ripe for the proposal.
Analysing the budgetary allocations to both Works and Housing, President, Nigerian Institute of Building (NIOB), Mr. Chucks Omeife, said that the budgetary allocation was good and if properly applied in the right direction could set the tone for greater things that would happen in the housing sector.
For the housing allocation, Omeife said that the fund allocated must be used as an intervention fund if desired result would be achieved. According to him, this could be in different ways targeted at specific results.
- To increase the housing stock, the fund can be used to provide necessary infrastructure in different localities -roads, water and light thereby opening up those localities for development and hence providing opportunities for affordability.
- The fund can be used to strengthen the mortgage system with very strong policy dictation and direction to the operators so that it can serve as a revolving fund in the system and hence provide ease of access to all.
- Part of the fund can be used for housing subsidy for Nigerians bearing in mind the low income and no income class who may never be able to afford a house even if the conditionality are lowered.
He said that the important thing for govt to know and appreciate was that housing was very critical and central to our survival as individuals and collectively as a nation.
"Whatever fund that is allocated to housing through budgetary provision should be seen and used as an intervention fund, similar to what was done for the banking sector, the capital market, the entertainment industry, the manufacturing sector, recently the labour union. It is only when it is used that way that the effect can trickle down and can be used as a revolving fund.
He added: "Government must not be involved in any way in the direct construction of houses for the people but can intervene through policy in making the acquisition process more manageable, the provision more result driven and mortgages more accessible and legally more refined.
"The N180 billion and N26 billion earmarked respectively for works and housing is a good development especially at this point where Nigerians are going through very harrowing experience as a result of the high level of decadent of our infrastructure and acute shortage in the national housing stock. What is expected from the above is a segmented and holistic approach with a detailed maintenance back up for our roads and other infrastructure."
On the Lagos land reform agenda, Mr. Akin Olawore, a leading estate surveyor and valuer, said that his experience was that in most cases the amount charged as LUC was reasonable though obtained through some unorthodox mathematical formula.
However, he said that the recent increase envisaged would impact negatively on the net proceeds of the landlords who by the tenancy law was not entitled to receive more than one year rent advance... "It should be realised that the fact of one year advance rent payment has reduced the financial capacity of the landlord to meet his obligations and then this increase in LUC will further impact negatively," he said, adding that what wais likely to happen was a further escalation of rent as the negative impact would likely be pushed to the tenant in form of rent increased.
Besides, Olawore noted that at the very worst the two parties would share the impact and reduce spendable personal income in the economy. This, he said, would affect projected returns and affect property investment endeavours somewhat.
On the various reductions on Consent and Development Permit fees, he commended the gesture, saying it would generate more income to government, as it would encourage more property owners who had hitherto shied from the perfection of their land title to come forward and do so. "The volume will increase and more revenue will be generated by the government. The fact that investors are able to reduce cost of property development will increase the impetus to invest and end user property owners will now be in a position to turn the property into economic assets and be able to offer collateral to financiers for productive funds," he concluded.
General Secretary, NIOB, Mr. Kunle Awobodu, said that any government policy that was aimed at reducing the cost of acquiring land, facilitating its accessibility and its concomitant documents was friendly to developers.
However, he said that there were a lot of hidden costs in the process of obtaining relevant government documents towards development that might make the two per cent reduction in governor’s consent not provide the required succor.
"Introduction of compulsory insurance scheme and project monitoring under building control regulation might increase the cost of obtaining building permit. Invariably, increase in 0.05 per cent in the land use charge rate will be difficult to embrace by developers, who have been complaining of multiple taxations in Lagos State," said Awobodu, stating however, that when improvement in the provision of government infrastructure became visible such changes became acceptable.
But then, Awobodu expressed the worries of analysts, which he said was part of large resources being generated in Lagos was wasted in servicing political machinery, which was the bane of democratic process.
To Ayodele Lawal, a quantity surveyor, the reform was in order. According to Lawal, the policy, if well implemented, was capable of encouraging development, especially, in real estate sector, apart from enhancing revenue to the government, developers and private house owners would be saved from undue bureaucracy that had hitherto, bedevilled land administration in the Lagos.
He stated: "I find the policy okay, it shows a government working towards a win-win situation by encouraging development on one hand, while also capable of raising funds for governance. Developers and property owners should take advantage of this policy," he counselled.
It would be recalled that in his budget speech, Governor Fashola, while appraising the budget, maintained that the reform in the land use charge would boost real estate on one hand and ensure quick documentation processes.
While announcing the necessity of the reform, he hinted that there must be must an increase of 0.05 per cent in the rate of Land Use Charge (LUC), effective from 1st January 2012.
According to the governor, the reform was to assist in surging up government revenue and by extension, brought efficiency to land administration in the state.
He said: "Although the revenues we expect from this increase will not be sufficient to meet all our costs, it will be useful and necessary if we must continue to fund the new minimum wage, security, education, healthcare, housing, waste management and inner city and neighborhood road repairs and construction without depending on the diminishing and at best unstable oil prices," he said, noting that as government exercise these choices, his administration was mindful of the genuine aspirations and desires of the citizens to own their houses and transact businesses with their properties.
He also said that in order to continue to stimulate and facilitate this critical economic exchange, he had also approved the recommendation to reduce the rate of governor’s consent by two per cent.
Although, he stated that the rates for Stamp Duties and Registration remain the same, the gross costs for perfecting title now stands reduced from a total of 15per cent to a total of 13per cent, while government also pegged the total cost of mortgages for residential purposes only to a gross sum of one per cent of the value of the property.
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