Yinka Daramola is the Executive Director, NatanelFlorens. In this interview, he says the government and the private sector could explore the rent-to-own initiative as an answer to the housing challenge in the countr.
What is your assessment of the real estate sector?
The real estate sector in Nigeria is clearly underdeveloped. There’s still a lot to be done in a market where we have a deficit of 17 million housing units, and also a market where out of the existing 13.6 million housing units, 11.5 million are on rental, representing about 85 per cent. It has been said that we will need to build at least one million housing units per annum to bridge that gap considerably.
A World Bank study estimates the cost of building Nigeria’s 17 million housing deficit at about N59tn. This figure is huge and obviously can’t be funded alone by the government. That is why the private sector must play a key role. There must be a robust and synergised approach to housing in Nigeria, because something as basic as an increasing population could erode whatever gains one makes in trying to bridge the gap.
While we are thinking of how to cross the hurdle of development, we must begin to consider ownership of the built-up properties. What is the sense in developing if people can’t own these same assets? At NatanelFlorens, what we have done is to create our rent-to-own version called Rent-Own-EarnTM, with the belief that gainfully employed Nigerians have a right to own their own properties with ease.
In a country where 85 per cent of Nigerians are tenants, there is indeed cause for worry. The truth is that this high rental figure is a testimony to the large pool of people below the rich line. Without your own house, the propensity to create wealth is zero. Owning your own home is an important factor to wealth creation. The Rent-Own-EarnTM is NatanelFlorens’ wealth creation version of rent-to-own. It is being able to live in the property you want to acquire, pay a yearly rent, and after a certain period, the property becomes yours.
So, with NF’s Rent-Own-EarnTM, you can rent and own your property after a certain period and thereafter start earning an income, while still living in the apartment; but this only happens after you have fully discharged your obligation and now own the property. This is likened to convertible long tenancy where the house fully reverts back to the tenant after the leasehold tenure on the land. This also allows property owners to earn free income for the tenor of the title leasehold.
What impact do you think this scheme can make on the real estate sector?
I believe that the impact is already being felt in the real estate sector across clusters. The developers are excited about our offer that hitherto unoccupied properties can now be populated and they can in turn get value for these assets, which were hitherto lying down unoccupied. We have had to deal with developers because no matter how much NatanelFlorens develops, we can’t bridge that huge housing gap. Developers also have discovered that to get themselves out of the situation of sitting on assets that are idle and without off-takers, it will make more sense to collaborate with an institution that has the capability of providing the off-takers as well as funding to eventually pay them off.
What role do you think the government can play in the rent-to-own initiative?
In the case of the government, we strongly believe that this is about the only answer to the housing challenge we find ourselves in. Renting to own is a convenient, hassle-free option to owning your own property. Government’s intention as always is to provide shelter for its citizenry and every government wants to do this without imposing burdens on its citizens. We, therefore, believe there is a DNA match in NatanelFlorens intention and that of the government. We are currently in discussions with some state governments that believe that this is the way forward. When we started out, we thought it was important for us to create awareness for our first set of rent-to-own properties in the market.
Are there plans to also incorporate developers into this initiative?
Quite a number of developers heard of how quickly the properties we offer are taken up by off-takers because of our rent-to-own proposition and thought that it might make sense to plug into our huge database of off-takers who are registered with us and waiting for the next property to be offered. We have, therefore, been able to collaborate with quite a number of developers in this market who are desirous of having their properties taken up by our off-takers. There are quite a number of indices we look at before we decide to work with developers. These indices include location, pricing and quality.
We are very particular about location because that’s what to a large extent drives rental value of the assets we take on. There’s an average rental value for specific types of properties in specific areas. For example, there’s an average for four-bedroomed semi-detached units in a place like Ikoyi, also in places like Surulere, Yaba, Magodo, Omole and so on. We, therefore, ensure that in discussing with developers on cost, the rental value we agree on is not different from the rental value of like properties in such areas.
This is actually borrowed from the NatanelFlorens development structure in that, NatanelFlorens when developing, would develop and charge rent based on the rental value in the area it develops.
Once the developers satisfy all of these, we then negotiate and agree on the value of the assets and pay them off. They are happy to have readymade off-takers for their properties. They also get full value for their properties once we are agreed. Terms and conditions, however, apply.
In terms of quality, we at NatanelFlorens have standards we can never compromise on. We believe our prospective homeowners deserve the best at a cost that is affordable. We, therefore, ensure that developers’ properties fit into our own standards. We have a full-fledged technical team that assesses their assets and properties, going through a proper integrity test.
It is always difficult to convince people to key into new initiatives in this part of the country, what has been the reception of your offering so far?
We are seriously satisfied with the level of interest that this has generated so far. As we speak, we have over 20 developers who have signed off their properties worth over N20bn in Lagos and Abuja. The developers are happy that the properties hitherto lying idle have been taken up by off-takers from the NatanelFlorens pool and are very comfortable with the value they have received from NatanelFlorens for same.
