How did the pandemic affect the business in the past year?
As a Total Real Estate Solutions Company, with businesses and products in different real estate segments, the pandemic has various impact on our business. For example, the affordable homes sector was impacted on both the supply and demand sides. The supply side was affected by the six-month interruption of construction projects. As a result of this delay, the cost of finance increased, as interest rates kept growing but projects were on hold. Second, after the pandemic, developers suffered from even higher costs of materials. Disposable income generally reduced, and unemployment has increased further. This impacted our sales because people are now prioritizing only essentials: food, healthcare and education over buying a home. Funding is also a challenge. Banks are not able to provide funding to either developers or buyers. The mortgage industry was already challenged prior to the pandemic, the situation exacerbated it, so people have been more conservative with their money. Finally, uncertainty has brought a shift from buying to rental.
How does this shift from buying to renting affect your operations as a facility manager?
This is where we are unique. We are not just a facility manager but a total real estate solutions company. We did a great deal of market research and paid attention to our customers and saw where consumer behavior was tilting. As a result, we introduced two key products during that period. One is a service called Rent to Own, which allows one to rent and restructure payments so that if they can manage to make a certain level of deposit, we will give them the keys to their houses. Essentially, as a tenant they can pay part of the equity in installments and own the home.
How does your Rent-to-Own program work?
We require a 75% deposit to move in, which however is not disbursed entirely by the tenant. We encourage tenants to be a part of the National Housing Fund, where they make a monthly deposit. The Federal Mortgage Bank of Nigeria will give every Nigerian up to NGN15 million at 6% interest if it is used for housing, compared to 15-20% obtained by banks. We were able to secure that for our customers. If you want to buy a property of NGN30 million, and we already have the development and the land, we ask tenants to contribute 25% over the first 24 months, which is NGN7.5 million. We will also get NGN15 million from the government, which tenants can repay over 20 years or more, depending on her age. The total amount is less than their current rental with the difference that they are now a landlord.
Have you ventured into the area of affordable housing?
We are entering into that now to support some state governments to access the National Housing Fund for their civil servants. As many civil servants earn low incomes, they cannot afford to own their own houses until they have retired at 55 or 60. The government has the land, so it should stop selling it to developers at exorbitant rates. We can play a key role here if the government provides us with land at lower rates; makes provision for general infrastructure with good access roads to the land; provides a list of people who can afford to buy the houses within a certain price range; ensures that with the land they also provide a title in order to protect our investment; and provide the assurance that those buyers people are pensionable and it will be able to guarantee the repayment of the loan. Once the government can satisfy these conditions, we will spend our own money to start construction. We will also include the facility management for the first two years, getting it ready to then be handed over. That is what I call sustainability in housing delivery.
What is the current situation in Nigeria regarding the housing deficit?
The so-called 17 million housing gap has been on the table since I started investing. Meanwhile, Nigeria's population has grown, but that figure has not changed. Another issue is that in many small towns across Nigeria, there are many vacant houses as people migrate to cities. Therefore, are we talking about actual housing demand across Nigeria, or just in certain locations? We need to redefine that deficit and contextualize it. There are 40 million houses available across Nigeria, and 30 million needed, but are all those 40 million houses accessible and connected to a point of economic activity? Do they all have good roads, electricity, and water or do people have to migrate to urban areas? We need to provide infrastructure to connect cities, improve transportation links to enable commuting, and increase electricity supply in order to reduce the housing deficit.
What are you doing within healthcare?
We have a new vertical business in healthcare. People may wonder what a real estate solutions company is doing in healthcare, but it is the same as asking what it is doing in education. People across every single sector require a physical space from which to operate, be it telecoms, oil and gas, education, or any other area. The quality of an environment is a significant contributor to the quality of the service delivered. As a company with facilities management background, we can contribute to every sector. Part of the reason why hospitals in advanced economies are superior to those in Nigeria is their real estate and infrastructure. Every year, Nigerians spend billions of dollars on outbound medical tourism. The main problem is hospitals' physical environments, from the gate and the lawn to the reception, lighting, and bathrooms. The second issue is the quality of the customer service. We realized we can play in that space by bringing the management system to support prime healthcare delivery and help renovate run-down government hospitals. We have two major projects today. We have invested NGN1.5 billion into the Lagos University Teaching Hospital, where we deploy state-of-the-art equipment. What we did there is similar to what we are doing in the housing space. When the patient pays, we work out a percentage. The latest innovative product we are bringing to the market is the modular diagnostic facility. If the building is already in a poor state, the cost of renovating it is huge. At times, within the first three years of an upgrading project, the owner changes his mind despite the contractual agreement. We came up with the modular system, which is a portacabin fully built with all the equipment in there. Rather than renovating a building, we will position that equipment outside and connect it to telemedical facilities elsewhere, such as India or Spain, serving customers here. It also has facility for tele radiography so we can transmit images of scans to a radiologist in London, for example, to look at everything and communicate with the patient. We also want to disrupt that space with a combination of state-of-the-art equipment and technology, and to this end we partner with top global players such as GE.