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HomeNewsConstruction business slows on new naira policy

Construction business slows on new naira policy

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The real estate sector and its products are feeling the pinch of the new naira policy as developers, potential investors and estate agents have been boxed to a corner by the scarcity of the new notes.

The policy has slowed activities in the sector and also reduced market transactions as seen in shrinking sales, leasing and renting activities.

While activities at project sites have plummeted, new investors have adopted a wait-and-see attitude to investing while agents are watching as potential buyers and renters concern themselves more with immediate needs of life such as food and health.

However, some close market watchers argue that the new policy will turn out a positive development or an opportunity for the sector, saying that once the CBN is through with mopping up the old naira notes, there will be a rush for real estate products by way of investment.

This, according to them, is because there will be a lot of money at the disposal of deposit banks which they can lend to borrowers/ potential investors.

“Nigerians in the habit of stacking money at home and stopping its circulation have been boxed to a corner. Banks would have more money to give out as loans. More people will be interested in housing products as investment forms as the era of keeping cash at home and in the offices is gone,” Bidemi Adebayo of Realty Point Limited, said in an interview.

But Femi Oyedele, an estate surveyor and valuer, differs. He said the new naira policy is already affecting the volume and rate of sale of building materials, adding that block makers, cement, sand and gravel sellers and tradesmen collect cash for their sales and labour.

“The construction sector/building materials sub-sector is slowing down in performance until customers get used to cashless transactions like bank transfer which is still catching up at the moment,” he said.

Read Also: New naira crisis exposes Nigeria’s weak minting capacity

“Real estate activities are done with a large chunk of money. A lot of the participants in the sector deal in cash. The effect on potential investors and buyers of real estate products is that it affects sales and letting of real estate. Sellers have to evolve new methods of selling properties,” he added.

Though Dotun Bamigbola, former chairman, Nigerian Institution of Estate Surveyors and Valuers, (NIESV) Lagos branch, does not see much to worry about the new naira policy and real estate as most transactions these days are done electronically, he agrees there is a slowdown

There are areas of the building material sub-sector which may use cash in limited quantities when it comes to material retailing. Notwithstanding, the safe mode of payment preferred in the industry is electronic through the various individual sellers’ or retailers’ banks,” he said.

As a capital intensive sector and a major store of wealth and value, some market analysts had expected that the sector would provide a haven for investors with the old naira notes which the CBN is recalling from those who have them stashed in their houses.

But experts and players say the sector is not an option for investing such old notes that are kept at home because most of them are proceeds of illicit transactions. They cite subsisting laws and regulations that go against such monies

One of such laws is the new Anti-Money Laundering Act, which focuses mainly on real estate and discourages illicit money or unexplained wealth coming into the sector.

“The Act is aimed to ensure that illicit funds are not allowed to get into the financial systems or into the economy. It does not encourage criminals to continue to perpetuate their crimes wherever they may be,” Kayode Adeluola, a senior advocate of Nigeria (SAN), said at a real estate forum in Lagos.

Adeluola said one of the easiest ways by which illicit funds get into the system is through real estate, adding that a lot of people who commit crime such as banditry, kidnapping, and drugs peddling usually do not have an idea of how to spend their illicit income and so the easiest way is to buy real estate.

According to MKO Balogun, CEO of Global PFI, real estate does not provide a haven for illicit money. “It will still be traced; what CBN is doing is to find out the people hurting the economy by hoarding money,” he said.

Gbenga Ismail, vice chairman of Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos State branch, said: “Even though real estate will definitely be one of the investment options for those who hoard such money, the difficulty will be that any money received still has to be processed and banked.”

On his part, Gbenga Olaniyan, CEO, Estate Links Limited, said because of the amount of naira involved and the difficulty in lodging, it is very difficult to accept cash for large ticket deals, wondering how, as a vendor or agent, one would lodge such money.

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