Data from the Central Bank of Nigeria has revealed that borrowing by real estate firms rose from N668.8bn to N707.03bn between January 2022 and October 2022.
The amount borrowed from banks was used as capital to broaden its services in the sector.
This is according to the Central Bank of Nigeria Sectoral Analysis of Deposit Money Banks’ Credit.
Further analysis showed that the firms borrowed the sum of N38bn between January 2022 and October 2022.
Reacting to a PUNCH report, the Chairman of the Real Estate Developers Association of Nigeria, Lagos Chapter, Bamidele Onalaja, said the real estate industry was faced with unprecedented financial challenges evident in inflation and cost of building materials.
He said, “Over the years, real estate investment in Nigeria has become one of the major investments attracting both local and foreign investors. From the commercial city of Lagos to every nook and cranny of the nation, several individuals and companies now engage in real estate investment.
“However, the industry is faced with unprecedented challenges such as inflation, which has led to a spike in the cost of building materials, and the adverse effect of global warming, which has seen a reduction of available land.
Also, the International Monetary Fund in a report stated that tighter financial conditions such as interest rate hikes had affected commercial property prices by making it more expensive for investors to finance new deals or refinance existing loans.
The report, titled, ‘Commercial Real Estate Sector Faces Risks as Financial Conditions Tighten’, said this trend was lowering investment in the sector.
It added that the stringent financial conditions would also have an indirect impact on the sector by slowing economic activity and reducing demand for commercial property such as shops, restaurants, and industrial buildings.
The IMF said financial conditions were important drivers of commercial real estate prices.
SOURCE: PUNCH
