The Managing Director of M&E Kaiser Limited, Jamila Faniyi has stated that getting affordable long-term financing in the construction and real estate sector is now a big challenge. She shared this concern during the Nairametrics Real Estate Industry Outlook Webinar on March 9, 2024.
Jamila explained that the main hurdle in real estate and construction is the lack of proper infrastructure. “Our biggest issue is infrastructure. When we have good roads and railways, everything falls into place,” she said. “If we sort out infrastructure problems, like better roads and railways, it will be easier to get materials, connect with buyers, and develop unused land. This could lead to a real estate boom.”
She also highlighted the difficulty in securing long-term financing with reasonable interest rates. “We rarely find long-term financing with single-digit interest rates. Most offers come with double-digit rates, which rise with inflation,” she explained. “We struggle to get financing, relying mostly on private lenders who charge high rates. This hinders growth in the sector.”
Obinna Onunkwo, Deputy CEO of Purple, added that there’s a mismatch in ideologies between financiers and the sector. “Many investors see real estate as a short-term investment, while it’s actually a long-term asset for wealth storage,” he noted. “This mismatch is part of the problem.”
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He explained how banks focus on short-term transactions, while real estate projects require a longer outlook. “Building a mall can take 20 to 24 months, but banks offer money for just 90 days. This disconnect causes issues.”
According to the latest CBN report on lending rates, commercial banks’ prime interest rates for lending to the real estate sector ranged from 7% to 28.50%. SunTrust Bank had the lowest rate at 7%, while UBA’s rate was the highest at 28.50%. Access Bank, First Bank, Zenith Bank, and GTCO had rates at 22.00%, 13.57%, 19.13%, and 20.00%, respectively.
In light of this, platforms like Krent provide a platform that not only connects buyers and sellers but also fosters an environment where affordable financing is a central pillar.Â
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