IMPOSE TAX ON UNOCCUPIED PROPERTIES IN ABUJA

Farmers Market (4 SQM & 8 SQM)
August 30, 2016
THE HOMES GROUP DEBUTS IN ABUJA
February 18, 2017

  • WHY ABUJA ESTATES REMAIN UNOCCUPIED – HOMES GROUP CHAIRMAN
  • FCTA IN ORDER OVER TAX PLAN ON ABUJA PROPERTIES – HOMES GROUP CHAIRMAN
  • IMPOSING TAX ON ABUJA PROPERTIES IS LONG OVERDUE – HOMES GROUP CHAIRMAN

Musa Dangoggo is the Group Chairman, Homes Group Limited, after spending over 25 years in the building industry; he decided to setup his firm to further make great impact in the housing industry. He spoke with OLUGBENGA ADANIKIN, in this interview on issues bordering the sector; need to tax unoccupied properties and ways to actually make housing really affordable. Excerpts below:


As a stakeholder in the housing sector, how can the federal government address the issue of housing deficit in the nation?

 

The government has to launch new initiatives and reinforce some in place that have potential which are aimed at addressing many of the industry's challenges like the high building cost: as a result of dependence on imported materials, delays in public contract payments and high rate of defaulting on government contracts, for example, the Oxford Business Group reports that the construction industry is owned more than N 100 Billion which fosters uncertainty and consequently discouraging foreign investors from entering our market. Lack of a legally binding national building code which is embarrassing to say the least is another issue and leads to poor standards, reliance on state infrastructure projects and not tapping into the private sector. I had a funny experience when I wanted to build a road to an estate I developed, albeit profit was a motivating factor. I also wanted to make my customers happy and I was sternly told to stop and get an approval first, fine I thought rules should always be followed, but it took forever to get an approval that will help and do the work for government, I ended up giving up, it was wasting too much time, which leads to my next point: Bureaucracies and bottle necks, the World Bank ''doing business” report ranks Nigeria 147 out of 189 countries and 151st in category of dealing with construction permits, according to the same report the cost of obtaining a building permit is equal to more than 3500% of per capital income compared to 737% in sub Saharan Africa.

Nigeria is also ranked 185 out of 189 for ease of registering property, which cost 20.8% of a property’s value compared to 4.45 in Europe. Sometimes, I wonder how we do it; it’s a testament to Nigerians resilience that the construction sector is among world’s fastest growing.

High land prices caused by part in speculators, for instance in F.C.T and Nigeria at large every citizen is entitled to land, you only need to apply and be allocated land, this was done for the betterment of our people but people abuse the privileges by applying for land solely to make humongous profit via hoarding away the land to sell in favorable terms when the price increases, this drives up cost to the customers. So addressing the housing deficits doesn’t just entail pouring in money at it with housing programs, every four years which end up being disjoint and adds to bureaucracy. I will like to humbly advise the politicians and civil servants using the little experience I have from years in the industry, Clear up this backlog! it has to be the first step, for every builder knows without strong foundation the building will surely collapse. After that, we can now concentrate on giving the new Nigerian Mortgage Refinance Company more leeway, restructuring the Federal Mortgage Bank, practicing schemes like rent to own, mass housing schemes, land swap initiatives, tacking inflation, improving and creating housing programs and initiatives etc.

You will be surprised how most of the problems will take care of itself. i.e the government doesn’t have to worry about bringing down the building material prices; the Dangotes, Lafarge, BUA’S, Emel etc will handle it. People like me will source for funds independently either through foreign direct investment or incorporating a REITs fund (Real Estate Investment Trust), in fact the UPDC has one in partnership with Standbic IBTC and BGL Plc. All stakeholders should resolve to take off the shackles on this industry, deregulate and streamline the due process so the government can concentrate on financing critical ventures, forming PPP’s, providing equal opportunity for everyone and defending the smaller companies from monopolies and unfair business practices. I will like to end with these, when Hon. Minister Fashola was Governor of Lagos State, in an effort to ensure that land transactions are carried out with minimum difficulty ,Lagos State cut down land use charges from 13% to 3% of property value. I hope he can re-create something similar and better for Nigeria.

 

W hat is your take on Affordable Housing?

 

Determining housing affordability is a housing cost that does not exceed 30% of a household’s gross income; India uses a 40% rule. Sadly when we talk about affordable housing in Nigeria we are not referring to about 61% of the population who live their lives on less than $1 a day in informal housing, they are priced out of the market, this is part of the reason why many housing programs fail because they are not tailored to target population income level and the households ability to pay. But a lot of people are moving up from the segment of the society into the growing middle class, these are the target market for affordable housing.The high end is saturated which leads to private companies looking for fortunes in the affordable housing market which will further drive down price due to competition. The long term view for the Nigerian real estate sector especially affordable housing is bright and it is up to us, every Nigerian to fulfill this mandate and move people out of poverty so they can have affordable housing, Insha Allah.

 

C an housing be really affordable considering the costs of inputs such as building materials?

If the government does its part and sweeps away the countless problems I enumerated earlier like the rapid population increase and rural to urban migration which has contributed to the shortfall of housing in Nigeria. Other factors are the cost of building materials, access to infrastructure, and deficiency of housing finance arrangements, stringent loan conditions from mortgage banks. In addition, taxes and fees also increase the sale price of a house which ultimately cost its affordability. In Nigeria, it takes on average six months and 12 procedures to conclude a perfection of title to land (paying stamp duty, registration of land title and obtaining Governor’s consent) to process legal documents and inadequate government policies that affect housing delivery. Then, we can begin to address the problem turning disadvantages like rapid population and urbanization into advantages capitalizing on the influx of people for profit, the fee market will foster competition which will drive down prices (Dangote vs Lafarge, Julius Berger vs CCECC etc.) in spite and regardless of the issues facing the sector, real estate projects are increasing being launched and completed and investors are even getting higher.
With several housing initiatives (e.g. NMRC, FMBN) trying to play a dual role of ensuring long-term funding as well as driving initiatives that address the structural issues facing the property market. As seen in the other emerging markets, housing for the mid to low income customer segment is profitable. For this segment of the market, housing micro-finance would play a significant role in capturing this opportunity. All stakeholders must be carried along to achieve this and all hands must be on deck. Finally education, you see as long as our tertiary institutions do not bring 60% average to excellent students, then this is quagmire, we will never escape because citizens drive progress in a nation.

T he issue of unoccupied homes and estates in Abuja is something worrisome, what will you say is responsible for this?

 

Quite a few of them am sure did not carry out the market research necessary for undertaking such projects because most of the empty lots are those targeted to the high end user, remember i mentioned earlier that the high end market is saturated with a lot of supply and little demand, not to mention most high end consumers prefer to build their own homes and quite a few are just politicians, businessmen/women investing/keeping/hiding their money in assets (which ever floats your boat). The compound that with the fact that the Nigerian economy is in a very bad state caused by the global fall in oil prices which provides almost 65 percent of our internally generated revenue and budget, there is bound to be vacancies, you might even argue we remain resilient as ever with our hustle and bustle mentality. However, Insha Allah this will be, perhaps a blessing in disguise which will prompts us to diversify our economy.

 

T he FCTA recently disclosed plans to initiate law to tax property owners in Abuja, especially those unoccupied, do you agree with this?

Yes! For the big city like Abuja, there must be sources of revenue to maintain its pristine beauty. As a matter of fact, there is a statutory matter in most parts of the world. But, I will advise the F.C.T not be too overzealous in putting too much money because it will be transferred to consumers especially in terms of rentals and service provision for businesses that operate services apartments and so on. The F.C.T can start with a low tax figure to ease the burden for its citizens then move on to meet their set objective over a period of time say 5 to 10 years, if at all they need to cover up losses, which I doubt with the number of people coming into the city monthly. Also, the F.C.T should make sure that the citizens are seeing the result of the money they relinquish to them, that is, the tax. The money should be put to good use; this will encourage the people to pay up without prompting. Indeed, it is definitely a good idea to maintain the environmental ecology of the city so that the people will enjoy a good living in Abuja. Frankly, it is long overdue.

 

W here do you intend to see the homes group in 20 years?

The Homes Group will be the company that provides housing solutions and expertise in different fields of operation in the industry. We will be the go company for professionals in the housing industry when they need help and answers. It will be like a home for research for designs, quantity surveying and engineering all within the view of achieving great and exceptional homes for everybody. This is an additional nursing the three numbers of companies towards achieving their set objectives and all these will be in 10 years time! Not 20 years by Allah’s will and mercy. End

 

Interview By: Olugbenga Adanikin For The Nation, Tuesday, August 23, 2016

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