Despite the plummeting oil prices, investors confidence and interest in the Nigerian real estate market remains strong, especially in the commercial segment where retailers are undaunted and pipeline office space projects continue to go up, market sources have disclosed to Press.

The sources explain that real estate depends more on the service sector than the oil sector, pointing out that as against almost 50 percent contribution to the nation’s GDP by the service sector, the oil sector accounts for just 16 percent of the GDP.

Obinna Onunkwo, a Managing Partner at Purple Capital Partners Limited, told BusinessDay that savvy investors were not deterred by the falling oil prices which is why, he explained, his company, along with Network Hotel Limited, were committing $20 million to building the 10,000 square metre Marryland Mall in Lagos.

“There is a strong link between the growth in the retail market and household income”, he noted, wondering how many Nigerians bought their houses from oil money or how many that did their shopping with money earned from crude oil sells.

Bolaji Edun, the CEO of Broll Nigeria—a property services and advisory firm—agrees with Onunkwo’s views, assuring investors that the real estate market outlook in Nigeria still appears “robust” especially because some 50 percent of its GDP is now generated from the services sector.

Our sources however, say that the recent devaluation of the naira resulting from the falling oil prices against is going to impact negatively on house prices, estimating that prices might go up by as much as 20 percent and, by extension, soften demand from prospective home buyers.

Chudi Ubosi, the Africa President, International Real Estate Federation (FIABCI), affirms the impact would be felt in about 60 days, explaining that “real estate is inelastic and the change in prices will only begin to reflect when prices of building materials move upwards”.

Lanre Okupe, chairman, Cornerstone Real Estate Limited, also affirmed the impact, saying, “we expect the naira devaluation to interpret into a minimum of 20 percent increase in housing delivery cost and pricing”

Okupe who spoke in an interview with BusinessDay explained that like other sectors of the economy, the building and construction industry could “pretend” to be immune to the devaluation for only a short while, pointing out that though the impact might not be instant, it would be well pronounced by the first quarter of 2015.

Data from the National Bureau of Statistics shows the building and construction sector grew by 18.36 percent and contributed 3.17 percent to Nigeria’s Gross Domestic Product in the third quarter of 2014, which, analysts fear, could be stalled as the sector struggles to adjust to the new market forces.

Adetokunbo Ajayi, CEO, Propertygate, who also projected a 20 percent hike in property prices, explained that with most finishing products for housing units being imported into the country, the new trading rate of the naira against the dollar would certainly define new prices for properties.

The new prices, he feared, would be repelled by prospective buyers who have continued to drag their feet over home buying in recent time, adding that the devaluation of the naira would obviously lower activities in property sales, as most intending buyers would opt to rent rather than buy at high rates.

“Though home buying is a necessity, there is also an alternative to it which is renting; so we expect more people to rent rather than to buy at these high rates,” Ajayi said.

Ajayi also feared that developers who sold off-plan would be the most hit by this development, noting that some them would either deliver sub-standard products in order to make profits or deliver at a loss to maintain integrity.

“We should also expect litigations against developers who would not be able to meet the delivery timeline, because subscribers are not going to be easily cowed into price hike; likewise, some developers would only deliver projects to maintain market integrity but with no profit,” he said.

Azuka Ugboh, a director at Lekki Gardens, whose company is known for off-plan sales, affirmed that though the new exchange rate could increase delivery prices of upcoming projects, assuring however, that his company had no plans to raise prices of its units under construction.

“We cannot raise prices for our subscribed projects because that will amount to a breach of contract. However, if the pressure on the naira becomes more visible, we could adjust prices of upcoming projects”, he said.

CHUKA UROKO & ODINAKA MBONU