4 Ways the Petroleum Subsidy Removal Will Affect Real Estate in Nigeria

  The Federal Government’s removal of its decades-long subsidy on petrol has had a ripple effect on most aspects of the country’s economy. Businesses, seeking to pass on at least some of the extra operating costs caused by an increased fuel price, have in turn raised the price of their products and services.

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Not surprisingly, the real estate industry will be impacted, as will every other sector. But it’s not clear to everyone what the full extent of the coming changes will look like. Here, we’ll run through some of the ways the significant rise in the price of petrol we’ve witnessed will affect Nigeria’s real estate scene.

A Surge in Land Prices

We can expect land prices in much of the country to adjust upwards. Landowners won’t want to let their holdings go for preexisting rates. They will want their investments to track the economy-wide bulge in costs. The speed with which they implement this upward review will vary. Some, especially those looking to sell in the near future, will top up their prices sooner. Others won’t see the need to change things until the effect of the increased petrol price has trickled farther and deeper through the commercial landscape. But we can be certain that land prices won’t stay the same.

Delays in the Delivery of Off-Plan Projects

Many companies in the real estate industry may have to revise their schedules for the delivery of off-plan projects—property which have been paid for and ought to have been completed before a due date afterwards. That’s because the costs of construction and other services around these projects will rise, and the developers will want to pause work on them until the market stabilizes. So it’s a given that some of the properties in their project pipelines won’t be ready until at least a few months after their previously advertised due dates.

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Higher Rent

Landlords are increasing their rents. This is true for residential and commercial properties, whether they are new or have been in use for years. Most investors who have had to spend more on a recent real estate project than they initially budgeted will want to recover the higher costs by bumping up the rent on their property above the previously existing market average. And owners of living and work spaces that have been occupied for a while will also recalibrate their rent so they can cover their own living costs.

Climbing Development Levies

Real estate developers demand a development levy from persons who have bought into their estate. The funds raised through this charge are supposedly used to provide infrastructure and amenities for the estate concerned. We can expect that property developers will review this levy upwards in response to rising costs across the economy in the wake of the petrol subsidy removal. This could come into effect for new subscribers, existing ones who have not yet paid the levy. So it’s important that you settle whatever outstanding fees you have with real estate companies to avoid getting caught up in the rate hikes they’re likely to implement.

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Final Words

If you’re an adult living and working in Nigeria, it’s likely that you’ll be affected in some way by the changes we’ll see in real estate due to hiked petrol prices. This is true whether you’re looking to rent a flat, purchase land, or take delivery of a building project you’ve already paid for. Hopefully, you’re able to ready yourself for them and adjust to what is still a fluid situation. Featured Image Source: Bloomberg

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This article was first published on 3rd July 2023

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