How to Invest in Real Estate in Nigeria During Inflation

Real estate is one of the most lucrative and stable investments anyone can make. However, investing in real estate is challenging, especially in Nigeria, where inflation, currency devaluation, and economic uncertainty are prevalent. In this piece, we will explore some of the things you need to consider when investing in Nigeria's real estate during this time.

Why Invest in Real Estate in Nigeria?

Nigeria is the most populous country in Africa and the seventh most populous country globally. It has a large and growing middle class, a young and dynamic population, and abundant natural resources. These factors make Nigeria an attractive destination for real estate investors who want to tap into the massive potential of the Nigerian market.

According to a report by PwC, the Nigerian real estate sector is expected to grow by 8.7% annually from 2021 to 2025, driven by the demand for residential, commercial, and industrial properties. The report also states that the Nigerian real estate sector contributed 8.4% to the GDP in 2022, making it one of the most critical sectors of the economy.

Some of the benefits of investing in real estate in Nigeria include:

• High returns: Real estate investments can generate high returns regarding rental income, capital appreciation, and equity growth. According to Risevest, a platform allowing Nigerians to invest in US properties, Nigeria's average annual return on real estate investments is 25%, compared to 10% in the US.
• Hedge against inflation: Real estate investments can serve as a hedge against inflation, as property prices tend to increase with the general price level. This means that real estate investors can preserve the value of their money and even profit from inflation.
• Tax benefits: Real estate investors can enjoy tax benefits such as depreciation allowance, capital gains tax exemption, and mortgage interest deduction. These tax benefits can reduce the cost of ownership and increase the net income from real estate investments.
• Diversification: Real estate investments can diversify your portfolio and reduce risk exposure to other asset classes such as stocks, bonds, and commodities. Real estate investments correlate poorly with other assets, meaning they do not match them. This can help you balance your portfolio and smooth out your returns over time.

How to Invest in Real Estate in Nigeria During Inflation?

Investing in real estate in Nigeria during inflation requires careful planning, research, and execution. Here are some of the things that you need to do when investing in real estate in Nigeria during inflation:

• Please choose your location wisely: Location is everything regarding real estate investment. You must choose a location with high demand, low supply, good infrastructure, security, and growth potential. It would be best if you also considered the impact of inflation on different locations. For instance, some locations may experience higher inflation than others due to exchange rate fluctuations, government policies, and market forces. When choosing your location and setting your price, you must factor in these variables.
• Choose your property type carefully: There are different types of properties that you can invest in, such as residential, commercial, industrial, or agricultural. Each property type has advantages and disadvantages, risks and rewards, and suitability for different investors. Choose a property type that matches your goals, budget, risk appetite, and expertise. Please also consider the impact of inflation on different property types. For instance, some property types may be more resilient to inflation due to factors such as demand elasticity, supply elasticity, income elasticity, and substitution effect. You must analyse these factors when choosing your property type and setting your rent or sale price.
• Please do your due diligence: Before you invest in any property, you'll need to do your due diligence and verify all the relevant information about the property. This includes checking the title documents, land survey plan, building plan approval, environmental impact assessment report, tax clearance certificate, occupancy permit, deed of assignment, and any other legal documents that may be required. You also need to look over the physical condition of the property and assess its value based on its location, size, quality, features, amenities, and market trends. Doing your due diligence thoroughly and professionally to avoid legal issues or financial losses later on would be best.
• Negotiate smartly: Negotiating is an essential skill for any real estate investor. It would be best to negotiate smartly with the seller or landlord of the property you want to invest in. Please know how much you are willing to pay for the property and how much you can expect to earn from it. You also need to know how much leverage you have over the seller or landlord based on factors such as market conditions, competition, urgency, and relationships. You must negotiate smartly to get the best deal possible and maximize your returns.
• Use online platforms: Online platforms are a great way to invest in real estate in Nigeria during inflation. Online platforms can help you access more properties, compare prices, conduct transactions, and manage your portfolio. Some online platforms you can use to invest in real estate in Nigeria include:
• Risevest: Risevest allows you to invest in US properties from Nigeria. You can buy units of properties that are managed by Risevest and earn returns in dollars. Risevest handles the property acquisition, renovation, rental, and sale. You can start investing with as little as $10 per unit and enjoy an average annual return of 15%.
• Wealth.ng: Wealth.ng allows you to invest in Nigerian properties through fractional ownership or REITs. Fractional ownership means buying a fraction of a property and sharing the ownership with other investors. REITs mean that you can buy shares of a company that owns and operates a portfolio of properties. Wealth.ng handles property selection, valuation, maintenance, and management. You can start investing with as little as N10,000 per fraction or share and enjoy an average annual return of 20%.
• Coreum: Coreum allows you to invest in Nigerian properties through crowdfunding or co-investing. Crowdfunding means you can contribute to a pool of funds to buy a property and share the returns with other investors. Co-investing means you can partner with Coreum to buy a property and share the ownership and returns with them. Coreum handles property sourcing, due diligence, acquisition, development, and sale. You can start investing with as little as N50,000 per contribution or partnership and enjoy an average annual return of 25%..
• Keble: Keble allows you to invest in Nigerian properties through land banking or development financing. Land banking means buying land at a discounted price and selling it later at a higher price. Development financing means lending money to developers building properties and earning interest on your loan. Keble handles the land identification, verification, acquisition, and sale. You can start investing with as little as N100,000 per land or loan and enjoy an average annual return of 30%.

Conclusion

Lastly, Work with a qualified real estate agent who can help you find the right property for your needs. Investing in real estate in Nigeria during inflation can be challenging but rewarding. You need to consider and do several things when investing in real estate in Nigeria during inflation, such as choosing your location wisely, choosing your property type carefully, doing your due diligence, negotiating smartly, and using online platforms. By following these tips, you can make intelligent and profitable real estate investments in Nigeria during inflation.