Real Estate Expert, ESV STEPHEN OLA-JAGUN
ESV Stephen Ola Jagun is a seasoned professional in the real estate industry, with both local and international experience. He has received several awards and accolades both locally and abroad. A few weeks ago, he spoke with ISAAC ABIMBADE (08155107955) about the proposed Lagos monthly rent policy and its potential ineffectiveness in Lagos. Below are excerpts from that interview.
Recently, the Lagos State government proposed a monthly rent policy that is set to take effect soon. Do you think this policy can work in Lagos?
That’s a good question. First, let me say this: the government should have consulted with practitioners in the real estate market to understand how this policy can be implemented effectively. Here are a few reasons why I believe it will be challenging to implement this policy in Lagos:
Investors typically need to pay upfront, in full—100%. For instance, if a person takes a loan from a bank to buy a house worth 100 million naira and rents it out, with annual rent averaging 5 million naira.
It will be difficult for them to recoup their investment with the proposed monthly rent. If this policy is implemented, potential investors may choose to avoid real estate altogether.
Additionally, consider the mortgage situation. If I, as a landlord, am spreading my tenant’s payments over time, I would expect the government to do the same for me to avoid it becoming a financial burden. If the Lagos State government cannot implement such a system, what does that indicate about its viability?
The government has recently commissioned new housing estates, which they are selling, not offering on lease. This reflects the reality of profitability in the market. If the government were to flood the market with properties available for monthly payments, it could alleviate some of the pressure. Eventually, this might encourage landlords to adopt a similar approach, leading to a market adjustment.
The government is collecting ground rent and taxes annually from landlords while expecting them to charge rent monthly. Do you see the contradiction here?
Furthermore, what efforts is the government making to reduce construction costs? If the cost of construction decreases, it would motivate more people to comply with the proposed policy.
You mentioned how the currency has been losing value, but in recent months, it has stabilized between 1,500 and 1,600 naira. Previously, purchasing materials, like iron rods, was unpredictable; prices could fluctuate widely throughout the day. When suppliers recognize that iron has devalued, they tend to increase their prices to avoid losses when restocking. Do you understand my point? Asiwaju has played a big role in stabilizing the value of the naira, which is a positive development
In summary, without addressing these key issues—consultation with industry practitioners, the financial burdens on landlords, and construction costs—the proposed monthly rent policy is unlikely to be effective in Lagos.
Another issue to consider is what happens when tenants fail to pay their rent on time. In the U.K. and the U.S., if you delay your rent payment by even a day, you risk eviction. The eviction process is straightforward: landlords only need to demonstrate that the tenant is not paying rent, and the tenant can be removed. Additionally, the landlord will have collected a deposit of one month to cover any potential losses.
For instance, when a tenant signs a lease, they may pay one month’s rent upfront along with a security deposit. If the rent is due on the 30th and the tenant has not paid, the landlord already has the deposit in hand to cover that lost rent.
That is serious then?
There was a case where I contacted NEPA (the power utility) about a property where the tenant was not paying the bills. However, NEPA ignored my letter because they know that once the tenant moves out, they can simply present the bill at the house again. This tenant had been tipping NEPA staff to avoid having their electricity disconnected. As a result, many landlords resort to self-help measures or even attempt to chase tenants out.
If you are considering collecting monthly rent, it’s important to understand how quickly you can act if a tenant fails to pay. You might say you will issue a seven-day notice. If the tenant doesn’t move out by then, you would have to apply to the court. Unfortunately, that process can take a long time. Even after going to court, they might give the tenant several months to vacate, which means a tenant who owes one month’s rent could end up staying for 12 or even 24 months.
Did the Lagos State government consult with industry practitioners before implementing this policy?
When creating such policies, it’s crucial for decision-makers to engage with the people directly involved and seek their opinions. Often, around election time, these topics resurface because they aim to appeal to tenants, as politicians want to be seen as responsive. However, it’s clear that such policies are challenging to implement effectively.
How many of those who are pushing for this law are willing to give their homes to those who owe them? Their own houses are in places like Ikoyi and Banana Island, where people would be embarrassed to owe them.
Now, what is your opinion on the Coastal Road? What impact will it have on the states along its route?
I came across an insightful post on LinkedIn. It’s the only social media platform I use since it’s primarily professional. The author referenced one African country, pointing out a fundamental mistake we often make in Africa: we keep saying we want to generate economic activity, but we fail to establish the foundational elements to support it. This particular country has focused on providing essential infrastructure, which then allows other activities to flourish.
If the road is built, farmers will have a reliable way to transport their agricultural products from the villages. Without good roads, how can people move goods from one location to another? If we encourage agriculture but lack transportation to the market, we are still far behind. Have we accomplished anything? Where will the goods be stored? If they are processed in Idanre, but the warehouses are in Ibadan, how do we move them if there is no good road? How will they transport cocoa to warehouses near Lagos? Where are the roads?
A truck might take three to five days on a journey that should only require two to three hours. With the right infrastructure in place, we can foster economic growth. I strongly support heavy investment in infrastructure because, not only will we benefit now, but in the coming years, we will reap the rewards. There’s no major road anywhere in the world that doesn’t stimulate development.
For instance, if you drive from Lagos to Covenant University, 4 or 5 years ago, you would pass through isolated, quiet areas. Now, estates have sprung up all along that route. Why? Because people see that area and realize it exists, leading them to consider buying plots and building homes. This generates economic activity.
As a professional, I believe that landowners affected by infrastructure projects should be adequately compensated. This compensation should be built into the project costs to ensure they are not discouraged.
The coastal road has been on the agenda for years. It took determination and persistence to move forward with its implementation. I have been hearing about that coastal road since the 1990s. However, because no one took action, some people have been constructing estates along those proposed routes while those responsible for oversight have ignored the situation.
