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Rising Construction Costs Drive Rent Increases

Rising Construction Costs Drive Rent Increases, Burdening Home Seekers in Nigeria"
In Nigeria, the challenging economic climate is exerting a detrimental effect across various sectors, particularly in real estate. This impact is significantly felt by individuals, households, and businesses alike.
 
Among those bearing the brunt are individuals and families residing in rental accommodations, now grappling with escalating rents, particularly in urban outskirts where tenants face a staggering over 40 percent surge in rent over the past year.
The confluence of factors including rampant inflation, which hit a peak of 28.9 percent in December 2023, volatile exchange rates, currency devaluation, and the removal of petrol subsidies has propelled commodity prices to unprecedented heights.
 
According to Olubisi Shaola, a property law expert and real estate developer at Finn Grey Projects, fluctuating prices of building materials, inflation, and currency devaluation have significantly impacted the real estate market and developers in Nigeria. He noted the challenges faced by developers in managing construction budgets and timelines due to increased construction costs.
 
This predicament has made it arduous for property developers and contractors to provide affordable housing for the majority of Nigerians, with over 75 percent lacking access to suitable accommodation. Consequently, there has been a ripple effect on housing prices, particularly for newly constructed properties, along with project delays.
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Tenant communities have been severely affected, facing almost monthly increases in rents. With a scarcity of new housing entering the market, landlords are capitalizing on the situation by substantially raising rents, unsettling many tenants, especially in urban areas.
 
Over the past year, low-income neighborhoods have witnessed significant rent hikes, with one-room self-contained units soaring from N150,000 to N250,000, two-bedroom flats escalating from N400,000 to N600,000, and three-bedroom apartments rising from N500,000 to N800,000 in certain areas.
 
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Even upscale locations have experienced rent hikes, with two-bedroom apartments now demanding N1.2 million, up from N850,000, and three-bedroom residences commanding over N1.8 million, compared to previous rates of between N1 million and N1.2 million in January 2023.
 
Tenants like Godday Nwokedi, a businessman at Alaba International Market, have recounted their experiences of landlords drastically increasing rents, citing soaring building material prices and labor costs as reasons.
 
Further exacerbating the situation is the surge in prices of key building materials such as cement and reinforcement rods, attributed to various factors including raw material costs, transportation expenses, and exchange rate fluctuations.
The escalating costs have also impacted labor, with artisans now demanding significantly higher wages, partly due to increased transportation expenses to worksites.
These price hikes have also affected other crucial building components like paint, further straining construction budgets and exacerbating the challenges faced by both developers and tenants alike.
 
Source: BusinessDay

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