Operators in the real estate sector have expressed their apprehensions that the removal of petrol subsidies would exacerbate the country’s housing deficit.
President Bola Tinubu during his inauguration speech on May 29, declared an end to the petrol subsidy regime.
In his reaction, the Chief Executive Officer of Ace Hi-teck Construction Company Ltd, Adewunmi Okupe, said the removal of the subsidy would trigger prices of building materials to rise and worsen the country’s house gap.
He said, “When building materials become unaffordable, then the housing product itself will be very far from affordability. This is the bad side. The good side, however, maybe that we will be forced to stop paying lip service to research, development and utilisation of alternative local building materials. Necessity is the mother of invention, they say.
“I am already thinking about using some alternative materials to put up affordable homes. I am just looking for a suitable site and funds for a demonstration. With this new approach, we can still renew the concept of housing affordability but with a different perspective.”
In the same vein, a former President of the Association of Town Planning Consultants of Nigeria, Moses Ogunleye, said housing delivery would be affected by the removal of the petrol subsidy.
He said, “For instance, the sector relies on fuel, specifically petrol to power equipment like a mixer, block moulding machines, welding, tilling, and so on. So, when the cost of fuel goes up, the cost of delivering these components will also go up. More importantly, the cost of transporting materials from one end to the other will also go up.
“Although we were told that the price of diesel is not being subsidised, so removal is not expected. It may also be affected by subsidy removal. Nevertheless, many vehicles involved in transporting building materials also use petrol. For factories producing products for roofs, windows, floors and sanitary wares, which also rely on petrol, the prices of their products may also be increased immediately. So, the unit cost of producing houses will go up. The spiral effects will be felt in rents payable on homes.”
Also, the Chief Executive Officer of Trips Ltd, Sola Enitan, said the removal of fuel subsidies had direct and indirect effects on the real estate market.
He said, “The removal of fuel subsidies can have significant implications for the real estate market. One major consequence is the increase in transportation costs, including commuting and logistics. This can result in higher operating expenses for businesses, potentially reducing their ability to expand or invest in new real estate ventures. “The rising transportation costs may also limit mobility and access to certain locations, which can impact property values in those areas.” According to him, higher fuel prices could contribute to inflationary pressure in the economy, leading to increased construction costs and indirectly affecting real estate prices.
He claimed developers and investors may face higher expenses when constructing or renovating properties, potentially resulting in higher property prices or slower development activity.
“Another significant impact of removing fuel subsidies is the potential shift in demand for real estate. As fuel prices rise, individuals may adjust their preferences for the property location, favouring areas closer to their workplaces or essential services to reduce transportation costs. This change in demand may lead to increased interest in urban areas or properties near public transportation, driving up prices in these locations. However, it is important to consider that the effects of removing fuel subsidies can vary, depending on factors such as the local economy, geographical location, and the effectiveness of other socioeconomic policies. He noted that government interventions or supportive measures could help mitigate any adverse effects and ensure a smoother transition for both the real estate market and the overall economy.
Meanwhile, the Executive Secretary of the Association of Housing Corporations of Nigeria, Toye Eniola, told The PUNCH in an exclusive interview that the fate of affordable housing was clouded.
He said, “No subsidy environment will definitely impact negatively on the cost of building materials. Prices will go up, transportation costs will go up and it will reflect on every area of cost centres of construction and this will be passed on to the cost of the finished product, which will ultimately make these housing unaffordable.
“In the long run, however, if subsidy removal can stabilise our forex market and help to save so much money, such savings could be drafted to the housing sector, which will help to provide affordable housing for the vulnerable, only if that is in the agenda of the government.”