Harnessing innovation, regulation and revenue for a thriving megacity
Continued from next week
In some cases, two or three land uses are mixed to form a hybrid of land use. For example, industrial land use can be mixed with office land use or office land use mixed with commercial land use. Governments also regulate the number of heights of buildings to control density or give approval to building plans to ensure adequate aeration and natural lighting. They also regulate the development of land near security bases, airport ground, or to control density. It is disheartening the way Ikoyi, Lagos State, is being turned into a city of high-rises with neglect for plants and gardens. Ikoyi is losing its grandeur and opulence because of greed and lack of respect for planning laws. Regulation must be put in place to control the number of heights of buildings in Ikoyi. A maximum of four floors is recommended. Prospective highrise builders can go to Atlantic City and Victoria Island.
Governments have authority to control land use, property development, real estate agency and property management as it is part of their functions of ensuring welfare of the people (Chapter 2 of the Constitution of the Federal Republic of Nigeria). Hence, there is Lagos State Real Estate Regulatory Authority (LASRERA). But governments cannot regulate already regulated professionals who are not the cause of the need to regulate the real estate industry. Estate Surveyors and Valuers should not be mandated to register with LASRERA in order to practice Estate Agency in Lagos State because Estate Surveyors and Valuers are already being regulated by Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON). African governments need to do more to regulate the real estate industries.
Generating revenue through property market
There are four categorisations of the methods of generating revenue from real estate – encompassing land and any permanent or mobile structure on it, including buildings, roads and other infrastructure – in a state. These are:
- Transactional method: Government can map out its land into estates and sell off some of its landed properties especially as people tend to trust land transactions with governments more than with Omo Oniles (individual land owners) due to security of tenure. The government can also enter into a joint agreement of developing its land with private property developers through public-private partnership (PPP). These government lands lying fallow across the state can be sold to generate revenue or allocated to property developers for joint development. Abandoned properties can be sold or rehabilitated and rented out to people to generate income.
- Income method: Government can generate revenue in the form of land-based taxes like ground rent, inheritance tax or land administration fee, withholding tax, capital gain tax, capital appreciation tax, land use charge (neighbourhood improvement tax, ground rent, and tenement rate), building approval fee, consent fee, etc, or collect rent on developed buildings. The government can make a law that will tax abandoned properties in states to activate the abandoned property markets in Lagos State and invigorate property market dynamics whose valuation is estimated to be around N3.0 trillion. Awakening the dead capital in Lagos State, which Andrew Nevins, partner and chief economist at PricewaterhouseCoopers, estimated to be $300 billion, by regularising and titling more lands will make the Lagos property market to reach its potential.
- Employment method: Government can create employment opportunities through land monitors, a task force that will ensure government lands across the state are safe and not illegally occupied. Housing development also has the potential to engage unemployed people as building construction of a house can engage as much as eight workers including bricklayer, plumber, labourer, tiler, painter, electrician, carpenter, welder, security officials etc.
- Others: Government can register a limited liability company like Ibile Holdings by Lagos State government or Gateway Holdings Limited of Ogun State or Ministry of Finance Incorporated (MOFI) and sign off certificate of occupancy of lands for the company which government can securitise to raise money from the capital market. Securitisation is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans, or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralised debt obligations (CDOs). Property Blockchain and Real Estate Investment Trusts (REITs) can be created to allow for the issuing and fractionalisation of ownership of property assets.
Conclusion
Governments have a great potential to improve their revenue generation potentials through innovation and regulation of land transactions. Income from land taxes and levies like Land Use Charge (LUC) in Nigeria can still be increased through innovation and effective regulation. Cities such as Lagos, Port Harcourt, Praia, Abidjan, Conakry, Kinshasa, Luanda, Dar-e-Salaam, Dakar, Cotonou, Lome and Mogadishu as well as communities such as Makoko, Ganvie, and Nzulezu, amongst others have waterfront lands. Waterfront lands are more valuable in real estate development for obvious reasons. Apart from having water transport means, they are scenic and provide fresh air to residents of its proximity. The value-addition of water and cities are therefore critical to understanding the future of urban and rural developments in Africa.
Africa has the advantage of being bordered mostly by water and it can use this feature of waterfront to develop exquisite residential estates. Lagos State has the highest housing density and is the fastest growing state in Nigeria because of its role as the commercial hub of the country. About 150,000 people come into Lagos State every day. There are islands in Agboyi Ketu, Oriade and Badagry that can be exploited to generate revenue through exquisite residential estate development. The government has not done enough in its revenue generation drive using the property market. They will do better by engaging estate surveyors and valuers in their land administration and management who can re-awake their property markets.
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Olufemi Adedamola Oyedele, MPhil. in Construction Management, managing director/CEO, Fame Oyster & Co. Nigeria, is an expert in real estate investment, a registered estate surveyor and valuer, and an experienced construction project manager. He can be reached on +2348137564200 (text only) or femoyede@gmail.com
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