COMMERCIAL REAL ESTATE RISK IN NIGERIA: ISSUES FOR INVESTORS

COMMERCIAL REAL ESTATE RISK IN NIGERIA: ISSUES FOR INVESTORS

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Commercial real estate investment, like life itself, comes with its own associated risks and these risks are events that could bring harm or loss to an investment. A risk is that probable event that could lead to depreciation of the value of property or outright loss of investment (Clayton, 2007). The existence of such factors should not discourage an investor from investing but rather use the knowledge of commercial real estate risk analysis and management that the researcher is examining to help secure an investment. The primary commercial risk in real estate investment in Nigeria is the possibility of falling into the hands of fraudsters. Fraudsters sometimes attempt to sell a property that does not belong to them. This is another source of issues for investors but could be eliminated by engaging the services of professionals to help investigate the title to the property that is being sought for purchase and to ensure that all the documents needed from the seller are prepared, signed and collected (Fisher, 2005).

Another possible commercial real estate risk investors may face as a real estate investor in Nigeria is government or political risk. Because of the wide ranging power of the executive arm of government and fluidity of functions, the government could acquire private land but the land so acquired must be for public purposes. Unfortunately, there are several instances where government has acquired private land for “public purposes” and “development control” only to turn around and allocate to other individuals to use for their own private projects. Some have experienced their Certificate of Occupancy revoked by a new government due to the fact that the owner does not belong to the same political party. This kind of policy inconsistency is a major discouragement to investors. However, be that as it may, whenever investors are planning to purchase a land in an area, engage professionals (e.g. Surveyors) to confirm whether or not the land is under acquisition by government or could or could not be sold (Black, 1986).

COMMERCIAL REAL ESTATE RISK IN NIGERIA: ISSUES FOR INVESTORS