‘Banks’ recapitalisation opened up real estate crisis’

CONTRARY to expectation that banks’ recapitalisation would boost money in circulation to the extent of providing loanable funds for housing development, the reformation only opened up the decay that characterised the banking and financial sector over the years.

Observers had projected that the recapitalisation would bring about stiff competition among banks, which will, in turn, cut down interest rate on loans, and with adequate capital base in the kitty of banks, it would be possible to lend funds for long-term tenure which will enable developers to plan housing projects without serious asset/liability mismatch.

“First, it was discovered that all the over-bloated profits being declared by banks were false figures that were non-existent and the saturation of the money market was a mere mirage,” remarked James Omeru, second Vice-President, Nigerian Institution of Estate Surveyors and Valuers (NIESV).

According to Omeru, in a paper titled: Banking Reforms, Economic Empowerment and Real Estate Sector presented at NIESV conference, the crisis in the banking sector, occasioned by share price manipulation and stock market crisis, affected banks to the extent that they could not lend money again to customers including those engaged in housing production and acquisition.

“This is the pathetic situation we have found ourselves in Nigeria and unless something is done urgently, the housing situation will continue to degenerate to the extent that slums development will soon take over our cities,” he remarked

He contended that apart from personal savings and bank loans, real estate developers had not fully utilised other sources of housing finance for their projects, arguing that such sources could only be effective if government addressed the power sector debacle to empower Nigerians in small businesses.

Omeru observed that banking sector reforms had forced property prices to decline in some areas due to banks’ debtors selling off their properties below open market values to stave off Economic and Financial Crimes Commission (EFCC) prosecution, adding, “I think there is rapid disposal under self-imposed forced sale conditions of property and real estate owned in Nigeria and abroad by the big debtors.”

The NIESV chieftain equally said that there was abandonment of projects in the construction industry by contractors who could not get funds to complete the projects “many of them could not be paid by clients, leading to slump in the real estate business as funding was not forthcoming for new property development.

“Also, there was a sharp decline in demand for properties, especially at the upper end of the market and petroleum product importers were severely constrained by funding challenges,” the estate surveyors and valuers noted.