Full Project – AN APPRAISAL OF INVESTOR CONFIDENCE IN THE NIGERIAN REAL ESTATE SECTOR

Full Project – AN APPRAISAL OF INVESTOR CONFIDENCE IN THE NIGERIAN REAL ESTATE SECTOR

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AN APPRAISAL OF INVESTOR CONFIDENCE IN THE NIGERIAN REAL ESTATE SECTOR

 

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

The Nigerian Real Estate Sector has recorded steady and consistent growth over the last four years becoming one of the greatest contributors to the Nation’s rebased GDP from the non-oil sector – having contributed 8.03% and 11% in 2013 and 2014 respectively (Ikekpeazu, 2004). The market which is currently valued at approximately N6.5 Trillion is estimated to grow at an average of 10% over the next few years. The major growth drivers in the sector have been credited to: an increased inflow of foreign investment (especially from South Africa, MEA and the United States); increased institutional investment from local companies including PFAs and Mutual Funds; the growing population of High Net worth Individuals; and the targeted intervention of the Federal Government in the housing finance sector. This however indicates that a lot of stakeholders and investor are confident about the structure of the Nigeria real estate sector even with the dwindling economy of the nation (Olotuah, 2000).

Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent (Agbola, 1998). If these factors are not well understood and managed by the investor, real estate becomes a risky investment. The primary cause of investment failure for real estate is that the investor goes into negative cash flow for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency. A similar practice known as flipping is another reason for failure as the nature of the investment is often associated with short term profit with less effort.

The success of any investment activity rests heavily on the availability of adequate finance in real estate investment which more often than not is beyond individual investors’ current financial resources. This financial insufficiency naturally turns investors to financial institution for possible credit advancement. Mbanefo (2002) observed that the importance of banks in our economy lies in their monopoly  of the resources to provide loans for industrial and commercial developments. The provision of this loan however, carries the risk of default in repayment hence the need to take adequate, reliable and appropriate security for the purpose of insulating default risk associated with credit transactions in banks.

Real estate continues to be in high demand indicative of investor’s confidence since it meets the need of the public consumer. A hotel, commercial office, residential estate or retail park will continue to perform well, whether on the basis of sales or rents as long as the product meets the needs of the consumer on the basis of location, price and quality. We are beginning to see the green shoots of recovery in investor confidence across the Nigerian real estate sector. This is evident in the number of hospitality & leisure, residential, retail and commercial office transactions either in the early stages of development or in the planning.

Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work and competition among investors to purchase individual properties may be highly variable depending on knowledge of availability. Information asymmetries are commonplace in real estate markets. This increases transactional risk, but also provides many opportunities for investors to obtain properties at bargain prices. Real estate entrepreneurs typically use a variety of appraisal techniques to determine the value of properties prior to purchase to boosting investor’s confidence (Agbola, 1998).

Investor’s confidence in real estate is determined by an investment rating of a real estate property which is the measures of the property’s risk-adjusted returns, relative to a completely risk-free asset. Mathematically, a property’s investment rating is the return a risk-free asset would have to yield to be termed as good an investment as the property whose rating is being calculated. The underlying drivers for property ratings are the dividends (net operating income) and capital gains over a certain holding period, and their associated risks or variances. A property’s investment rating is then a transformation of the risk-adjusted averaged return to a single number that conveys the property’s long-term potential to yield profits.

1.2   STATEMENT OF THE PROBLEM

The Real Estate sector offers a great potential source of growth for Nigeria. Until now, the understanding of its composition and growth has been somewhat limited to its required use in Nigerian national accounts without considering the role of investor. Currently, Nigeria is in the midst of a housing boom, primarily due to the great demand created by a rising population. Nigeria’s housing deficit is estimated to be 17 million as of August 2012 which has gave several investors confidence of profitability in real estate in Nigeria. However, the researcher seeks to provide an overview of the investor’s confidence in the Nigerian real estate sector.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1.  To examine the level of investor’s confidence in the Nigerian real estate sector.

2.  To determine the factors that can enhance the investor’s confidence in the Nigerian real estate sector.

3.  To determine the factors that can reduce the investor’s confidence in the Nigerian real estate sector.

1.4   RESEARCH QUESTIONS

 

1.  What is the level of investor’s confidence in the Nigerian real estate sector?

2.  What are the factors that can enhance the investor’s confidence in the Nigerian real estate sector?

3.  What are the factors that can reduce the investor’s confidence in the Nigerian real estate sector?

 

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1.  The findings from this study will educate the general public on the activities of the real estate agents in Nigeria pointing out for analysis factors that can bring in more investors to the sector of the economy.

2.  This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study on the appraisal of investor’s confidence in the Nigerian real estate sector will cover the prospects of investors in the Nigerian real estate sector. It will also cover the factors that can boost investor’s confidence in the Nigerian real estate sector.

LIMITATION OF STUDY

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

REFERENCES

Agbola, S. B. (1998):  The Housing of Nigerians: A Review of Policy Development and Implementation in the Housing Sector.  Research Report 14, Development Policy Centre, Ibadan, Nigeria; 79 – 86.

Ikekpeazu, F. (2004): New Trends in Low-cost Housing delivery systems in Nigeria: An Overview of the public-private partnership approach.  Housing Today, 1 (8), 30 – 36.

 

Olotuah, A. O. (2000): Demystifying the Nigerian Urban Housing Question. Inaugural Lecture Series 53 delivered at the Federal University of Technology, Akure, pp 22.

Nbanefo, R. (2002):The Partnership Principle: Key to Implementing the Habitat Agenda.  Habitat Debate, 3(1), 1, 4-5.

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Full Project – AN APPRAISAL OF INVESTOR CONFIDENCE IN THE NIGERIAN REAL ESTATE SECTOR

Click here to Get The Complete Research Project Chapter 1-5


RESEARCH PROJECT CONTENTS
CHAPTER ONE - INTRODUCTION
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
CHAPETR TWO – LITERATURE REVIEW
2.1. Introduction
2.2. Conceptual Framework
2.3. Theoretical Framework
2.4 Empirical Review
CHAPETR THREE - RESEARCH METHODOLOGY
3.1 Research Design
3.2 Study Area
3.3 Population of the Study
3.4 Sample Size and Sampling Technique
3.5 Instrument for Data Collection
3.6 Validity of the Instrument
3.7 Reliability of the Instrument
3.8 Method of Data Collection
3.9 Method of Data Analysis
3.9 Method of Data Analysis
3.10 Ethical Considerations
CHAPTER FOUR - DATA PRESENTATION AND ANALYSIS
4.1. Introduction
4.2 Demographic Profiles of Respondents
4.2 Research Questions
4.3. Testing of Research Hypothesis
4.4 Discussion of Findings
CHAPTER FIVE – SUMMARY, CONCLUSION & RECOMMENDATIONS
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
REFERENCES
APPENDIX


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