Building planning permit rates have yet again taken a leap in the construction and real estate sector in Lagos, following a review of prices by the state government last month, raising fears among prospective home builders and property developers of even harsher times to come under the Sanwo-Olu administration.
The development is coming on the heels of increased financing costs, rising interest rates and inflation that took shine off real estate investments. A lot of property developers were forced to downsize portfolios, invest in assets at potentially cheaper levels and reposition properties to meet shifting consumer demand.
For instance, the exchange rate more than doubled, putting pressure on building material importers and culminating in high prices in the market. Currently, the prices of local building materials, such as wood, tiles, iron rods and cement have also skyrocketed.
Cost of renovating and developing new homes also rose sharply. The rise in interest rates made it more expensive to finance real estate projects and reduced returns for investors. Expectedly, most landlords and property owners have capitalised on the situation to raise their rents in most parts of the metropolis.
Prior to the increase, building assessment is N10, 000 for one to 650 square meters and N4, 000 for subsequent 1,000 square meters for all areas, while stage certification is 35 per cent of building assessment and registration and application N5, 000 and N25, 000 respectively for all areas. The renovation fees are 25 per cent with former permit and 100 per cent with no proof of former permit.
Town planners said the rates would add to the overall cost of construction, disrupt budgeting or financial plans, particularly as the rates are made retroactive. The new rates will lead to an increase of between 15 and 20 per cent on documentation, which is part of stage one of the construction budget. Ultimately, investors or developers will have to increase rents on the development, whether residential or commercial to be able amortise their investment.
Besides, prices of sale of property will also be affected, as some developers may not apply for planning permits due to the high cost. This has been the situation even before the rates were increased. Many developers, particularly single dwelling owners in LGAs like Badagry, Epe, Ibeju- Lekki, Ikorodu and others have put up buildings without planning permits.
President, Nigerian Institute of Town Planners (NITP), Nathaniel Atebije, said the immediate implication of the hike is that it may encourage illegal and poor construction activities. “Developers will, more than ever before, cut corners, procure permits through fraudulent and corrupt practices, especially in Lagos, where we do not have enough personnel and equipment to monitor developments.
