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The Impact of Missing Land Titles on Real Estate Development

Despite improvements in the ease of doing business in Nigeria's real estate sector, more than 60 percent of property owners in the country's 923,000 square kilometers of land do not have titles due to the burdensome process of obtaining a Certificate of Occupancy (C-of-O) and other necessary documents.



The Impact of Missing Land Titles on Real Estate Development

Inefficient land registration and titling procedures have had a negative impact on development timelines and have discouraged investments in the sector. For example, property owners in Lagos had to wait for approximately six years before receiving their documents.


The real estate sector is plagued by uncertainty surrounding title acquisition and the perfection of titles, as well as issues related to consent, revocation, and re-certification. Moreover, land costs are unreasonably high and are further exacerbated by transfer and perfection expenses.


According to the Land Use Act (LUA) of 1978, the responsibility of issuing titles lies with state governments, as all lands are vested in the governors. However, industry stakeholders have repeatedly called for a review of Section 1 of the Act, which grants significant power to the governors, often leading to abuse and uncertainty of title for those seeking it.


The 2018-2019 Nigeria Living Standards Survey (NLSS) report by the National Bureau of Statistics (NBS) revealed that 71.4 percent of sampled landlords across the 36 states and the Federal Capital Territory (FCT) do not possess titles. The report also indicated that only 13.2 percent of property owners in the country have title deeds, with a mere 8.1 percent holding a C-of-O.


Stakeholders have identified several critical issues, including cumbersome processes, official corruption, lengthy durations, high documentation costs, and the authorities' inertia in reforming land policies. These factors contribute to increased property values, rendering land unaffordable for the urban poor and leading to the proliferation of informal settlements in cities.


In some states, individuals are required to pay varying percentages of capital gains, ranging from 10 percent to one percent, or amounts relative to the land's cost, while only about 48 percent of states mandate a valuation to determine the land's value and the associated registration costs. The remaining states rely on arbitrary rules or the governor's discretion, which may result in unfair treatment of property owners or individuals registering titles.


Statistics indicate that between 2018 and 2023, the Federal Government approved 7,985 titles and issued 1,300 certificates to owners of verified Federal Government land as of October 25, 2018. The Minister of Works and Housing, Babatunde Fashola, recently announced the introduction of e-C-of-O and stated that the government had signed approximately 6,685 certificates during President Muhammadu Buhari's eight-year tenure.


Throughout the states, it was discovered that a significant number of property owners often abandon the application process midway, leaving government agencies burdened with a large number of incomplete applications due to non-submission of vital information and other documents. This issue is closely linked to bureaucratic bottlenecks and the high cost of applications.


Although states like Lagos have implemented e-application systems for land documentation, the desired outcomes have not been fully achieved as the intermediaries involved in providing e-certificates still pose obstacles in the process.


In Ogun State, the government issued a total of 4,000 certificates of occupancy to landowners by 2022. In comparison, during Akinwunmi Ambode's administration in Lagos, a total of 5,172 certificates were signed in a span of three years. From May 2019 to May 2022, the Babajide Sanwo-Olu administration signed 727 electronic certificates of occupancy (C-of-O), in addition to those issued for regularisation purposes.


In Borno, Governor Babagana Zulum issued 775 C-of-O during his first term in office. However, the process of obtaining these titles has faced lukewarm response from residents due to observed encumbrances in the procedures. The absence of titles makes it challenging to transact in real estate, leading to difficulties in converting real estate into capital and a high incidence of fraud. These issues cast a shadow of low integrity on real estate and its transactions.


Gladstone Opara, President of the International Real Estate Federation (FIABCI), emphasized that hurdles in acquiring property titles are a major hindrance to real estate development. He pointed out that titles not only contribute to the growth of the real estate sector but also aid in identifying citizens and their place of residence, which has been proven worldwide.


Opara stated that an efficient online documentation process for proper titles would help combat crimes and enhance credibility. Currently, using a letter of allocation as documentation prevents individuals from obtaining loans or listing the property accurately, as many organizations require C-of-O or similar documents. The manual processing of such applications, moving from one desk to another, perpetuates corruption.


He added that the lack of proper documentation appears to be a man-made issue, contrasting with advanced nations where requests for titles are electronically captured and delivered within a few days.


Opara criticized the Lagos State government for not doing enough to ensure easy access to title ownership. The increasing costs of obtaining titles, sometimes matching the property's value at the time of purchase, often discourage people from completing their documentation.


According to Adedotun Bamigbola, former chairman of the Lagos branch of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), facilitating access to property titles is a fundamental consideration for improving ease of doing business and ensuring accessibility for individuals and organizations.


To address these challenges, it is essential for the government to implement solutions such as improved online documentation, which have been suggested over the years.


Land is a crucial asset for any development, but unfortunately, the Land Use Act (LUA) has not fully realized its potential in the 44 years it has been in effect. The Act has given governors control over land titles, often leading to its manipulation for political gain.


While some states, like Lagos, have utilized land as a tool for development, political motives have also influenced its use. In some instances, individuals have had their land taken unjustifiably.


The process of obtaining land titles is burdensome in certain states, taking up to four years. Without proper land ownership, it becomes challenging to invest in residential or industrial development.


Limited access to titles, along with the high costs and time-consuming documentation, discourages many property owners. To address these challenges, state governments should embrace technology, particularly cadastral zoning for mapping purposes, as well as blockchain technology for secure ownership transfer and monitoring.


Implementing technology would streamline the process, enable online applications, and reduce individual influences. The government should ensure fair assessment of properties and minimize registration costs. In the past, the Nigerian Institution of Estate Surveyors and Valuers (NIESV) proposed reducing the registration cost from 15 percent to one percent during Governor Babatunde Fashola's administration in Lagos. Although the governor agreed to a three percent cost, it still led to a significant increase in registrations.


Additionally, people need to be educated about the processes involved. The Surveyor General, under the guidance of the Governor, should identify lands under acquisition and determine their appropriate use, freeing up the land for development.


Kazeem Owolabi, the Managing Partner of RefinHomes, emphasizes the need for a quick and responsive title acquisition process to facilitate development. Delayed titles adversely impact the speed and progress of delivering homes, as funding for real estate projects heavily relies on land titles. The government must understand the urgency and work towards making titles readily available.


Automating title processing, removing bottlenecks, and establishing responsive filing, confirmation, and complaint channels are crucial steps for the agencies involved. Proper monitoring of the processes is also essential.


Obtaining affordable housing or accommodations starts with accessible titles. If the costs are high, developers pass them on to homebuyers, making housing more expensive.


Successful amendments to the Act would enhance and facilitate real estate transactions, increase the housing stock, and eventually reduce the housing deficit.



Source: The Guardian


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