Types of Real Estate Investment in Nigeria:
In Nigeria, growing urbanization and economic development have presented a wide range of investment opportunities, particularly for those in the real estate market. From bustling cities to serene countryside, Nigeria’s real estate market is a complex landscape encompassing various property types, each with its potential for profits.
To navigate the market effectively, it is essential to understand the various types of real estate, recognize their differences, and evaluate the profitability of each one.
In this blog post, we’ll delve into the various types of real estate, shedding light on the characteristics and potential benefits of each one.
Types of Real Estate Investment
There are several types of Real Estate investment in Nigeria but we’ll be paying particular attention to just four (4) out of the many.
1. Commercial Real Estate
Commercial Real Estate is a property that is utilized solely for business-related activities. It can be anything from an office building, a restaurant, or a hotel, to a shopping mall, retail store, or even a warehouse. While commercial real estate investments can provide higher rental incomes, they may also involve higher risks and capital requirements.
Commercial Real Estate is often owned by an individual or group of investors and is leased to tenants to conduct income-generating activities and its rent can be collected on an annual or a monthly basis depending on the agreement.
However, it is worth noting that the profitability of commercial real estate often depends on location, infrastructure, and the economic prospects of the region.
2. Residential Real Estate
Residential properties are one of the most common types of real estate in Nigeria to invest in, with a variety of housing styles to consider.
This category includes apartments, flats, duplexes, and condominiums. The demand for residential properties in Nigeria remains consistently high due to rapid urbanization and population growth. Cities like Lagos, Abuja, and Port Harcourt have witnessed a surge in the demand for affordable housing, making residential real estate a potentially profitable venture.
Investors in Residential Real Estate can profit from the increase in value of their properties between the time they buy them to the time they sell them, or by collecting rent from tenants.
Succinctly put, while buying a house solely for investment purposes is an option, you can also make money by renting out extra space in your residence.
3. Industrial Real Estate
Industrial Real Estate is the use of properties for industrial activities that may include manufacturing, assembly, warehousing, research & development, and distribution. In Nigeria, efforts to boost local production and improve infrastructure have increased the demand for industrial spaces. Proximity to major highways, ports, and transportation networks significantly influences the profitability of industrial real estate investments.
The production of goods is so important to the framework of society, making industrial real estate one of the most valuable properties anybody can own.
One advantage of Industrial Real Estate is its longer lease term which is usually between 3- 15 years, and is ideal for investors seeking longer investment horizons.
While it may require huge capital to invest in, it promises a high annual yield of about 12% according to Business Day
4. Real Estate Investment Trusts (REITs)
REITs have a growing popularity in the Nigerian real estate landscape. They are not a property type in itself but are companies that own, operate, or finance income-generating real estate such as office buildings, hotels, shopping malls, storage facilities, and others.
They allow individuals to invest in real estate assets and earn a share of the income without actually owning the physical property. Investing in REITs often provides dividends from rental income and capital appreciation, which is a more accessible way to enter the real estate market.
The Most Profitable Type of Real Estate Investment in Nigeria
Determining the single most profitable type of real estate in Nigeria is challenging, as it depends on various factors such as location, market trends, economic conditions, and investor expertise.
Residential real estate and commercial properties tend to be more consistently profitable due to the constant demand for housing and business spaces. However, other segments like industrial properties and real estate investment trusts can offer substantial returns if approached strategically.
A subjective evaluation goes into selecting the best type of investment property. How soon you want to see a sizable return on your investment will have an impact on your choice. Additionally, your financial capability is an important factor that influences your investment choice.
Whatever form of real estate you choose to invest in, you must conduct a thorough market analysis. It would be an excellent move to analyze the neighborhood and the property you are interested in., to determine its potential for expansion.