The Chief Executive Officer of Casafina Development, Olufemi Seyi, has said rental income in Nigeria is typically low, averaging between 3 and 5 per cent.
Seyi stated this at the unveiling of some housing units built by the company in Anthony Village, Lagos, recently.
He noted, “Rental income in Nigeria is typically low, averaging between 3 and 5per cent. This prompted us to explore the possibility of creating purpose-built investment properties capable of delivering significantly higher returns, potentially between 10 and 15 per cent. The goal is to position real estate as a competitive alternative to federal government bonds and other fixed-income instruments, offering not only attractive cash returns but also the added benefit of capital appreciation. To achieve this, we strategically acquired a prime-location property and undertook comprehensive renovations to optimise its rental potential and overall value.
“So, we acquired this property in a prime location and renovated it. It’s a total of 24 units of one-bedroom apartments. I’m glad to say that we did pre-launch reservations, and we were sure that we would do at least 30 per cent to 40 per cent occupancy for our clients. And with the current rental rate, you probably will be able to rent it out. An average investor will get about a 20 to 25 per cent return annually on these properties. And you know, the figures speak, so it’s not just about, so if you look at it, do 30 per cent occupancy, which is possible, meaning 10 days in a month, N50,000 per night.
That’s 500 times 12. That’s December. It’s a bit busier, so that’s N6m per annum. There are very few instruments that will provide that kind of return. So that’s the inspiration behind it. And then we also want to use this to showcase what is doable and then launch a second project like this, which is another 24 units of one-bedroom maisonettes, a bit more luxurious, somewhere in Adeniyi Jones. We think that we can repeat what we have in terms of return for investors.
“It’s a total of 24 units with a rooftop lounge, of course, armed security, 24-hour water, and 24-hour security, as the case may be. Those are the basic features because this was a test case, and we’ve seen that it’s successful. So, subsequent projects will now include other amenities like a rooftop swimming pool and an apartment swimming pool on the ground floor. We’re doing a party lounge. You can do a 60-man party on the rooftop with a pool and all. The beauty of this place, and significantly, all the locations we are going to pick is the fact that we take into consideration where people want to go. So, if you are here, you are like 20 minutes away from the airport. You are like 20 or 30 minutes from Victoria Island, if you want to exit Lagos, you’re coming from the US, UK, wherever you drop, you come here. If you want to quickly go to visit your relatives in Ibadan you actually can easily go. So, it’s like the centre of town. It took us a while to get the property that fits what we wanted, but it’s a good fit for what we wanted.”
In a similar vein, an estate surveyor, Olorunyomi Alatise, said rental income was typically low, averaging between 3 and 5 percent.
He said, “This is primarily due to the mismatch between rental prices and tenants’ ability to pay. Many Nigerians face economic hardships, which limits their capacity to afford higher rents. Additionally, the informal nature of much of the housing market, where many rental agreements are not formalised or regulated, can sometimes result in lower-than-expected income for property owners. Moreover, the lack of efficient rental systems and infrastructure in many parts of the country reduces the appeal of rental properties to potential tenants, contributing to lower rental returns.
“Despite the low rental income, real estate remains a viable long-term investment in Nigeria due to its potential for capital appreciation. Over time, properties, especially in prime locations, tend to increase in value as cities expand and infrastructure improves. This capital gain, coupled with the stability of the real estate market in the face of inflation, makes property a good hedge against currency devaluation. Investors, therefore, may not see high immediate returns from rental income, but the eventual sale or increased value of the property can deliver substantial profits in the long run.”
