Investing in developing towns

Many investors in the real estate and investors to be do not always see anything good in the developing or underdeveloped areas. Everyone desires a portion in the high brow zones of the city. This had led many who would have gotten their own personal properties to remain tenants to their own detriment.

The choice and likeness for the major cities account for population influx and the attendant northward rise of cost of living. The surge for the cities creates an unsatisfied demand for both living and business premises. The Nigerian experience is quite different as normally, people do maintain dual living apartments. A property in their villages and another in the town, thereby decreasing available spaces for others to use. Above all these, the developing towns or areas are best suitable for consideration in terms of property acquisition.

As major cities are almost full with its attendant high cost of living, developing areas of today are growing faster than expected, turning to the big cities of tomorrow. The developers of these areas are begging people to consider these areas with its juicy offers attached to it. Such areas do look barren but just a few years to go, it turns into yet another city with unimaginable cost of acquisition.

Take a look at the invoice above, it attests to the cost of acquiring a flat in Festac town Lagos. The town was built in 1977 for the Festival of Arts and Culture which was held in Nigeria year. When that town was built, it was on the out skirts of the Lagos city then. Many Lagosians will not like to migrate to this area then for the fact that it’s off the main Lagos. Today in 2009, that apartment goes for a whopping N4.500.000.00 (four million, five hundred thousand naira, approximately $30,000.00). Also, the area is rented for N300.000.00 per annum now.

A flat that cost N6,380.00 in the year 1995 as the receipt said is now being sold for N4.500.000.00 in the year 2009. it looks ridiculous yet totally true. The idea of investing in a developing area is not a fluke as your investment increases in its worth as the city gets filled up.

That was in Lagos, we went out of town to seek information in other areas to justify these trend and our finding corresponded. A headmaster in Anambra state, eastern Nigeria, Mr. Okeke bought two plots of land at the price of N450.00 in 1974. Just opposite him, in 2005 another kinsman of his bought a plot of land at the price of N1.300.000.00
Should Mr.Okeke sell one of his plots that cost him N175.00 only now, he will pocket N1.300.000.00 or more in 2009. thus an investment of N175.00 in 1974 is now worth over N1.300.000.00 having farmed on it for 35 years. If we compare the price it was bought and what it could be offered for now, the investment must have appreciated in value to the tune of 742, 757% in 35years.

Now, if the major cities of today are very costly for people, the developing areas are super spots to clinch without delay. If you take time to interact with the older folks and real estate happens to be the subject of discussion, you will but learn so much.

In a real estate seminar recently, one of the facilitators in his early 70’s reminded us that times have not changed. According to Mr. Ahmed, a surveyor he was part of the team that mapped out the current Nigerian capital city Abuja. He never belived that the seat of power will ever be relocated to Abuja, this he rejected the offer of signing an application which came to civil servants as peanuts then. According to him he could have paid for a plot of land in any area of Abuja then in full with ease. Living at Obalende then,he never wanted to stay away from where the action melts. He equally saw Surulere then a swampy town being populated but never took action. According to him a Plot of land by 1978 was going for a paltry N4.000.00 but considered there a place for low income earners. As his lecture winds up, the last chance he missed was annoying. In 1993, during the election crisis, he fled to Benin Republic the nearest country to Nigeria from Lagos state.

On his way home when the situation returned to normalcy, in the company of one of his friends who hails from Badagary a boarder town with Benin Republic, his friend asked him to invest the excess funds on him on land but he said no! These plots of land was offered to him at the price of N1,000.00 each and he had over N40,000.00 unspent on him. As he recounted, that area of Lagos for him is not worth thinking about. Today that area offered to him at the rate of N1.000.00 by 1993 is being sold for N200,000,00 in the year 2009.

As pathetic as the story was, this situation is not limited to Lagos state alone. It is same with all the cities all over the world. There are reasons why real estate is a nice option to consider in terms investment.
• As land diminishes in quantity, it increases in its worth as its demand gets higher due to increase in population.
• It has low depreciation if not zero depreciation, yet it yields income in multiple ways depending on how you put it to use.
• It is a better option as a collateral for business transactions
• Landed properties could be remodeled to serve various purposes.
• In the process of government acquisition of an area, proper compensation is made to the owners.

Investing in real estate today is even more lucrative than what it has been before now. Today’s properties are in estates built with better layout, design, landscaping, security network and better business opportunity. The cost of buying a bungalow in a high density area can afford you acres if not hectres of land in the developing towns.

As these new towns are springing up, road networks are extended into these areas, making movement faster and easier.