Today, Real Estate is a cliché in every country. Real Estate property is attributed as a sure-bank investment for persons who can afford this intangible form of assets, and unlike money, it is ranked higher than financial instruments.
This article is not to argue about its societal placement as a form of an asset over other forms of assets but its role through valuation in the economic growth and development especially Nigeria.
There are several determinants of economic development in the world. They include inflation, real estate development, money flow, and interest rates, to mention but just a few. The main focus is on real estate as other determinants evolve around the statistical calculations of demand and supply.
Demand and supply are not really a major factor in valuing real estate, as there are other significant factors such as the people’s purchasing power, the category of the real estate, the soil composition and geographical location of the Land which would also factor in natural and man-made disasters, etc.
Real Estate is synonymous to Land and everything that is permanently affixed to it. This includes buildings, structures, etc.
Real Estate has various categories such as Residential, Industrial, Commercial and Development, and Agriculture. These categories are usually depicted in the Certificate of Occupancy granted to either Statutory or Customary holder of the land for a term of years.
The Land Use Act of 1978 is the primary law governing Land in Nigeria. The Act vests all land in the state, that is, land in its entirety within each 36 states territory and boundary in the Governor of each state.
Just like every profession has its representatives, Real Estate has its representatives and they are called Estate Surveyors and Valuers (ESV).
These set of people provide information, contribute and advise persons (individuals, corporate entities, and governments) on the knowledge and strategies to build infrastructures, maintain infrastructures, and on national development.
Some roles of Real Estate Valuation includes:
- Auctioneering: arriving at the initial value which the property will be auctioned i.e. guide price
- Evaluating and valuing monetary value for property either for loan purpose, mortgage purpose, Construction purpose, assignment or transfer purpose, business startup, etc.
- Consulting on statistical compensation required for the revocation of property for public interest
- Splitting businesses based on its assets
Economic growth is defined as the process of growing or expanding a country’s economy geometrically through macro-economic indicators especially gross domestic product (GDP) per capita.
It is also defined as the expansion of an economy’s total output which is measured with GDP to determine the improved standard of living and quality of life among the population. Therefore, when the output per capita is greater than or outgrows the population, there is economic growth.
Economic growth remains sustainable through economic development. Economic development is synonymous to an environment which is synonymous to real estate or land.
As reiterated earlier, there are determinants of economic growth such as Real Estate development, interest rate, money supply, and inflation but the focus is on Real estate development.
The Role of Real Estate Valuation in the Economic Development of Nigeria
The role of real estate valuation cannot be overemphasized. Valuing a property goes to the root of establishing the propensity of appreciations or stagnation over a certain period of time. Property valuation determines the exact value or worth of a property.
This determination gives the owner an insight into the possible returns on his investment or informs a seller on the value of his or her property before sale; likewise buyer.
When valuing a property, an Estate Surveyor and Valuer consider three (3) key approaches: a cost approach, comparable sales approach, and the income approach. These three approaches determine the return on investment on a property in any geographical location.
In Nigeria, Real Estate valuation plays a role in economic development as real estate is one of the contributory factors of the economic GDP. A property rightly valued, can either be developed, maintained or sold.
When public infrastructures or assets are developed or built and maintained to serve the growing populations; especially in urban and semi-urban areas targeting low and middle-income earners.
The outputs generated from these infrastructures will be one of the contributory factors of economic development and growth in Nigeria.
Valuing real estate is crucial for economic development. Several countries in the world turn to experts in the field to consult on the worth of a property and its projected value in future before committing to it.