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Abstract
This study explores how institutions affect the process of investment and the time it takes to buy and sell commercial property in Lagos, Nigeria. We isolate institutional factors that impact transaction efficiency and provide a snapshot of the process with average transaction times for the largest commercial real estate market in the most populous country in Africa. This study adopts a qualitative approach and relies on information collected from semi-structured interviews with 36 senior level individuals active in the Lagos commercial real estate market. Among our findings, we note the commercial real estate transaction process is divided into seven distinct stages and the average time to complete an acquisition across all stages (all property types) is 306 days. Title registration/perfection stage takes the longest time (around 132 days) and represents a significant risk to investors. We argue this is a consequence of imperfections in the formal institutions of title registration.
Acknowledgements
The authors express their appreciation to the Commonwealth Scholarship Commission (UK) for providing financial support to the PhD research on which this study is based.
Notes
1. North (Citation1990) argues that since it takes resources to establish and define property rights and to enforce agreement, they come with a cost too, and these costs constitute the TCs that are associated with the formal institutions of a market, or the costs of using the institutions of a market. For instance, Ball (Citation2010) puts the TCs of development control in England at about £3 billion per annum.
2. See also the structure–agency institutionalism (SAI) model [Healey and Barrett (Citation1990) and Healey (Citation1991, Citation1992) and applications to land development; for example, van Der Krabben and Lambooy (Citation1993), van Der Krabben and Boekema (Citation1994), McGreal et al. (Citation2002), Han and Wang (Citation2003).
3. For GDP calculation provided by the National Bureau of Statistics (NBS), real estate is proxied by the sum of fees and commissions receivable for real estate services rendered in any particular year.
4. This also excludes the valuation stage found in the less common JV cases.
5. The earliest C of O granted in 1978 currently have around 59 years remaining. There is presently no consensus as to what is likely to happen to the holder of a C of O after expiration as the LUA is silent on lease renewal entitlement and procedures at expiration.
6. Often referred to as ‘gazumping’ in the UK.
7. This is the official application form to obtain a C of O or a Governor’s Consent.
8. Income tax is payable by Nigerian citizens and non-citizens. For tax purposes, a person is regarded as a resident of Nigeria if he/she spends 183 or more days in Nigeria within a 12-month period.
9. This is usually lower than the purchase price of the property, but in some instances, could be higher.
10. There are strong ties between the civil service and political parties in Nigeria, and during election years government resources and human capital are often marshalled by the ruling class to aid in election campaigning. During these periods, routine official duties may be abandoned or postponed, and this can affect applications for C of O and Governor’s Consent.
11. For example, Awuah, Hammond, and Lamond (Citation2013) considered the cost of title formalisation in Ghana, but did not investigate the entire transaction process.