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Property & Environment

Low Profit Margins Shrink Bungalow House Type

Posted: Apr 12, 2016 at 3:00 am   /   by   /   comments (0)

Nkasiobi Oluikpe LAGOS


Despite the many benefits that bungalow house type offers, low profit margins have continued to shrink its development in the country.

Again, since developers shy away from bungalow development, the quest to bridge the 17 million housing gap and also make housing available and affordable for low income earners may still remain a pipe dream.

Concerned stakeholders say the only place where home ownership dream of the low income earners can become a reality is at the backwaters of states or outskirts.

They reckon that housing structures such as duplexes, terraces and blocks of flats within the metropolis, being currently undertaken by developers, are not within the reach of the low income earners.

Experts justified the trend, noting that developers are businessmen who look forward to making returns on investment.

According to them, it is not economically viable to invest on a bungalow since the same piece or size of land can yield several returns if other structures such as detached duplexes, blocks of flats, multi-storey buildings or terrace are put on it.

“When you have a parcel of land, the first thing that comes into your mind is how you can maximize the value of that land. Value doesn’t necessarily mean economic value; it could be aesthetic value or social value or anything. You want to put up a structure that would meet your objective of putting the building together.

“Now if you look at what is going on, the trend is moving away from the typical ‘face me I face you’ that our fathers used to build in those days. You hardly find bungalows in most of those countries where mid income professionals really live, that is what has permeated our culture presently. People would rather use the land to build either semi-detached duplex or terrace, you want to build block of flats, all to maximize your returns on income on the same size of land. If you check the return to you in the long run, it is still economically better”, Femi Akintunde, Managing Director, Alpha MeadFacilities & Management Services Limited, said.

Akintunde also disclosed that the building development type in Nigeria is tending towards the Western style where people take advantage of land size and space available, noting that people want to move with the trend as the trend and style are psychical. He noted that maybe in another 10 years that psycho will pass, but for now, nobody wants to build outside of the trend.

In spite of the low profit margins of bungalows, analysts agree that new bungalows are easy to maintain, offer a safer option for living as all ones rooms are located on the same floor, eco-friendly choice for families concerned about the environment and with the trend towards reducing living spaces, the bungalow is ideal with open concept plans that offer light and airy rooms. They also agree that they make great homes for individuals with mobility limitations and there’s an added benefit to the large lots on which bungalows are usually built – they provide space to accommodate additions should you want to expand your living space in the future.

Asimiyu Bashir, immediate past chairman, Nigerian Institution of Building (NIoB), noted that if one buys a land for about N7 million and erects a bungalow on it, one may not get the value for one’s money unlike when it is a multi-storey building.

“Same trend applies when you want to go for approval for five or six plots. It is only the payment that is a bit different, coupled with the ‘omonile’ syndrome. If you pass through all those hurdles and end up with just a bungalow that just one single individual will occupy, it does not really make much sense”, Bashir noted, adding that “the cost of the land is the basic thing that affects the trend. If government will make land available, people will still go for bungalows because it is still the best. When you go for storey buildings, you will also discover that some people have phobia for height, the elderly will not be able to climb. So bungalow is still good for us in this kind of environment.”

He reckoned that if one has a multi-storey building around, it affects other buildings around because air will not circulate very well, “but if everybody has bungalows you will discover that air circulation will go round. But like I said, the major and basic thing is the cost of the land.”

NIoB immediate past chairman noted that even though there are those who still have taste for bungalows, the average developer will not be making substantial money from putting up a bungalow for just one occupant unlike when there are several occupants among whom some of the problems could be shared or spread.

“When there is a problem, all of them will share the cost together. But on a bungalow, it is just only one person that you will go and meet to pay for Land Use Charge, multiple taxation and other charges. If you share it out among the multiple tenants, then it will be easy. If it’s just one occupant and they bring N100,000, how will he pay? These are some of the problems we have with bungalows. It’s a matter of choice anyway, but I know private developers will not want to develop a bungalow in return for their investment. They are businessmen who need to recoup their money”.

While maintaining that the set of people who consider building bungalows are the wealthy retirees who put it up in order to enjoy the remaining empty space, Akintunde added that you have to consider maintenance and operational costs, which will have to be borne by only one single individual.

Insisting that you really have to build something that you will be able to sell quickly, Akintunde said whether you build on a land in Ikoyi or where the land is cheap, it doesn’t change the cost of your building materials.

Rotimi Akinlose, Managing Director, Residential Auctions Company (RAC), said bungalows have low profit margins and the value of land these days makes it imperative for developers to build blocks of flats on a single piece of land or other unit houses that will sell for higher prices to maximize the value of the land.

“Bungalows presently exist where you have mass housing estates. But in a city building bungalows will be a waste of money because you cannot maximize the true value of the land.”

Akinlose stressed that though bungalows will still be there for those who need affordable housing, government, he insists, will have to be more proactive in building the bungalows than the private developers.

Olumide Olutimayin, Managing Director, Axora Homes Limited, also agrees that the return on investment for bungalows is quite low and that there is really not much demand for them.

“As big as Magodo Phase II is, I know of only four bungalows in the place. And those four bungalows were built by the earliest residents. Bungalows only work well in low cost housing estates where the cost of the land is very low but when you are spending in excess of N10 million for land and you are building a bungalow on it, it doesn’t make any business sense. An end user or owner occupier that doesn’t have money can settle for a bungalow because it’s cheaper to build.”

He maintained that the advantages of bungalows over other building types are not really as pronounced. The truth of the matter, he said, is that there is really no market for bungalows, except in backwater areas.