By David Akinmola
The rising cost of housing in Lagos may be set for further pressure as developers and property investors contend with a building tax of up to 30 per cent, adding to the growing burden of land, construction materials, financing and other costs associated with delivering homes in Nigeria’s commercial capital.
For prospective homeowners already struggling with soaring property prices and rents, the additional tax burden could further widen the gap between what ordinary residents can afford and the cost of putting decent accommodation on the market.
Property developers and industry stakeholders have warned that taxes and levies imposed across the housing development chain ultimately form part of the cost of delivering properties, with developers often left with little option but to transfer a significant portion of the burden to buyers and tenants.
The concern comes at a time when Lagos is facing one of Nigeria’s most severe housing affordability challenges, driven by high land prices, expensive building materials, rising labour costs and elevated financing costs.
Cement prices, for instance, have remained substantially higher than historical levels, while the cost of other construction inputs, including steel, fittings and imported components, continues to expose developers to exchange-rate and supply-chain pressures.
Against this backdrop, the imposition of a building-related tax of up to 30 per cent could further weaken the economics of housing development, particularly for developers operating in the mass and middle-income segments where profit margins are already under pressure.
For a developer, the impact is not limited to the tax payment itself. Higher statutory charges can increase the total cost of a project, raise the amount required to finance construction and ultimately push up the selling price of completed units.
The consequence is that a policy intended to generate revenue for government could inadvertently make formal housing more expensive if the cumulative tax burden is not carefully balanced against the need to expand housing supply.
This is particularly significant in Lagos, where demand for housing continues to outstrip the supply of affordable units and where a large proportion of residents rely on rented accommodation.
Industry operators argue that the priority should be to create an environment that encourages rather than discourages investment in housing supply.
They contend that while government requires revenue to provide infrastructure and public services, excessive taxes, levies and approval-related charges can discourage new developments, especially when developers are already contending with high interest rates and weak consumer purchasing power.
The challenge is compounded by the structure of Nigeria’s housing market, where formal mortgage financing remains limited and many prospective homeowners must either raise substantial equity or depend on increasingly expensive rental arrangements.
For low- and middle-income households, any increase in the cost of constructing new homes could therefore have a wider social impact, as developers factor higher development costs into property prices and landlords subsequently adjust rents.
Analysts say the issue should be viewed within the broader question of how Lagos can increase housing supply while maintaining affordability.
Rather than relying heavily on taxes and charges on property development, they argue that government could consider incentives for developers providing affordable housing, faster approval processes, access to infrastructure and more predictable regulatory costs.
Such measures, they say, could reduce the cost of delivering housing and encourage private capital into a sector requiring billions of naira in new investment to close the supply gap.
The 30 per cent building tax debate therefore goes beyond the immediate cost to developers. It raises a larger question about who ultimately bears the burden of taxation in a housing market already struggling with affordability.
For Lagos residents facing rising rents and property prices, the answer could determine whether new homes remain within reach or become increasingly out of the financial reach of ordinary households.
