By David Akinmola
Real estate developers in Lagos have warned that escalating costs of land acquisition, construction materials, labour and financing are threatening the viability of new housing projects, with buyers and tenants expected to bear a larger share of the burden as developers adjust prices to remain in business.
The warning comes amid renewed pressure on the housing market, where high demand, limited affordable supply and rising development costs are widening the gap between what developers can deliver and what households can afford. Recent industry reports indicate that construction costs have risen sharply over the past two years, while rents in some major urban markets have recorded substantial increases.
For developers, the problem extends beyond the price of cement and other building materials. Land acquisition, statutory approvals, infrastructure provision, professional fees, labour and the cost of financing are combining to increase the total cost of delivering residential properties.
Industry operators said the pressure is forcing developers to reassess project pricing, particularly as construction budgets prepared months earlier are increasingly becoming inadequate by the time projects reach completion.
The latest pressure has also been reflected in the cost of cement, with reports showing the price of a 50kg bag of Dangote Cement rising above N15,000 in some locations. Operators have warned that further increases could feed directly into construction costs, property values and rents.
The development is particularly significant for Lagos, where demand for housing remains strong but affordability continues to deteriorate. A recent housing and capital market report identified low household incomes, limited mortgage access, high land and construction costs, infrastructure deficits and inefficient land administration among the major constraints to housing affordability in the state.
Industry analysts say the consequence could be a further shift in the property market, with developers increasingly targeting higher-income buyers who have the purchasing power to absorb rising prices, while low- and middle-income households are pushed towards more distant locations or smaller housing units.
This could worsen the existing mismatch between housing demand and supply, particularly in the affordable segment.
A recent industry assessment found that properties below N15 million accounted for about 55 per cent of demand but represented only a small portion of available supply, highlighting the difficulty of matching new developments with the purchasing capacity of the majority of prospective homeowners.
The financing challenge is also becoming increasingly important. With borrowing costs remaining elevated, developers who rely heavily on bank financing face higher interest expenses, which are eventually reflected in project prices.
Industry observers therefore argue that reducing the cost of housing will require more than efforts to control the price of individual building materials.
They point to cheaper long-term financing, improved land administration, faster approvals, better infrastructure and incentives for developers of mass-market housing as critical to reversing the trend.
For prospective homeowners and tenants, however, the immediate concern is that the rising cost of development could further increase the cost of securing accommodation.
In Lagos, where housing costs already consume a significant portion of household income, further increases could deepen affordability pressures and encourage more residents to move farther away from employment centres in search of cheaper accommodation.
The development could also affect the rental market as landlords who acquire or develop properties at higher costs seek to recover their investments through increased rents.
Recent research cited by Lagos housing analysts showed that annualised rent growth in some Lagos locations was significantly above headline inflation, with increases exceeding 40 per cent on some mainland corridors and reaching about 51 per cent in prime areas of the Island.
Consequently, developers and analysts are urging policymakers to address the structural factors driving construction costs rather than relying solely on interventions targeted at individual materials.
The industry argues that unless the cost of producing housing is reduced, efforts to expand supply may continue to fall short of the growing demand from Nigeria’s rapidly urbanising population.
For developers, the challenge is now to balance commercial viability with affordability at a time when construction costs are rising faster than the purchasing power of many households.
For buyers and tenants, the implication is more immediate: the cost of securing a roof over their heads is likely to remain under pressure unless the underlying cost of delivering housing begins to moderate.
The housing market, industry stakeholders say, therefore needs a broader policy response that addresses land, finance, infrastructure, construction inputs and regulation simultaneously.
Without such intervention, rising development costs could continue to make new housing increasingly expensive, leaving millions of Nigerians facing a market where the demand for affordable homes is growing faster than the supply of homes they can actually afford.
