Blockchain Can Solve Nigeria’s 22 million Housing Deficit

We have seen pockets of progress over the years with rising numbers of property listing companies and tech landlord-house-seekers intermediaries, but housing deficit continues to prevail in Nigeria.

Rising population, rapid urban migration and uncoordinated policy direction of the government are some of the critical factors deepening the housing gap. Because of the scale of this deficit, innovative investment solutions are all-important right now.

Nigeria’s housing deficit

The head of the federal mortgage bank in Nigeria, Ahmed Dangiwa, put the country’s present housing deficit at 22 million units; and the bulk of that is in urban areas — Lagos, Port Harcourt and Abuja.

As the urban population expands — almost half of the country’s population now live in urban areas — building additional units would require more than N6 trillion (US$16 billion) investment yearly. Of this, we can expect very little to come from government funding.

Nigeria's Housing Deficit

Crowdfund financing

Crowdfunding is a permissionless way of raising money. So far, the trend of pooling capital from several retail investors to finance a new or existing business venture has proven successful in Nigeria. The growth of AgricTech platforms has provided a template for other poorly funded areas of the country.

Thrive Agric, which crowdfunds investments for smallholder farmers, have funded more 14, 000 farmers with over ₦180 million ($500,000) raised in February, 2019 alone; and providing returns of up to 20 per cent for retail investors. Currently, there are up to ten different crowdfunding startups providing value in the agric space.

These platforms have unlocked an untapped financing opportunity for farmers who are mostly locked out of the Nigerian credit system and also lowered the investment threshold for many middle -class Nigerians who have been shut out of the capital market.

Real estate developers could also leverage this financing model. It won’t be a significant shift from the traditional model of most real estate projects: already, developers often raise capital from private investors to finance massive projects.

However, there are additional costs and risks with raising small amounts from 500, 000 retail investors rather than 50 high-net worth private investors, for instance. This is where blockchain startups could provide a unique value.

Tokenisation in real estate

Tokenisation on the blockchain makes it possible to represent ownership in a property on an open, distributed digital ledger. Simply, it means converting rights to an asset into a digital token.

Hypothetically, say an apartment of 50, 000 square metres cost N30,000,000. That can be converted into 500,000 tokens (a token representing 10 square metres).

These tokens can then be freely bought and sold on a designated platform. Every holder of the token becomes an investor/part-owner of the property, and would be entitled to a share of the profit when the property is sold.

Uba Nnamdi Chukwuebuka is the co-founder of one of the blockchain startups in the real estate industry solving the problem of lack of funds to build houses in Nigeria. HouseAfrica allows retail investors to own a small fraction of a home and also provides rent-to-own services.

Using the Waves Blockchain, it converts real housing assets into digital assets backed by a square meter of the house. The digital asset is called Square Meter Token (SQMT). 5 SQMT represents 1 physical square meter of the property.

“We are solving housing deficits and lack of funds to build these houses [bridging the housing deficit],” Uba said.

Nigeria's Housing Deficit


We are giving everyone access to fund real estate project and enjoy rental returns, sales profits and price appreciations. So you own house on your mobile via blockchain technology and make returns from a real house,” he explained.

The company raises funds for developers, who build these houses, they are then either sold or rented, and the revenues are shared with the co-owners. The projected return for the first project is about 38 per cent for 3 years.

HouseAfrica has partnered with “an SEC [Securities and Exchange Commission] approved trustee company that holds and protect our investors’ funds.” And Allianz Insurance insures the building projects.

Though blockchain is nascent and there are still few regulations around the industry, there are some apparent advantages to tokenising crowdfunded real estate projects.

Tokenisation creates liquidity

Liquidity is the ability to convert an asset into cash within a short period. Currently, to sell a property or land in Nigeria, it would likely take months to close a deal but with fractional real estate investing through blockchain technology, you could complete a transaction in minutes.

Cost reduction in processes

Cost is reduced by removing the administrative effort of record keeping and transaction reconciliation. The blockchain handles all that.

Other benefits include improved administrative efficiency and greater transparency.

What about protection for investors through regulations?

When it comes to regulation, it often follows innovation. When these blockchain startups successfully start raising funds for major projects in the country, regulatory bodies would definitely start applying appropriate measures to weed off companies that might want to defraud investors.

Like Mr. Uba Nnamdi said, the regulation would “build up confidence among the investors” in a market plagued with pyramid schemes.

At the moment, the potential of the blockchain technology is not been tapped in the country. But through the cooperation of market participants, regulators and technologists, this new technology could yield significant results especially in the real estate sector.


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