A COMPARATIVE ANALYSIS OF RENT (AL) VARIATION IN RESIDENTIAL AND COMMERCIAL PROPERTIES IN NIGERIA

A COMPARATIVE ANALYSIS OF RENT (AL) VARIATION IN RESIDENTIAL AND COMMERCIAL PROPERTIES IN NIGERIA

CHAPTER ONE

1.0    INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Shelter is a basic necessity in life. An individual can satisfy this need by either occupying his own (owner’s occupier) property or renting another person’s property. In our traditional society, the need for shelter is mainly met through the first alternative that is owner occupation. With the emergency of urban centers’, the situation has changed. Many people are no longer about to own property because of the difficulty in the acquisition of land and the high cost of building construction. Therefore, they are left with the alternative of renting other people’s properties in order to satisfy their need for shelter. Consequently two classes of urban resident have emerged, the landlord and the tenant under this arrangement the tenant pays to the landlord a certain amount of money in consideration for his use of the landlord’s house. This amount is popularly known as rent. During the civil war the Nigeria that is 1966 to 1970 many landed properties in the urban areas of the former Eastern Region of Nigeria, including Enugu, were destroyed. Consequently, there was a sharp decline in the supply of landed properties after the war.

Furthermore, the post – civil war period witnessed an unprecedented number of the rural population trooping into the urban centres due to the conspicuous prosperity brought about in the urban area by the oil boom. This 2 resulted to high demand for the existing limited supply of landed properties. Consequent upon these, rent for landed properties increased considerably. This trend has continued with the effect that “the average worker is paying 30% to 40% of his salary as rent” (Oshadiya, 1985). Thus the increase in rents on the properties has led to the variation of rent on properties. In urban area due to location advantage (for example prime location) which some properties offer above others for commercial and residential uses, rent tend to very on account of the type of use which a property can offer.

1.2    STATEMENT OF PROBLEM

Location of economic properties has been a difficult concept to understand. Although the primary objective of commercial properties is the derivation of financial gains, while that of residential properties is for habitation, shelter and comfort, the demand for land is a reflection of the profitability or utility derivable from its use. The greater the benefit to be obtained from a particular use, the higher the rent that the user will be willing to pay for it. There appear to be wide ranging differences in the levels of rent passing on residential and commercial properties in Enugu and Nigeria generally. 3 This research is seeking among other things to find out the causes of rental variation in commercial and residential properties in Nigeria, Ogui New Layout and G.R.A as a case study.

1.3    AIM AND OBJECTIVES OF THE STUDY

The main aim of this research is to examine the reasons for rental variation in commercial and residential properties with a view to provide tool to be used in catching issues related to rent on these properties in Enugu and Nigeria generally. To achieve the standard goal, the following objectives are to be pursued;

1.     To identify the level of rents for commercial and residential properties in the study area.

2.     To ascertain and examine the factors influencing the rents being commanded by these properties.

• To determine or examine whether the income of prospective buyers/tenants affect their decision to acquire properties.

1.     To ascertain if there is disparity in rental values for residential and commercial properties in the study area.

2.     To find out the rate of demand between commercial and residential properties?

1.4    RESEARCH QUESTIONS

1.     What is the level of rent for commercial and residential properties in Ogui New Layout and G.R.A respectively between years 2002-2004?

2.     What are the factors influencing rents passing on those commercial and residential properties.

• Does the income of prospective buyers/tenants affect their decision to acquire properties?

1.     Is there any disparity in the rental value or rent passing on residential and commercial properties in the study area?

2.     Amongst properties put for Commercial and Residential use, which is on a higher rate of demand?

1.5    SIGNIFICANCE OF THE STUDY

The finding of this study will be of benefit to the following groups; Firstly, tenants who are charged rents based on different reasons, especially when the properties are of the same nature (physically).

This will again enable the investors not only to understand how occupier thinks, but also why and the things they consider before acquiring properties for certain uses. Secondly, the generality of the public can now understand the reason why the rents being commanded by these properties have to differ.

Lastly, this research work will help to determine the factors influencing, commercial and residential properties which is an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.

1.6    SCOPE OF THE STUDY

The study covers a period of three years (2002 to 2004) and it is restricted to selected properties (Residential and commercial) comprising blocks of flat and tenements in Ogui New Layout and G.R.A, Enugu.

1.7    LIMITATIONS OF THE STUDY

Expectedly, this work met with some hindrances during the stage of data collection. The issue of rent passing on a property (residential or commercial) is usually regarded as classified information, which is not easily disclosed to people particularly researchers. This was largely suspected to be the reason why some Estate surveyors, property owners, tenants, Estate firms, property companies and even Estate agents who were approached through oral interviews, discussions and visitations found it rather difficult to reveal essential information despite every explanation that the exercise is strictly for academic purposes, a good number of them, still nursed the fear that it may be for property rating and taxation purposes. 6 There was also the problem of logistics occasioned by the society. The researcher worked with a very light budget throughout the period of study as the frequent and repeated visits to relevant persons and offices entailed quite some money. Moreover, also recall that some of the interview respondents were not co-operative as they kept on playing to the gallery as a means of avoiding supplying the required information. On a general note however, the researcher ensured that these bottle – necks never affected the findings of this study since the success far outweighed the hindrances as enumerated.

1.8    OVERVIEW OF STUDY

Chapter one treats the introduction of the project work. Chapter two deals with literature review, chapter three treats the research methodology, chapter four is on data presentation, analysis and interpretation and chapter five deals with findings recommendation and conclusion.

1.9    DEFINITION OF RELEVANT TERMS

RENT: The universal dictionary of the English language (1971) defined rent as the regular payment made for the use of land or buildings that belongs to someone else. The Economist defined rent as “the revenue from land resources that is equal  to the value of its marginal services rendered in a productive process” (Richfield, 1974). In summary therefore, the word rent is that fixed periodic payment made by a tenant to his landlord for the exclusive possession and use of leased property.

PROPERTIES: According to the High Court, the Court of Appeal and the Supreme Court, property is the right to possession, enjoyment and disposition of all rights and things subject to ownership. Property is therefore a legal right expressing the relationship between a person, the owner and his possession of the thing owned.

A RESIDENTIAL PROPERTY: according to Kilpatrick (1999) is a land use in which housing predominates, as opposed to industrial and commercial areas. Housing may vary significantly between, and through, residential areas. These include single-family housing, multi-family residential, or mobile homes.

COMMERCIAL PROPERTY: According to Malys (2012), this refers to buildings or land intended to generate a profit, either from capital gain or rental income. It includes office buildings, industrial property, medical centers, hotels, malls, retail stores, farm land, multifamily housing buildings, warehouses, and garages. In many states, residential property containing more than a certain number of units qualifies as commercial property for borrowing and tax purposes.