Nasiru Ibrahim is an architect and founding partner of Black Orchard Limited, a property development company in Abuja’s real estate sector. In this interview, he says the impact of coronavirus on the sector will be slow and that it is still a safe investment similar to gold.
Black Orchard has carved a niche for itself in the real estate sector. How did it start?
Black Orchard Nigeria Limited started as a fantasy among friends. Then we were here in Abuja as youth corps members, in 2005, three of us; I, Mustapha and our late friend, Yakubu, who unfortunately didn’t get to see our dream come into reality. Though the passion to be in the real estate industry was there, I am also into the industry by virtue of my training as an architect. So we were dreaming and dreaming and wanted to do something but it was difficult for young people to raise capital and go into real estate business in Nigeria. Banks were not forthcoming and as youth corps members, we were not creditworthy but we started putting our dreams into reality in 2011.
We registered the company to do property development and subsequently, we started articulating our ideas when the mass housing scheme was introduced by the Nasir el-Rufai administration in the FCT. A lot of people were keying into the scheme and we experimented with that. We tried to get some Turkish partners but it didn’t work out because as young people we didn’t have money.
We, however, saw light at the end of the tunnel sometime in 2011 when we decided to pool our resources together and raise capital. We thought the market was just to save money, buy land, build and sell. We put in N5 million each and I remember mine was not even up to the N5 – I gave N3 million with the hope that I will raise N2 million and make up the amount. We thought we could get a plot for N10 million but we were shocked that we couldn’t get a developable plot for N10 million in Abuja. We thought that once we got money, that’s all, but we were shocked.
As we started to market the company, we came across a client who wanted us to build a house for him. We did the job, he was satisfied and he gave us another work. As usual with young naïve people having access to money, we thought, okay, maybe, we should reinvest all of the money into the business but that was the first lesson we learnt; that if you are into business, you shouldn’t think that you can reinvest all your money and just sit back and take the profits. We completed the job with additional works and our money was N45 million and at the end, we were not paid a kobo and we were left with a debt of N15 million. We were back to ground zero as we could only repay N10 million which was part of our capital.
How did you surmount that challenge to emerge as a successful real estate company?
Just like we had bad luck with the other client, we were lucky to have a client that was like an angel. He had faith in us and gave us a project in Katampe, when it was an upcoming district with a lot of promise for property business. We were able to execute successfully seven units of flats there and when we were paid, we had enough liquidity and that was our saving grace.
At what level are you now, considering you started on a humble note with many teething problems?
I can say that after our second project, we had done units that matched what the mid-level market was looking for. By the time we finished those units, we had significant cash flow to choose which projects we were going to do next. The moment we finished the Katampe project, we started two others concurrently. That showed we were making progress and going forward. We had to be very careful which projects to choose. A lot of people came with propositions but we had to choose because, in the property business, location is very important.
Besides, we manage our subscribers in a manner that we have earned their trust. We structure payments in a manner that they are tied to physical developments on site. So it makes it easy for them to trust us and once we got the trust we got offers from all over. It has been a calculated, slow and sustainable growth based on delivery.
Looking at what you have done and what you are planning to deliver in the nearest future, can you say you are in the ‘A class’ property market?
We are not looking at class, ours is to create value. If a project comes to us now and we are able to create value in the A class, we will do it. If another comes and we are able to create value in the B class we will do it. Let me tell you about our ethos, generally, we have started to create a niche for ourselves in the mid-range market and we are not targeting the upscale. It’s easy for us to have the temptation to go upscale but what we are offering is affordable luxury. What house does the middle class need to succeed in Abuja? The advent of terraces or townhouses is not by design but by necessity. It has proven that it is a type of housing that a larger percentage of the middle class can cue into, by virtue of cost of land, the convenience of shared facilities, shared security and back-up power supply.
However, after holding on for a couple of years only doing projects we feel we can deliver within 14 months circle, I think we have come to a point we can announce ourselves as reliable partners that deliver affordable luxury. The temptation to go to the A class is there and we have a couple of projects coming up in Asokoro. But we will not abandon the market that has the highest number of people in it. Our long-term vision and strategy are around that market.
How is the coronavirus pandemic impacting on the real estate sector in Nigeria?
Coronavirus is having impact on all sectors of the economy. It is just a matter of qualification. Now, we have a site that we are just tidying up the substructure and when the rains come it will be like tripling the time and quantum of work you need to do. Because of the rains, you will excavate, it will collapse back and you have to excavate again. But because of this lockdown, we had to speed up what we could and to push ourselves to do more. So we have reached a stage where, even if the rains come, we will be okay. But that is an inconvenience for business because we had to delay other things to push this, which was not on the critical part.
The most painful part is that we are executives and we can take this time like a holiday but the truth is that there are people who earn from us and that is what gives us joy. A lot of them work and earn on a daily basis and because of this lockdown we have not been working for the past three weeks and some of them are stranded. We gave some of them that are not on monthly pay handouts but that is disheartening.
In terms of demand for houses, do you see that going down and affecting prices?
The truth is it will affect demand but the reality is it might not affect demand immediately, because it is not everybody that will wrap himself around how this pandemic will affect his or her finances. It is not everybody that will be affected but the world is going to change and priorities are going to change. A lot of sectors are taking a hit investment wise; the stock market is not performing as usual, similar to the 2008 economic crunch, as a result of non-performing loans. But when government wants to stimulate the economy, it starts with the construction industry.
So are you expecting a stimulus package for this sector?
It’s a no brainer, even if the government does not want to do it, the fact that the stock market is not performing and people do not have where to put their money, maybe people would want to direct their investments into the property market. The problem with real estate is that the impact of some changes is not as swift; there is usually a lag.
When the impact of something negative comes, it takes a little time but when the impact of something positive comes, it takes no time and that is why real estate is a safe investment. It has shock absorbers similar to gold.