Real estate development runs through a sequence that, in practice, can take anywhere from 18 months for a small infill project to 8 years for a major mixed-use scheme. The phases are:

1. Site identification and acquisition
2. Feasibility and design
3. Approvals and permitting
4. Construction finance arrangement
5. Pre-sales and marketing
6. Construction and project management
7. Completion and handover
8. Operations and asset management

Each phase has its own cash flow profile, its own risk profile, and its own typical failure modes.

8.1.1 Site Identification and Acquisition

The cheapest mistake in real estate is the one made before the land is bought. The most expensive mistake is the one made because the land was bought too quickly.

A good site has clean title, the right zoning for the intended use, access (a usable road, not a track that will be impassable in October), reasonable proximity to infrastructure (electricity grid, water main, sewage if applicable), and a market that wants what is going to be built. Brokers may not be involved at this stage, but knowing what a developer looks for at site acquisition helps you assess a project’s quality later when a client asks you to finance a unit in it.

A developer who buys land cheaply in a flood-prone area, builds, and then discovers that no insurer will write fire and special perils cover at a reasonable rate — that developer is in trouble. The broker advising a client on units in that estate is also in trouble. Lekki has produced more than one example of estates built in former wetlands where residents now face annual flooding. The October 2024 floods in Ajah and parts of Lekki Phase 2 made this point dramatically.

8.1.2 Feasibility and Design

A feasibility study quantifies whether the project actually works as an investment. Land cost, construction cost, professional fees, finance cost, marketing expenditure, contingency, profit. On the revenue side: unit prices, projected absorption rate, void periods. The output is a residual land value (what you can afford to pay for the land given everything else) and a projected IRR.

In Nigerian practice the standard rule of thumb is that residential development should target an IRR of 25% or more in naira terms, because the cost of capital, the project timeline, and the currency risk all eat into returns. A project showing IRR of 18% is usually not worth doing — too thin a margin against the risks of cost overruns, sales delays, and naira depreciation.

Design follows feasibility. The architect, structural engineer, mechanical and electrical engineer, quantity surveyor, and project manager are the core consultants. In larger projects you add landscape architects, traffic engineers, environmental consultants. Their fees typically sit at 10% to 15% of construction cost in Nigeria.

8.1.3 Approvals and Permitting

This is where Nigerian development projects routinely get into trouble. The approval chain runs through state planning authorities (LASPPPA, KASUPDA in Kano, FCDA in Abuja), local government building approval offices, the Environmental Impact Assessment process if the project is large enough, sometimes federal approvals for projects near coastlines, airports, or national assets.

Building Plan Approval in Lagos through LASPPPA, in theory, takes 28 working days. In practice — three months is normal, six months is common, and projects with title irregularities can stall for over a year. Approval fees in Lagos are calculated on the gross floor area and the value of the building. For a 5,000 sqm scheme in a high-value area like Ikoyi or VI, the total of approval fees, infrastructure development charges, and statutory deposits can run into ₦80m to ₦150m.

The Lagos government’s enforcement around unapproved buildings hardened in 2023-2025. LASBCA (Lagos State Building Control Agency) and LASIAMA (the Infrastructure Asset Management Agency) routinely sealed and demolished structures without proper approvals. The Banana Island demolitions of 2024 made headlines. A broker financing a client to buy from an unapproved development is putting the client’s capital and the lender’s security at risk.

8.1.4 Construction Finance Arrangement

Developers fund construction through a mix of equity, debt, and pre-sales receipts. Typical equity-to-debt ratios in Nigerian residential development run from 30:70 to 50:50 depending on the developer’s track record, the lender’s appetite, and the project’s pre-sale momentum.

The lender funding construction is typically a commercial bank rather than a PMB, because the cheque sizes are larger and the underwriting needs corporate banking capability. Construction lenders disburse against quantity surveyor certificates that verify work done at each milestone. Interest accrues but is typically capitalised, with repayment from sales proceeds rather than monthly servicing.

Construction loans in Nigeria carry interest rates of 22% to 30% per annum in the current environment, which puts pressure on project IRRs. This is why pre-sales matter so much — the cheapest construction capital is the buyer’s deposit, which carries no interest.

8.1.5 Pre-Sales and Marketing

A developer typically markets units off-plan well before construction completes. The marketing strategy varies by price segment. High-end developments in Ikoyi-Lekki rely on private events, broker networks, diaspora marketing through agents in London, Toronto, Houston, and direct sales to high-net-worth networks. Mid-market estates use a broader mix including online listings on Property24, PropertyPro, Privateproperty.com.ng, social media, sometimes outdoor advertising on the Lagos-Ibadan Expressway.

Pre-sales achieve two things: they bring in cash that reduces the developer’s reliance on bank debt, and they de-risk the project by proving market demand. A scheme that hits 40% pre-sales before construction completion is in a much stronger position than one that has only sold 5%.

For brokers this is where opportunity meets responsibility. Marketing fees and commissions can be material — 3% to 5% of unit sale price is common in Nigerian off-plan marketing. But pushing clients into off-plan from developers with weak track records is bad practice that has cost many clients their deposits.

8.1.6 Construction and Project Management

The construction phase is when project risk is highest. Cost overruns, schedule slippage, contractor disputes, theft of materials from site, weather delays during the rainy season, fluctuating naira costs of imported materials (cement is local, but tiles, sanitary ware, lifts, generators all have import content).

A capable project manager keeps these risks under control. The Royal Institution of Chartered Surveyors (RICS) and the Nigerian Institute of Quantity Surveyors (NIQS) maintain registers of qualified professionals. A project that does not have a named QS issuing certificates and a registered project manager running site meetings is a project to be cautious about.

8.1.7 Completion and Handover

When the building is finished, several things happen. The architect issues a Certificate of Practical Completion. Snagging — the systematic identification and rectification of defects — begins. Defects liability periods (typically 12 months in Nigerian practice) start running. Utility connections are finalised (electricity meter installation has its own headaches involving the local distribution company; water connection through state water boards or in many cases the developer’s own borehole and treatment plant).

Buyers take handover, typically against payment of the final balance and on confirmation that all snagging items have been resolved or scheduled. The mortgage broker’s role here is to ensure the disbursement happens at the right moment — too early and the lender takes on completion risk; too late and the buyer may default on the purchase agreement.

Development is the first half of the life cycle. Operations is the second half, often longer-lasting and quietly more lucrative for owners who manage their properties well.

8.2.1 Property Management

A property manager handles the day-to-day reality of owning an income-generating property: rent collection, tenant relations, service charge administration, maintenance scheduling, security, cleaning, ground maintenance, statutory compliance (Land Use Charge, NESREA environmental compliance, fire safety inspections).

For investors who own multiple units across multiple estates, professional property management is essential. Firms like Alpha Mead, Greenbridge, Knight Frank Property Management, JLL Nigeria, Broll Nigeria provide outsourced management. Fees typically run at 7% to 12% of gross rental income for residential, lower for stable commercial tenancies.

8.2.2 Facility Management

Facility management is a subset focused on the physical building — building systems (HVAC, lifts, generators, water treatment, fire safety equipment), common areas, security infrastructure, cleaning, landscaping. The International Facility Management Association (IFMA) has a Nigerian chapter, and the field professionalised significantly in the late 2010s.

In high-end developments — Eko Atlantic’s residential towers (Eko Pearl Towers, Eko Mall residential floors), the Reef Estate in Ikoyi, the Civic Towers on Ozumba Mbadiwe, Banana Island estates — facility management is a major recurring cost. Annual FM charges in a premium residential tower can run ₦3m to ₦8m per unit.

8.2.3 Investment Performance Measurement

Owners track property performance using a small set of standard metrics:

• Gross rental yield: annual rent divided by property value
• Net rental yield: same but after deducting expenses
• Cap rate: net operating income divided by property value (forward-looking version of net yield)
• Internal Rate of Return: incorporates the time value of money across the holding period
• Vacancy rate: percentage of let-able space unoccupied at any time

Current Nigerian benchmarks (June 2026): residential gross yields of 4% to 6% in Lagos prime areas (Ikoyi, VI), 6% to 9% in mid-market areas (Lekki Phase 1, Magodo, Gbagada), 9% to 12% in budget areas (Ajah, Sangotedo). Commercial yields run higher, 8% to 12% for Grade A offices, but vacancy risk is also higher.

A broker is not a developer and need not pretend otherwise. But understanding development gives the broker several practical advantages:

Better client conversations. A client thinking about buying off-plan deserves a broker who can ask intelligent questions about the developer’s track record, the funding structure, the construction monitoring, the title position. Vague reassurance is not enough.

Selectivity on developer partnerships. A broker who establishes referral relationships with developers should pick credibly. Joining the marketing panel of a developer who has not delivered a single estate is asking for trouble. Joining the panel of an established player — Mixta Africa, Cosgrove, Adron Homes, Lekki Gardens, ParkView Estates, Sujimoto — gives the broker access to credible product to recommend.

Cross-selling and lifetime value. A buyer who closes on a unit through your brokerage will eventually need property management, possibly mortgage refinancing if rates fall, perhaps a second mortgage if they invest in a buy-to-let. A broker who maintains the relationship after handover earns far more revenue per client than one who treats each transaction as standalone.

Recognising warning signs. Cost overruns visible at site, contractor disputes mentioned in property publications, abandoned floors of a development, developers who become hard to reach — these are signals that an experienced broker reads and acts on, protecting both client and lender.

Real estate development runs through eight phases from site acquisition to operations, and each phase has characteristic cash flows, risks, and failure modes. Nigerian projects routinely struggle at the approvals/permitting stage and during construction, where cost overruns and contractor issues are common. Pre-sales reduce a developer’s reliance on expensive construction debt; off-plan financing is the broker’s most common exposure to development-stage risk. After completion, property and facility management determine whether the asset performs as planned. Standard performance metrics — yields, cap rates, vacancy — let owners track that performance over time.

The broker’s value lies less in being a developer than in being an informed intermediary who can read a project’s quality, choose credible developer partnerships, and walk clients away from schemes that will fail to deliver.

1. List the eight phases of the development cycle and name one characteristic risk at each phase.
2. A developer is showing a project IRR of 19% in naira terms. Would you recommend a client invest in units of this project? Why or why not?
3. Explain why pre-sales matter to a developer’s funding structure.
4. What is the difference between property management and facility management? Name two firms operating in each space.
5. Current Lagos residential gross yields run 4% to 12% across price tiers. What does the yield range tell you about risk and demand in each tier?

A developer began an 80-unit gated estate in Ibeju-Lekki in 2023, off-plan sales priced from ₦18M (one-bedroom flat) to ₦55M (four-bedroom detached). The developer collected approximately 60% of the total sales value in deposits over 2023-2024. By June 2026, the foundations are in place for all 80 units, structural work to first floor on about 30, and nothing else. Buyers are organising on WhatsApp groups demanding refunds. Three civil suits have been filed against the developer.

You are a broker. A new client wants to buy a remaining unit at a reduced price the developer is now offering. The developer says the project will complete by mid-2027 if more deposits come in.

Discussion: How do you evaluate this opportunity? What due diligence is essential? What do you say to the client? Would you refuse to facilitate the transaction? If you proceed, what protections should be built in?

A high-net-worth diaspora client based in Houston wants to acquire a three-bedroom apartment in one of the Eko Atlantic residential towers (Eko Pearl, Azuri Peninsula, or one of the in-progress towers — White Pearl, Indigo Pearl, Aqua Pearl). Listed prices are in USD: $850,000 to $1.6M depending on tower and floor. The client wants the apartment as a buy-to-let and may eventually relocate.

Discussion: What property classification considerations apply? What financing options exist for a USD-denominated diaspora purchase? How does facility management fit into the running cost analysis? What yield should the client expect, and what would you advise about vacancy and currency risk?

— End of Lesson 8 —

Next: Lesson 9 — Construction Quality and Property Condition Assessment