Lagos Housing Crisis: Why Developers Are Selling Homes Instead of Renting Out Despite 3.3 Million Housing Deficit

Lagos Housing Market Mismatch: Developers Choose Quick Home Sales Over Long-Term Rentals

Lagos is facing a major contradiction in its real estate market. On one hand, the state has a housing deficit of 3.3 million units and millions of residents desperate to rent. On the other hand, developers are deliberately avoiding the rental market.

A new research report by Fortren & Company has revealed why property developers in Lagos prefer to sell off completed houses rather than retain them for rental income, despite strong and sustained demand for rental accommodation.

According to the firm, the decision has little to do with lack of tenants. It is purely financial.

The cost of building and holding houses in Lagos has become too high for most developers to sustain a long-term rental model.

High interest rates are killing the build-to-rent model

The biggest challenge is the cost of finance. Fortren & Company noted that borrowing costs have surged in the last four years.

The Central Bank of Nigeria Monetary Policy Rate which was 11.5 percent in 2022 climbed to 26.5 percent in 2024 before dropping slightly to 23.5 percent. Commercial bank lending rates followed the same pattern, moving from 11.5 percent in 2021 to 18.5 percent in 2025 and currently at 17.86 percent in 2026.

With such rates, developers cannot afford to wait.

The report estimates that it would take a developer between 8 to 15 years to recover investment through rental income. However, banks and investors who funded the project want their money back within 12 to 36 months after completion.

The fastest way to meet that repayment window is to sell.

By selling, developers get their capital back immediately and can move to the next project. By renting, they lock down capital for years and still battle with vacancy, maintenance, security, power and water supply costs.

Cost of land and materials hits record high

The report also highlighted the sharp rise in land and building material costs in Lagos.

Between 2022 and 2026, average land cost per square metre in prime areas stood at N2.8 million in Ikoyi, N2.63 million on Victoria Island, N1.25 million in Lekki Phase 1, N950,000 in Ikeja and N500,000 in Yaba.

Building materials have seen even steeper increases.

Cement price per 50kg bag jumped from N3,500 in 2021 to N13,550 in 2026, representing a 287 percent increase. Sharp sand rose from N3,000 to N15,000 per tonne, while granite (three-quarter inch) moved from N8,000 to N30,000 per tonne.

When developers add these costs together, they need higher selling prices or higher rents to make profit. And with rent collection risks, many choose the safer option which is outright sale.

Another advantage of selling is off-plan sales. Developers collect deposits and staggered payments from buyers before completion, which helps fund construction and reduces reliance on expensive bank loans. Rental projects do not enjoy this benefit.

Why most Lagosians still cannot buy

This preference for sales is happening at a time when most Lagosians cannot afford to buy.

Fortren & Company estimates that only 31 percent of Lagos residents own their homes. The majority are renters.

Income levels and poor access to mortgages are major barriers.

Citing the PiggyVest Savings Report 2025 released in March 2026, the report noted that 28 percent of Nigerians surveyed had no income, while 30 percent earned less than N100,000 per month. Though national figures, it reflects the wider affordability crisis.

For illustration, a Level 1 civil servant earning about N970,000 per year would need to save 30 percent of his salary for 289 years to buy a two-bedroom flat in Sangotedo and 659 years for a similar flat in Gbagada, assuming prices remain constant.

The mortgage sector is also underdeveloped. Nigeria’s mortgage debt to GDP ratio was only 0.50 percent in 2026, far below Kenya’s 1.57 percent and South Africa’s 41 percent.

This means there is almost no mortgage support to help average earners transition from renting to owning.

Cheaper land on outskirts not a solution

The report aligns with an earlier Nairametrics analysis which showed why buying cheap land outside Lagos does not make houses affordable.

Michael Onyeachor, co-founder of Besitz Group Limited, explained that developers who buy cheap land in emerging areas still have to provide basic infrastructure such as roads, drainage, electricity and water from scratch.

The cost of providing this infrastructure often cancels out the savings from cheap land, forcing developers to target luxury and upper-middle-income buyers to recover costs.

In the end, Lagos is stuck in a loop. Residents cannot afford to buy, developers cannot afford to rent out, and the housing deficit continues to grow.