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On August 2, 2024, the Lagos State government released plans to build the Lagos Rent Payment Platform. According to the Eko Revenue Plus Summit document, the platform will be co-owned by the Lagos State government and will generate ₦2.5 billion ($1.5 million) annually.
This revenue will be generated by charging a 5% transaction fee every time rent is paid through the platform. The government estimates that if 100,000 people pay their rent monthly, it will make ₦2.5 billion yearly.
However, while this might work, it could increase the rent price in Lagos.
For example, a 5% charge on ₦1.5 million ($919) yearly rent means an extra ₦6,250 on ₦125,000 monthly payment. Over a year this is an additional ₦75,000 ($46.91) to the rent which begs the question, who will cover it, landlord or tenant?
Rent is increasing at an alarming rate
Real Estate expert and founder of Besitz Group, Micheal Oyeachor says the plan could worsen the rent situation in the country. According to this Punch report, rent in Lagos has increased by 91% in the past five years.
Onyeachor believes that if the government wants to earn from rent paid by Lagosians, they need to support landlords.
“If as a landlord, I didn’t receive support from the government in building my house, I’d have very strong reservations about sharing my rent money with them.”
Interestingly, the government also plans to boost the payment of land use charges (LUC). It will do this by building a registration portal that is expected to generate ₦375 billion ($229.8 million) every year.
It estimates that the average LUC in Lagos is ₦500,000, and if the government receives that amount from at least 750,000 houses that will be registered on the portal, the government will hit its revenue target.
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However, the government isn’t just going to take without giving back.
It plans to invest ₦5 trillion to ₦15 trillion in the property sector. However, this investment does not come directly from the government.
It identified 19 partners and investors, including Access Link Property, C2Q Property, Brains & Hammers, D37 Capital, Trust Arthur, ARM Investment Managers, FSDH Merchant Bank, and WEMA Bank.
Another way it plans to help landlords and real estate developers is by building a platform that “aggregates and connects accredited Professionals & Suppliers in the real estate construction sector, to prospective homeowners and save them from long-standing delivery problems.”
The platform will be called the Lagos BuildIT platform and will be co-owned by the Lagos state government. While it is a way to help prospective homeowners, it is also another revenue source for the state.
It is expected to generate ₦1.2 billion every year by charging prospective homeowners a ₦10,000 subscription.
Lagos wants to compete with proptech startups?
The Lagos BuildIT platform is similar to CutStruct, which raised $600,000 in 2022 to connect vendors who sell construction materials with contractors.
Founded by John Oamen the startup uses a different revenue-generating model than the Lagos BuidIT platform.
CutStruct makes money from a take rate or a transaction charge. Take rates are typical in the construction industry, and vendors offer 2% to 10% depending on the materials and the agreement.
However, CutStruct charges a 0.9% take rate which includes goods-in-transit insurance. Interestingly, Oamen doesn’t see the state’s platform as a competitor; instead, he suggests a collaboration between both platforms.
YALO and RentSmallsmall are also platforms similar to the government’s rent payment platform. YALO, for example, is a rent-now-pay-later platform that allows tenants to pay their rent monthly, while the landlord gets a year’s worth of rent upfront.
Oamen of CutStruct — who also has extensive real estate experience — believes this type of platform solves the security problems tenants have with renting houses.
Paying a year’s worth of rent means that you have access to the house for the year; if anything changes, you have an ample amount to deal with it. In essence, tenants pay monthly but still have the security that comes from lump sum payments.
This is why Oamen recommends, “A potential collaboration between such proptechs and Lagos State could be a game-changer, satisfying both landlords and tenants while boosting state revenue.”
Do Lagos residents even want to pay rent monthly?
According to an X (formally Twitter) poll, people do not want to pay rent monthly. Out of the 25 people who voted, 68% said they’d prefer to pay rent yearly.
One resident who spoke to Techpoint Africa said that he’s already used to paying rent yearly, and paying it monthly might not be easy for people who aren’t disciplined with money.
Another tenant in Lagos said, “yearly rent is safer than monthly rent.”
He says this because it will give landlords the power to increase house rent more often, and it also puts the tenant at a disadvantage when there’s a disagreement as he could be sent out by the end of the month.
“If there are legal structures that protect tenants, then it could work.”
This legal structure is what Onyeachor recommends instead of a monthly rent payment platform. He said the government could create policies that enforce monthly rent payments instead of building a platform that might not look into core issues
