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.
This might work, but it could increase the rent price in Lagos.
For example, a 5% charge on ₦1.5 million ($919) rent means an extra ₦75,000 ($45); over a year, this is an additional ₦900,000 ($551). The question is, who will cover this increase, landlords or tenants?
Rent is increasing at an alarming rate
Real estate expert and founder of Besitz Group, Micheal Oyeachor, says the plan could worsen the country's rent situation. According to a 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 Lagos' residents, it needs 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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The government isn't just going to take without giving back; it plans to invest ₦5 trillion to ₦15 trillion in the property sector. But this investment will not come directly from the government.
It identified 19 partners and investors, including Access Links Property, C2Q Property & Investment Company Ltd, Brains & Hammers, D37 Capital Limited, Trust Arthur, ARM Investment Managers, FSDH Merchant Bank, and WEMA Bank.
There are also plans to help landlords and real estate developers by building a platform that "aggregates and connects accredited Professionals & Suppliers in the real estate construction sector, to prospective homeowners and saves 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. The platform will serve two purposes — help prospective homeowners and generate revenue for the state.
Lagos BuildIT is expected to generate ₦1.2 billion every year by charging prospective homeowners a ₦10,000 subscription.
Does Lagos want to compete with proptech startups?
Lagos BuildIT is similar to CutStruct, which raised $600,000 in 2022 to connect vendors who sell construction materials with contractors.
Founded by John Oamen and Tayo Odunsi, the startup uses a different revenue-generating model.
CutStruct makes money from a take rate or a transaction charge. According to Odunsi, take rates are typical in the construction industry, and vendors offer 2% to 10%, depending on the materials and the agreement.
The startup charges a 0.9% take rate, which includes goods-in-transit insurance — a better deal than the Lagos State Government's ₦10,000 subscription model.
YALO and RentSmallsmall are two other startups that might go head-to-head with the state government. 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.
This is why Oamen believes that "A potential collaboration between such proptechs and Lagos State could be a game-changer, satisfying both landlords and tenants while boosting state revenue."
Do Lagosians even want to pay rent monthly?
According to an X (formally Twitter) poll, Lagosians do not want to pay rent monthly. Out of the 25 people who voted, 68% said they'd prefer to pay rent yearly.
One Lagos 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 said, "Yearly rent is safer than monthly rent" 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 they 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 address major issues.
Editors note: This article previously read that the Lagos State rent payment platform will increase rent by 60%. However, the correct calculations reveal it will increase rent in Lagos by 5%.
