THE IMPACT OF INFRASTRUCTURE CONDITION ON RENTAL VALUE OF COMMERCIAL PROPERTIES IN MINNA NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Investments in infrastructural facilities do contribute immensely to the population growth of metropolitan cities of a nation. Good quality roads, railways, airport, educational institutions, security of life and properties and hospitals are essential for the smooth running of the economic sectors in a developing world. In many countries and for many years, economists, planners and surveyors have tried to provide answers to why economic growth is faster in some regions than others and why some cities grow faster than others.
With the availability of major investments in infrastructure of any city, there would be automatic population increase that would influence massive property development. It has been argued by Ogunba (1999) and Ighalo (1986) that rural-urban migration, rising purchasing power and demographic factors such as changes in the average family size are contributory factors to urban growth. Nigeria with 5.3 percent growth rate has a population of 140 million and it is one of the countries with the fastest rate of urbanization in the world . One of the greatest challenges of successive governments in Nigeria had been the need to provide adequate housing to its teeming population.
Many scholars have attempted in varying ways to define or explain the meaning and concept of the term “infrastructure”. Notwithstanding the fact that it is not the intention of this paper to explore or examine the myriad of definitions, the National Research Council of the United States of America captured to a very great extent the totality of the term as referring to “both specific functional modes – highways, streets, roads and bridges; mass transit; airport and airways; water supply and water resources; waste water management; solid waste treatment and disposal; electric power generation and transmission; telecommunication and hazardous waste management – and the combined system these modal elements comprise. According to Okoronkwo and Ezeh (2012) cited in Okorafor et al, (2017), infrastructures are not the things with which nature has endowed man, but the profitable conversion of these natural resources for the advancement of the society and benefit of man. Rainfall for instance is a natural gift from God. It is not an infrastructure. It becomes one when man technically conserves this gift and develops it to serve as regular and functional water supply for agriculture, industries and for domestic uses.
Infrastructural decay occasioned by the neglect has bedevil most of our towns and cities in Niger State, Nigeria. The scenario is not perhaps totally different from what is tenable in other states of the federation. The term infrastructure refers to all the physical, social and economic elements needed to support the population, in addition to other municipal services which include sewer, water supply, natural gas and electric services, schools and police stations, roads, airports, etc. As society develops, the need to provide basic infrastructure for the wellbeing of their inhabitants arises. Most of the Infrastructure are capital intensive in the procurement and perhaps also in their maintenance, and these services are usually provided by the different levels of government in the federation although private sector participation is now gradually becoming noticeable due to the liberalization policy of some aspect of the national economy by the present administration.
Infrastructural development refers to the bringing into existence of the basic amenities and services which must be in place for a particular activity or pursuit. However, no nation can boast of significant development or an enhanced economy without providing the basic Infrastructure for the citizens’ well-being. In Nigeria, sale prices of properties vary for different suburbs due to their attributes. For people who live in urban areas or cities, infrastructure decisions may be influenced by the balancing of desires and the environments.
Therefore, infrastructure is discussed as a key influence in explaining property price dynamics. Minna metropolitan area was chosen for the study to evaluate the effect of established infrastructure and location amenities on commercial property values. The adequacy of infrastructure helps to determine the level of success that a country achieves in terms of coping with population growth, reducing poverty, or improving environmental conditions (World Bank, 1994). One veritable parameter of assessment and indicator of status of any spatial, especially urban system is the state of infrastructure. The efficiency of any form of human activity system including an urban area largely depends on the provision of efficient infrastructural facilities and services (Babarinde 1998). Hence the significance of infrastructure in the proper functioning of an urban area cannot be dismissed. Apart from being a major pointer of environmental quality, urban infrastructure is a critical socio-economic development of any urban area (Okusipe 1999).
It places an important and indispensable role in the economic, social and environmental aspect of life of an urban setting. It has a pronounced impact on the quality of life. It is a back bone of any economy. Industry needs it to effectively and efficiently drive their production processes. It is evident that a myriad of factors such as the prevailing economic conditions, government legislation and policies, availability and state of infrastructural provision come into play to influence commercial landed property (values). In carrying out this study, all other factors were assumed constant while urban infrastructure was isolated and examined in relation to commercial property values. Hence this study will assess the impact of infrastructure condition on rental value of commercial properties in Minna, Nigeria.
1.2 Statement Of The Problem
The impact of infrastructural facilities in property market is very crucial. The fact remains that property units are fixed in location, they however differ in terms of their surroundings, neighborhood and the kind of community in which they are located. Considerable importance is attached in today’s world to property’s facilities as it influences the use and value of the property. Infrastructure and location has always been an important determinant of a property’s value. Many factors interplay to create property values. For commercial property, factors like accessibility, population, volume of trade patronage, adequate communication facilities, efficient transportation system and many other factors to be considered. Infrastructure and location may also be with the surrounding activities, and when these relationships are negative to the economic and social well-being of the property, such a property is said to have “Infrastructure and location obsolescence” and hence commands low rental value. Factors that negatively affect the value of real property, affects ownership’s goal or target income. They also cripple the investor’s interest by discouraging subsequent investment. Since facilities and location is considered as factors that may likely affect the rental value of commercial properties, and because commercial activities are very significant in strengthening the economic basis in our urban areas, therefore, playing important role in the socioeconomic development. This might also be the reason why most of the purposely built residential properties are being converted to commercial uses in our cities centers today. The primary objective of commercial properties is the derivation of financial gains, and, the demand for land is a reflection of the profitability or utility derivable from its use. The greater the benefit to be obtained from a particular use, the higher the rent that the user will be willing to pay for it. In Minna, there appear to be a wide range difference in the levels of rent passing on commercial properties in a particular areas and between different locations. Tenants are always faced with the fact that although, similar commercial properties commands different rental value within the same area, and also, when the properties are not situated in the same area or location, the rental value of same type of these commercial properties varies greatly. This study seeks to carry out an analysis of the impact of infrastructural condition on rental value of commercial property values in Minna. Minna is often seen as the urban city with the vilest infrastructure, inadequate storm drainage, and poor public water supply, garbage dumped on the road sides and non-existence or bad sewage system. The infrastructure of a city is a major determinant of the demand of commercial property. The infrastructure facilities in the study area affects the rate of commercial property demand in the area, this is because people will only buy or rent commercial property in areas were the infrastructure facilities development is sustainably available, this will help to enhance the economic and livability in the community. The impact between infrastructure and commercial property values has been the focus of many studies. Some of the earlier studies returned positive effect between infrastructure and commercial property values while others showed negative effect. Possible effect between infrastructure and commercial property values have therefore elicited the interest of the researcher in this direction. It is against this background that this study was conceived.
1.3 Aim And Objectives Of The Study
The aim of this study is to examine the impact of infrastructure condition on rental value of commercial properties in Minna, Nigeria. To achieve this aim the under listed objectives will be pursued.
- To identify the types and state of infrastructural facilities available to the commercial properties in Minna.
- To examine the adequacy of infrastructural facilities for commercial properties in Minna.
- To identify the regularity, effectiveness and functionality of infrastructural facilities in different areas on commercial properties in Minna.
- To analyze the rental values of shops and offices, as a result of infrastructural facilities in Minna.
- To establish the effect of infrastructural facilities on commercial property values in Minna.
1.4 Significance of the Study
This project is an attempt to assess the impact of infrastructural condition on rental value of commercial properties in Minna, the study discuss the types of residential property in the study area, identifies the types and condition of available infrastructural facilities available and tries to establish the relationship between infrastructural facilities and commercial property rental value. The result of research will help developers, investors, real estate managers and valuers and the government to know the relevance of infrastructural facilities to commercial residential properties and its effect on rental value thus given them a better chance to an informed decision.
The study will assist public authorities in putting more efforts in infrastructural investment and as well take full advantage of the income that can be generated from such investment.
This study will also serve as a reference material for subsequent research related to the effect of infrastructural facilities on commercial property value where researchers, students and scholars will tap into the wealth of knowledge provided in this study.
1.5 Scope and Limitations of the Study
The research work is confined to the study of the assessment of the impact of infrastructure condition on rental value of commercial properties in Minna. It deals with rental value of residential properties such as shops, offices, two bedroom flats and three bedroom flats which are the common types of commercial properties found in the study area.
There are several limitation encountered during the conduct of this research. These limitations include: non availability of adequate data which played a major limitation to this write up because of non-cooperative attitude of some respondents who were not willing to give information and data needed to aid findings, time was another major factor which affect the study as the researcher do not have enough time to make detailed investigation on all the aspects of the study. And the general unwillingness of some respondents to fill the questionnaire provided for the research made it difficult to gather data needed for this research study at the most appropriate time.
1.6 Operational Definitions of Terms
Commercial property: this refers to properties mainly developed and used for maximize rental income\profit. They are built to provide accommodation for business accommodation e.g. shops, offices, show rooms etc.
Property: Property is by property dictionary as anything that is owned by a person or entity, which be divided into “real property” and personal property.
Infrastructure: This is seen as a wide range of economic and social facilities crucial to creating an enabling environment for economic growth and enhances the quality of life, Nubi (2002).
Value: Value is basically the worth of a thing which depend largely on the basis of assessment and unit of measurement.
Property Value: property value according to Millington (1981) is the money obtainable from a person willing and able to purchase property when it is offered for sale by a willing seller, allowing for reasonable time for negotiation and with the full knowledge of the nature and uses which the property is capable of being put.
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