Lagos State’s Rent Payment Platform to Increase Annual Rent by 5%

The Lagos State government has recently unveiled plans to establish the Lagos Rent Payment Platform, a co-owned initiative that aims to generate ₦2.5 billion ($1.5 million) annually. 

This revenue will be generated through a 5% transaction fee charged every time rent is paid using the platform. 

The government estimates that if 100,000 people pay their rent monthly, it will make ₦2.5 billion yearly.

However, this plan could potentially lead to a significant increase in rent prices in Lagos. 

For instance, a 5% charge on a ₦1.5 million ($919) rent means an extra ₦75,000 ($45), which amounts to an additional ₦900,000 ($551) to the annual rent. 

This raises the question of who will bear the burden of this additional cost, the landlord or the tenant.

Rent Increases at an Alarming Rate

According to real estate expert and founder of Besitz Group, Micheal Oyeachor, 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.”

The Lagos State government also plans to boost the payment of land use charges (LUC) 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.

Government’s Investment in the Property Sector

To support landlords and real estate developers, the Lagos State government plans to invest ₦5 trillion to ₦15 trillion in the property sector. 

It has 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.

Additionally, the government will build the Lagos BuildIT platform, which will “aggregate and connect accredited Professionals & Suppliers in the real estate construction sector, to prospective homeowners and save them from long-standing delivery problems.” 

This platform is expected to generate ₦1.2 billion every year by charging prospective homeowners a ₦10,000 subscription.

Lagos State Rent Payment Platform: Potential Competition with Proptech Startups

The Lagos BuildIT platform is similar to CutStruct, a startup that raised $600,000 in 2022 to connect vendors who sell construction materials with contractors. 

CutStruct uses a different revenue-generating model, charging a 0.9% take rate that includes goods-in-transit insurance.

Other startups that might compete with the Lagos State government include YALO and RentSmallsmall. 

YALO 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 suggests that “A potential collaboration between such proptechs and Lagos State could be a game-changer, satisfying both landlords and tenants while boosting state revenue.”

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Lagosians’ Preference for Yearly Rent Payments

According to an X (formally Twitter) poll, Lagosians prefer to pay rent yearly. 

Out of the 25 people who voted, 68% said they’d prefer to pay rent yearly. 

Some Lagosians believe that paying rent monthly might not be easy for people who aren’t disciplined with money and that yearly rent is safer than monthly rent.

Onyeachor recommends that the government create policies that enforce monthly rent payments instead of building a platform that might not address core issues. 

He believes that if there are legal structures that protect tenants, then a monthly rent payment system could work.

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