Securing real estate investment funding in Nigeria requires a clear understanding of the legal and regulatory processes that protect both the investor and the financier. Suppose you want to secure real estate investment funding for a new development, joint venture, or land acquisition. In that case, it is essential to follow the right procedures to avoid financial loss and ensure full compliance with Nigerian land laws. This guide breaks down the key steps every investor should understand before approaching lenders or investors.
Understanding the Legal Framework for Real Estate Investment
Nigeria’s land administration system is governed by several laws that influence how investors acquire property and raise capital. Before seeking funding, investors should familiarize themselves with the primary legislation, including:
Key Laws Governing Property and Real Estate Funding
- Land Use Act 1978 – Vests all land in the Governor of each state and requires Governor’s Consent for land transfers, mortgages, and other significant transactions.
- Property and Conveyancing Law (PCL) – Applicable mainly in Western Nigeria; regulates conveyancing, sale of land, and property documentation.
- Companies and Allied Matters Act (CAMA) – Governs corporate ownership of property and requires companies to register mortgages and charges with the Corporate Affairs Commission (CAC).
- Federal Mortgage Bank of Nigeria (FMBN) Act – Regulates mortgage financing and access to National Housing Fund (NHF) loans.
These laws shape how an investor can structure property ownership, create mortgages, register documents, and obtain financing.
Conducting Proper Due Diligence
Due diligence is the most important step before trying to secure real estate investment funding. Investors and financial institutions want assurance that the land or property is legally sound, free from disputes, and suitable for development.
1. Title Verification
Verify that the seller or landowner has the legal right to transfer the property. This typically involves:
- Confirming that the title – Certificate of Occupancy (C of O), Deed of Assignment, Deed of Sub-Lease, or Gazette – is authentic.
- Searching the State Land Registry to confirm ownership and check for encumbrances such as litigation, mortgages, cautions, or consent issues.
2. Zoning and Land Use Checks
Each state’s urban and regional planning laws specify what a property can be used for—residential, commercial, agricultural, or industrial. Investors must ensure that the land use aligns with their intended project (e.g., building retail units on land zoned for commercial use).
3. Environmental Impact Assessment (EIA)
For large-scale developments, the Environmental Impact Assessment Act requires an EIA to demonstrate compliance with environmental standards and identify potential hazards.
Preparing a Bankable Business Plan
To secure real estate investment funding, a strong, well-structured business plan is essential. Lenders and private investors rely on this document to assess risk.
Your plan should include:
- Project Overview: Nature of the development, property description, and location.
- Market Feasibility: Demand analysis, competitor review, and economic justification.
- Financial Projections: Development costs, revenue forecasts, ROI, and contingency budgets.
- Risk Analysis: Potential obstacles and planned mitigation strategies.
- Exit Strategy: How investors will recover their capital—sale, rental income, or refinancing.
A professionally prepared plan builds investor confidence and strengthens loan applications.
Exploring the Funding Options Available to Investors
Nigeria provides a variety of financing channels for real estate projects. Each option comes with legal obligations and documentation requirements.
1. Mortgage Financing
Commercial banks and mortgage banks offer loans secured by the property. Requirements include:
- Proof of income, tax compliance, and credit history.
- Submission of valid title documents.
- Obtaining Governor’s Consent to mortgage the property.
- Signing and registering a Deed of Legal Mortgage with the Land Registry and CAC (for corporate borrowers).
2. Private Equity and Venture Capital
These investors provide funding in exchange for a stake in the project or profit-sharing. Legally:
- The terms must be set out in a Shareholders’ Agreement or Investment Agreement.
- Profit distribution, management roles, and exit clauses must be clearly defined.
3. Real Estate Investment Trusts (REITs)
REITs pool funds from multiple investors for real estate development. To access REIT funding:
- Developers must comply with Securities and Exchange Commission (SEC) regulations.
- A trustee agreement, offering memorandum, and compliance filings are required.
4. Joint Venture Agreements
A common strategy in Nigeria involves partnering with landowners:
- The landowner contributes land; the investor provides capital or expertise.
- A Joint Venture Agreement (JVA) must specify contributions, timelines, profit-sharing, and dispute resolution mechanisms.
5. National Housing Fund (NHF) Loans
The Federal Mortgage Bank of Nigeria provides low-interest loans to qualifying individuals and developers. Requirements include:
- NHF registration.
- Approved building plans and title documents.
- Compliance with FMBN lending conditions.
Drafting and Executing Legal Agreements
Every funding process must be formalized through legally binding documents to ensure enforceability.
Key Agreements Include:
- Loan Agreement: Specifies interest rate, repayment terms, collateral, default conditions, and lender rights.
- Joint Venture or Partnership Agreement: Defines roles, responsibilities, decision-making authority, profit allocation, and exit procedures.
- Deed of Legal Mortgage: Used when the property serves as collateral. It must be executed and registered at the Land Registry and CAC.
Proper legal drafting prevents ambiguity and protects investors from future disputes.
Obtaining Necessary Regulatory Approvals
Depending on your project, you may need:
- Building permits from planning authorities.
- Environmental permits for large-scale construction.
- Governor’s Consent for all land transfers and mortgages under the Land Use Act.
Failure to obtain approval can delay funding and affect future resale or refinancing.
Registration of Relevant Documents
To make your funding arrangement legally recognized:
- Register all property transfers and mortgages at the State Land Registry.
- Corporate entities must register mortgages and all charges at the CAC within the prescribed timeline.
Compliance and Risk Management After Securing Funding
Securing the funds is just the beginning. Investors must continue to manage:
- Repayment obligations to avoid foreclosure.
- Project timelines and budgets to maintain investor confidence.
- Dispute resolution mechanisms, such as mediation or arbitration, where conflicts arise.
Seek Professional Legal and Financial Guidance
Real estate transactions in Nigeria involve layers of regulatory checks and compliance requirements. Engaging a qualified real estate lawyer ensures that:
- Title investigations are accurate.
- All agreements comply with Nigerian law.
- Investors avoid legal pitfalls that could derail the project.
Conclusion
To secure real estate investment funding in Nigeria, investors must conduct proper due diligence, choose the right funding model, comply with regulations, and execute enforceable legal agreements. With the right legal strategy, real estate investors can confidently navigate Nigeria’s property market and protect their investments from avoidable risk.
Other articles on the blog
- Foreclosure Laws in Nigeria: Rights of Lenders and Property Owners
- Rights and Duties Of Landlords and Tenants in Nigeria
Navigating property laws in Nigeria can be complex, but the right legal guidance makes all the difference.
At Scotts Legal, we provide expert support in property acquisition, title investigation, registration, and property management, helping real estate investors make confident, compliant, and secure decisions.
For consultations and inquiries, send us a message – here.
