CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Shelter is a basic necessity in life. An individual can satisfy this need by either occupying his own (owner’s occupier) property or renting another person’s property. In our traditional society, the need for shelter is mainly met through the first alternative that is owner occupation. With the emergency of urban centers’, the situation  has  changed. Many people are no  longer about  to own property because of the difficulty in the acquisition of land and the high cost of building construction. Therefore, they are left with the alternative of renting other people’s properties in order to satisfy their need for shelter. Consequently two classes of urban resident have emerged, the landlord and the tenant under this arrangement the tenant pays to the landlord a certain amount of money in consideration for his use of the landlord’s house. This amount is popularly known as rent.

During the civil war the Nigeria that is 1966 to 1970 many landed properties in the urban areas of the former Eastern Region of Nigeria, including Enugu, were destroyed. Consequently, there was a sharp decline in the supply of landed properties after the war. Furthermore, the post – civil war period witnessed an unprecedented number of the rural population trooping into the urban centres due to the conspicuous prosperity brought about in the urban area by the oil boom. This

resulted  to  high  demand  for  the  existing  limited  supply  of  landed  properties. Consequent upon these, rent for landed properties increased considerably.

This trend has continued with the effect that “the average worker is paying

30% to 40% of his salary as rent” (Oshadiya, 1985). Thus the increase in rents on

the properties has led to the variation of rent on properties.

In urban area due to location advantage (for example prime location) which some properties offer above others for commercial and residential uses, rent tend to very on account of the type of use which a property can offer.

1.2     STATEMENT OF PROBLEM

Location of economic properties has been a difficult concept to understand. Although the primary objective of commercial properties is the derivation of financial gains, while that of residential properties is for habitation, shelter and comfort, 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.

There appear to be wide ranging differences in the levels of rent passing on residential and commercial properties in Enugu and Nigeria generally.

This research is seeking among other things to find out the causes of rental variation in commercial and residential properties in Nigeria, Ogui New Layout and G.R.A as a case study.

1.3     AIM AND OBJECTIVES OF THE STUDY

The main aim of this research is to examine the reasons for rental variation in commercial and residential properties with a view to provide tool to be used in catching issues related to rent on these properties in Enugu and Nigeria generally.

To achieve the standard goal, the following objectives are to be pursued;

1. i) To identify the level of rents for commercial and residential properties in the study
2. ii) To ascertain and examine the factors influencing the rents being commanded by these properties.

iii)     To determine or examine whether the income of prospective buyers/tenants affect their decision to acquire properties.

1. iv) To ascertain  if  there  is  disparity  in  rental  values  for  residential  and commercial properties in the study
2. v) To find  out  the  rate  of  demand  between  commercial  and  residential properties?

1.4    RESEARCH QUESTIONS

1. i. What is the level of rent for commercial and residential properties in Ogui

New Layout and G.R.A respectively between years 2002-2004?

1. ii. What are the factors influencing rents passing on those commercial and residential properties.

iii.     Does the income of prospective buyers/tenants affect their decision to acquire properties?

1. iv. Is there any disparity in the rental value or rent passing on residential and commercial properties in the study area?
2. v. Amongst properties put for Commercial and Residential use, which is on a higher rate of demand?

1.5      SIGNIFICANCE OF THE STUDY

The finding of this study will be of benefit to the following groups;

Firstly, tenants who are charged rents based on different reasons, especially when the properties are of the same nature (physically). This will again enable the investors not only to understand how occupier thinks, but also why and the things they consider before acquiring properties for certain uses.

Secondly, the generality of the public can now understand the reason why the rents being commanded by these properties have to differ.

Lastly, this research work will help to determine the factors influencing, commercial and residential properties which is an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.

1.6     SCOPE OF THE STUDY

The study covers a period of three years (2002 to 2004) and it is restricted to selected properties (Residential and commercial) comprising blocks of flat and tenements in Ogui New Layout and G.R.A, Enugu.

1.7     LIMITATIONS OF THE STUDY

Expectedly, this work met with some hindrances during the stage of data collection. The issue of rent passing on a property (residential or commercial) is usually regarded as classified information, which is not easily disclosed to people particularly researchers. This was largely suspected to be the reason why some Estate surveyors, property owners, tenants, Estate firms, property companies and even Estate agents who were approached through oral interviews, discussions and visitations found it rather difficult to reveal essential information despite every explanation that the exercise is strictly for academic purposes, a good number of them, still nursed the fear that it may be for property rating and taxation purposes.

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