What Does the Development Fee Cover in Nigerian Real Estate?

In Nigerian real estate transactions, the development fee is one of several statutory payments required when acquiring property. 

While it may seem like an additional cost, it plays a vital role in ensuring a property’s legal standing and infrastructure development. This is a great way to provide peace of mind to both buyers and sellers. 

This blog post will break down what a development fee typically covers, why it’s necessary, and how it fits into Nigeria’s broader landscape of real estate costs.

What is a Development Fee?

A development fee in the Nigerian real estate context is a levy imposed to cover the cost of infrastructural amenities.

It also covers other essential services required to make a property viable for residential or commercial use. 

It typically ranges from 5% to 10% of the property’s value.

In some instances though, it may be a fixed amount based on the type of property or its location​.

This fee often accompanies other charges like the agency fee, legal fees, and statutory fees. Not leaving behind costs like the Governor’s Consent and stamp duties. 

It ensures that the developer or the relevant government body can deliver the essential infrastructure necessary for the property to become livable or functional.

The development fee provides peace of mind to both buyers and sellers.

It ensures that all necessary infrastructural and legal obligations are met, which mitigates future risks for both parties.

Paying this fee makes everyone happy and rest assured.

For buyers, the peace of mind comes from knowing that their investment is backed by a legally compliant transaction and a property equipped with essential infrastructure, such as roads, drainage, electricity, and water supply. 

The buyer is confident that the property is ready for use or development without incurring unexpected future expenses. 

Additionally, the development fee often includes security measures and waste management. These things are crucial for long-term habitability and the property’s market value. 

By paying this fee upfront as a buyer, you can avoid future disputes over incomplete infrastructure or legal issues, which could arise if statutory obligations are not fulfilled​.

For sellers or developers, the developmental fee helps you to fulfill your legal and contractual obligations.

If you use it properly, you hand over a well-developed and compliant property to the buyer. 

By covering development costs through this fee, sellers reduce the risk of disputes or litigation from dissatisfied buyers who might otherwise claim that the property was not delivered as promised. 

Furthermore, it enhances the property’s value, as buyers are more likely to trust a property that meets all legal and infrastructural requirements.

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What Does the Development Fee Cover in Real Estate?

The development fee generally covers a wide range of infrastructure and essential services, which include:

• Roads and Drainage Systems: These are essential in making the property accessible and in ensuring proper water management, especially during heavy rains. Without a proper drainage system, properties are prone to flooding, which could lead to a decrease in value over time.
• Electricity Supply: Most development fees also cover the installation of electrical systems, so that the estate or property is connected to the national grid. In some cases, it may also cover the provision of alternative energy sources like solar panels or generators, depending on the estate’s setup.
• Water Supply: Water is an essential utility, and the development fee often includes the provision of a central water system. This can be in the form of boreholes or piped water directly from local water boards.
• Security Infrastructure: In some gated estates, the development fee includes costs for security infrastructure, such as gates, fences, surveillance systems, and sometimes even guards to ensure the safety of residents.
• Sewage and Waste Management Systems: Proper waste management and sewage systems are often included. They do this to ensure that waste is collected and disposed of safely. In areas where a public sewage system is not available, developers may build septic tanks or similar waste management systems.
• Landscaping and Recreational Areas: Many modern estates or commercial developments offer parks, green spaces, and recreational areas as part of the development plan. The development fee may cover the cost of landscaping and the creation of communal areas like playgrounds, sports courts, or even swimming pools.
• Street Lighting: Proper street lighting is essential for safety and convenience. Development fees typically ensure that streetlights are installed throughout the estate or property.
• Administrative Costs and Permits: Sometimes, the development fee also covers various administrative expenses. These administrative expenses may include the cost of obtaining necessary building permits and compliance with local planning regulations​.

Why is the Development Fee Necessary?

Development fees ensure that properties are fully ready for habitation or business use. In other words, they use the fee to make the property more attractive to potential buyers or tenants. 

Additionally, they prevent future occupants from having to pay for infrastructure upgrades or repairs out-of-pocket after purchasing the property.

Moreover, the fees help developers meet regulatory requirements, ensuring that properties comply with safety and environmental standards. 

This legal compliance is vital for preventing disputes and ensuring the long-term viability of the property​.

How Do Real Estate Companies Calculate the Development Fee?

The amount charged as a development fee can vary widely.

It depends on several factors like the location of the property, the land use plan (residential vs. commercial), and the infrastructure needs of the surrounding area. 

In some cases, the firm can determine the development fee by calculating it as a percentage of the property’s value.

In other cases, it is a fixed fee based on the property’s size and the amenities provided by the developer​.

Also Read:

• Difference Between Land Excision and Gazette in Nigeria
• Different Land Sizes and Measurements Available in Abuja
• What You Need to Know About Survey Plan in Abuja as a Real Estate Investor

Conclusion

The development fee in Nigerian real estate is more than just an additional cost. It’s a vital investment in the infrastructure and services that make a property functional and livable. From roads and drainage systems to electricity and security, the development fee ensures that all the necessary amenities are in place. These things ought to be in place before you take possession of the property.

Understanding what the development fee covers and how companies calculate it can help you make more informed decisions when purchasing a property in Nigeria. With this knowledge, you can ensure that you’re paying a fair price for the services and infrastructure that will support your property for years to come.

By doing your due diligence, consulting with experts, and negotiating where possible, you can navigate the real estate market more effectively. In addition, you will be able to avoid any unpleasant surprises down the line.

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