Experts in Nigeria’s real estate sector have warned the Federal Government that relying solely on escrow accounts will not adequately protect homebuyers from fraud and project abandonment. Speaking at a housing policy roundtable in Abuja, stakeholders emphasized the need for a multi-layered approach to buyer protection.
Limitations of Escrow Accounts
While escrow accounts hold funds until contractual conditions are met, they do not address underlying risks such as defective titles, unapproved building plans, or developer insolvency. “An escrow is just a payment mechanism. It cannot verify if the property has a valid Certificate of Occupancy or if the developer has the necessary permits,” said Mr. Adebayo Ogunlesi, a real estate lawyer and member of the Nigerian Institute of Town Planners.
Experts noted that many homebuyers lose money even when payments are held in escrow because the developer may fail to complete the project due to financial mismanagement or legal disputes. The system also lacks uniformity, with different banks and platforms offering varying levels of oversight.
Calls for Comprehensive Reforms
Participants urged the Federal Ministry of Housing to mandate title insurance for all new developments, require developers to register with a central database, and establish a dedicated dispute resolution tribunal. “We need a holistic framework that includes independent inspection, progress-based disbursement, and a compensation fund for defrauded buyers,” proposed Dr. Funmi Adewale, an economist specializing in housing finance.
Statistics from the Nigeria Housing Association indicate that over 40% of housing projects in major cities experience delays of more than two years, and about 15% are abandoned entirely. These figures underscore the inadequacy of escrow as a standalone safeguard.
Government Response
In a communique issued after the roundtable, the Ministry acknowledged the concerns and promised to review the National Housing Policy to incorporate stronger consumer protections. A technical committee is expected to submit recommendations within three months, including possible amendments to the Mortgage and Property Law.
Industry observers warn that without swift action, homebuyer confidence will continue to erode, potentially dampening demand in the housing sector and slowing economic growth.
