How Much Can I Make From Land Banking in Lagos in 5 Years

A wise man once said that land is the only thing that lasts forever. While everything else depreciates or fades over time, land only appreciates. Anyone hoping to make money from land banking in Lagos in 5 years had this in mind.

This age-old principle is at the heart of land banking, a strategy that involves buying undeveloped land and holding onto it, waiting for its value to increase before selling.

In a city like Lagos, where development is expanding at a rapid pace, land banking is a solid investment choice for those with the foresight and patience to wait. But how much can you really make from land banking in Lagos in 5 years? Let’s break it down.

The Basics of Land Banking

Land banking is the process of purchasing land in areas that are not yet fully developed or urbanized with the expectation that as development spreads, the value of the land will significantly increase.

Investors usually buy these lands at a lower cost, hold onto them for a few years (typically 3-10 years or even longer), and then sell them at a much higher price when the area becomes developed or the demand for land in the region increases.

In Lagos, land banking is a particularly lucrative strategy because of the city’s booming population. If you know Lagos, you know that people relocate to the state on a daily basis. Let’s not also forget the speed at which urban expansion is happening there.

Both factors essentially drive up a growing demand for both residential and commercial properties. Logically, as more people are coming in and different areas of the state are opening up, there’s more need for properties.

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Why Lagos in Particular?

Now, you may wonder, “Why should I bank land in Lagos as opposed to other cities?” Well, Lagos is essentially a land of opportunities. As of 2023, Lagos is home to over 16 million people, making it one of the fastest-growing cities in Africa.

In fact, the World Bank projects that Lagos will become the world’s largest city by 2100, which gives you an idea of just how valuable land in and around Lagos is becoming.

What’s more, the city’s GDP is expected to grow significantly, thanks to infrastructural projects such as the Eko Atlantic City and the Fourth Mainland Bridge. This means that real estate values are set to increase as demand for land intensifies.

According to the Guardian Nigeria, land prices in Lagos have been on a steady rise, appreciating by as much as 50% in 2023. This growth rate positions Lagos as a prime destination for real estate investment, especially in areas that are currently under development.

How Much Can You Make?

The amount you can make from land banking in Lagos within 5 years depends on several factors, but we can look at some averages to get an idea.

Land Appreciation Rates in Lagos

Based on historical data, land in Lagos appreciates at an average rate of 15% to 30% annually in most developing areas. However, in prime locations or areas where major infrastructure projects are announced, the appreciation can go as high as 50% to 70% annually.

Upcoming Areas

Let’s assume you buy a plot of land in an up-and-coming area like Ibeju-Lekki for ₦5 million today. Given the massive ongoing development in the area (like the Lekki Free Trade Zone, Dangote Refinery, and the new Lekki International Airport), land values have been rising steeply.

If land in Ibeju-Lekki appreciates at an average of 20% annually, here’s what your ₦5 million investment might look like over five years:

Year 1: ₦5 million + 20% = ₦6 million

Year 2: ₦6 million + 20% = ₦7.2 million

Year 3: ₦7.2 million + 20% = ₦8.64 million

Year 4: ₦8.64 million + 20% = ₦10.37 million

Year 5: ₦10.37 million + 20% = ₦12.44 million

So, after five years, your initial investment of ₦5 million could potentially grow to ₦12.44 million, yielding a profit of ₦7.44 million.

That’s nearly a 150% return on investment, assuming a 20% appreciation rate, which is relatively conservative for fast-developing areas like Ibeju-Lekki.

If you were lucky enough to get in at the lower end of the market (let’s say ₦1.5 million in a more remote area like Epe), the land could be worth as much as ₦6-10 million in 5 years, depending on development speed.

Prime Areas

Suppose you invested in a prime location or an area experiencing rapid development, the annual appreciation rate could be closer to 50%. In that case, your ₦5 million investment could look like this over 5 years:

Year 1: ₦5 million x 1.5 = ₦7.5 million

Year 2: ₦7.5 million x 1.5 = ₦11.25 million

Year 3: ₦11.25 million x 1.5 = ₦16.88 million

Year 4: ₦16.88 million x 1.5 = ₦25.32 million

Year 5: ₦25.32 million x 1.5 = ₦37.98 million

In this scenario, after 5 years, your ₦5 million investment could grow to ₦37.98 million, resulting in a profit of ₦32.98 million.

Prime vs. Emerging Locations

It’s worth mentioning that prime locations in Lagos, like Lekki Phase 1, Victoria Island, or Ikoyi, have historically seen higher appreciation rates. However, the cost of entry in these areas is much steeper, and growth rates might slow down as the land becomes more developed and saturated.

On the other hand, emerging locations like Epe, Badagry, and parts of Ibeju-Lekki offer more affordable entry points, and with ongoing developments, these areas could see explosive growth in the coming years.

For example, land in Epe was going for as low as ₦500,000 per plot a few years ago. Today, it sells for around ₦1 million to ₦3 million, depending on the exact location and proximity to major roads and projects. This means that some early investors have seen their investments grow by 200% or more in just a few years.

Key Areas for Land Banking in Lagos

Not all areas in Lagos are particularly lucrative when it comes to land banking. Some regions have a higher potential for appreciation than others. Below are a few areas to consider if you’re looking to invest:

1. Ibeju-Lekki

Often dubbed the “New Lagos,” this area has experienced rapid growth. This is due to projects like the Lekki Free Trade Zone, Dangote Refinery, and the proposed Lekki International Airport. Land prices in Ibeju-Lekki have been skyrocketing, and this trend is expected to continue.

2. Epe

With developments creeping toward Epe, this area has become a top spot for land banking. Although it is gradually opening up, Epe has seen significant government interest in infrastructure. This is one of the reasons why it is a prime location for future appreciation.

3. Ikorodu

Ikorodu was once considered a remote part of Lagos, but it is now a fast-developing area. Improved road networks and ongoing residential projects have increased land demand. All of these make it a viable option for land banking.

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Conclusion: Is Land Banking in Lagos Worth It?

The short answer? Absolutely! Land banking in Lagos has the potential to yield substantial returns in 5 years. Considering areas with upcoming developments like Ibeju-Lekki and Epe, the potentials are mind-blowing.

If you have genuine land from a real estate company and get your documentation right, you’re on to something profitable.

You may not necessarily see the profit today but in a few years when your land is now worth millions, you’ll be glad you started the process.

While no investment is without risk, the sheer growth of Lagos as a commercial and residential hub makes it an attractive option for real estate investment. If you’re thinking of land banking, this is your clue to get started.

Do you desire to buy land in Epe, Ibeju-Lekki or Enugu, send a WhatsApp message to +2348134794494