Long leases are gaining attention in Lagos as property prices and construction costs make outright homeownership increasingly expensive.
The arrangement allows buyers to secure the use of a property for an agreed period at a lower upfront cost, with some also seeing it as a way to earn rental income from residential real estate.
Its appeal cuts across younger professionals, investors and older Nigerians looking for alternatives to building or purchasing homes outright.
In an exclusive interview with Nairametrics, Sanni Faruq, Lead Consultant at Senior Homes and Properties, a real estate company specialising in long-lease arrangements, discussed changing buyer preferences in the Lagos property market. He also shared insights into how demand for these arrangements is evolving among different categories of buyers.
Nairametrics: How has demand for long-lease properties in Lagos changed over the past 12 months, and what are you seeing behind that change?
Sanni Faruq: Demand for long leases in high-demand areas in Lagos such as Yaba, Shomolu, Maryland, Ikeja, and Surulere has surged dramatically over the past year. This shift is driven by three primary economic forces.
First, hyperinflation and escalating construction costs have pushed outright homeownership prices out of reach for many middle-class professionals and mid-tier investors. A long lease lowers the barrier to entry by 60% to 70% compared to an outright purchase in the same neighbourhood.
Second, traditional tenants who are tired of unpredictable 20% to 30% annual rent hikes are turning to long leases to lock in their housing costs at today’s rates for two full decades.
Finally, Smart Investors realize that long leases offer vastly superior cash-flow margins, allowing them to operate high-yield short-lets or traditional rentals without tying up massive equity in outright land acquisition.
Nairametrics: How are buyers and subscribers using long-lease properties today, and have you noticed any changes in how these properties are being used?
Sanni Faruq: We have witnessed a clear evolution in how our clients utilize long-lease assets. About 3-5years ago, buyers viewed them purely as long-term residential security or just to earn rental income.
Today, long leases have transformed into active, hybrid income engines. For instance, we now have widespread adoption by short-let operators who acquire compact units like studios, miniflats and loft apartments on long lease to deliver fully serviced apartments.
Recently, we have also had clients in the diaspora, especially after the Detty December experience last year, where short-lets became so expensive that they now buy long leases, short-letting the space whenever they are not in the country to offset maintenance costs and generate steady cash flow, and simply stay there whenever they or their family members are in the country.
Additionally, we have also seen some of our older clients in their 50s and 60s, especially those with their kids abroad, leveraging long leases instead of spending hundreds of millions of Naira building a house no child is ready to live in; they simply buy a lease that could serve them for the rest of their lives.
Nairametrics: What are you seeing in terms of the types of buyers entering the long-lease market, and what appears to be influencing their decisions?
Sanni Faruq: The long-lease market is currently dominated by three distinct buyer profiles. First are young corporate and tech professionals targeting accessible entry points between N9 million and N25 million in key mainland commercial hubs like Yaba, Palmgrove, Shomolu, and Ikeja. They value immediate rental returns or the ability to live close to business hubs/Island without landlord interference.
Second are Diaspora investors, who are drawn by foreign exchange advantages and the desire for verified, low-friction assets that bypass complex title struggles that come with buying and building a property.
Third are high-net-worth investors practising extreme capital efficiency. Rather than tying up N150 million to N200 million in a single property, these seasoned investors distribute that same capital across five to seven long-lease units, multiplying their rental income streams across diverse high-demand locations.
Nairametrics: Which locations and property types are currently attracting the strongest demand for long leases, and what are you seeing in those markets?
Sanni Faruq: The strongest absorption rates are occurring in well-connected, high-density mainland areas, especially those with good proximity to the Island. Locations like Yaba, Shomolu, Gbagada and Surulere are booming due to their proximity to tertiary institutions like UNILAG, tech hubs in Yaba, and direct access across the Third Mainland Bridge to Victoria Island and Lekki.
Similarly, Mende, Maryland, and Ikeja attract consistent demand due to their closeness to the airports and government commercial seats like Alausa. In terms of property types, studios and mini-flats lead in volume because of their accessible pricing. However, demand for loft and maisonette units too are coming up these days.
Nairametrics: How is the pricing of long-lease interests currently determined, and how does it compare with the cost of acquiring a comparable property outright?
Sanni Faruq: Long-lease pricing is calculated based on the number of years on the lease term, the current rental value in the location, and the overall construction finish, such as whether a unit is delivered all-inclusive or fully fitted.
For example, in Shomolu, we currently have an 18-year mini-flat lease at N20 million; the current annual rental value is N3.5 million, which means our investors are guaranteed to get full capital payback within 6 years.
Looking at historical performance, three years ago we sold mini-flat leases in the Shomolu axis for N7 million when annual rents were N800,000 to N1 million; today, those exact units rent for N3.5 million annually. This compounding yield proves that long leases offer unmatched cash-flow efficiency and inflation protection.
When compared to outright acquisition, the financial advantage makes sense. The entry advantage over outright acquisition is staggering. In prime mainland hubs like Ikeja or Surulere, a finished one-bedroom commands N80 million to over N110 million for outright ownership, whereas a comparable 18-to-20-year long lease sells for N18 million to N26 million. An investor acquires 100% of the operational control and rental income for roughly 20% to 30% of the outright capital cost.
Nairametrics: What kind of financial performance are you seeing from long-leased properties, and how does that compare with other ways of generating income from property?
Sanni Faruq: Long-leased properties consistently outperform traditional outright purchases in terms of Cash-on-Cash Return and capital payback speed. Because the initial capital outlay is significantly lower, the net yield can be easily estimated and determined.
While a traditional outright purchase in Lagos typically yields between 6% and 9% annually with a 12-to-15-year payback period, a well-managed long lease yields between 15% and 22%+ annually.
For example, a N20 million long-lease asset producing N3.5 million to N5 million annually in rental income allows the investor to fully recover their initial capital investment within four to five years, leaving them with 12 to 15 remaining years of pure cash flow.
Nairametrics: What happens when someone wants to transfer or exit a long-lease interest before the agreed expiry date, and what are you seeing in terms of demand for these interests from new buyers?
Sanni Faruq: Exiting or transferring a long lease is a seamless, legally protected process. Every lease agreement includes an Assignment of Lease clause, granting the leaseholder the legal right to sell or assign their remaining unexpired years to a new buyer at current market valuation. Once transferred, the developer or facility manager updates the deed of sublease and official management records.
Secondary market demand for unexpired lease years is high. Because property values and rents in these locations appreciate continuously, an investor who acquired a 20-year lease three years ago can easily resell the remaining 17 years at a premium, capturing both capital appreciation and the historical rental returns already earned.
Nairametrics: What happens when a long lease reaches its expiry date, and what should someone considering a long lease understand about their rights and obligations at that point?
Sanni Faruq: When a long lease reaches its expiration date, legal clarity established at the beginning of the lease governs the process. If the owner wants to re-lease the apartment, standard contracts include a First Right of Refusal clause, granting the existing leaseholder the priority right to negotiate an extension or renewal term before the property is offered to the general market. If the leaseholder chooses not to renew, vacant possession of the property reverts to the primary owner or developer.
