The role of Sinking Fund policy in the management of public estates in Nigeria

The development of housing and housing infrastructure for man’s utilisation is considered to be of paramount importance towards the sustenance of households and their livelihoods in the society. Issues of housing provision as a matter of public concern globally is unique such that it requires the initiation of sound decision-making process which ultimately generates the thought for policy development. 

The provision of adequate housing through a series of sophisticated construction activities have proven not only to be time consuming but also capital intensive due to the cost of mobilising financial resources for actual physical development and other maintenance cost incurable in the future upon completion.

The durability of housing in terms of its physical and economic useful life makes the need for constant and effective management highly valuable. Housing as a form of real estate investment is known to have an active lifecycle comprising of different stages ranging from newly developed phase to redevelopment phase. 

The changes likely to occur between the periods of these lifecycle makes it logical for housing development not to be considered as one-time activity. In developing countries, it is evident that little or no consideration is made towards the practice of adequate savings for future expenditure such as maintenance or repairs despite the collection of service charge. 

Most public estates as could be found in less developed countries (LDCs) like Nigeria is found in the state of disrepair and usually unfit for habitation as a result of rapid dilapidation emerging in the building components.

The inability of housing owners to resort to the strategy of income accumulation through a working sinking fund policy have affected the quality of maintenance ideal for public property held under the management of public owners and their agents. 

Sinking fund in real estate terms involves a deliberate financial arrangement in which income collected as service charge is left to accumulate at certain interest rates with the specific objective to defray possible future maintenance cost and replacement of worn out areas of a property. 

The need for such a policy is to ensure the provision of funds for timely repairs of unforeseen or predictable defects over time. One of the major advantage of this approach in housing and facilities management is to preserve the physical and economic value of buildings by reducing the impact of obsolescence associated with property development.

The management of public estates which is perceived generally as inadequate due to lack of effective maintenance could be addressed through the implementation of sustained sinking fund policy which assures the availability of necessary finance for adequate management. The possibility for improved housing condition with enhanced user’s satisfaction will further promote the positive increase of capital and rental values on the long run in the real estate market.

The role of sinking fund in the maintenance of public housing will foster a high level of market competitiveness of public estates as compared to alternatives such as private estates, and with increasing preference for public estates the potential for revenue generation will be optimally realised. 

The management of public estates should be left in the hands of qualified real estate practitioners skilled in the art and science of estimating the financial needs of housing investments using appropriate methods of appraisal that is relevant in accounting for the amount adequate to be invested as sinking fund at a given period. 

Engaging the expert opinion of Estate Surveyors and Valuers in the management of public estates as trained property and facilities managers with the ability to predict changes in market values would create value addition and influence the public real estate sector to contribute enormously to the national economy just as in the case of private estates.

Ekundayo Ezekiel A. Ajala,

Suite C11, Second Floor, Fodio Plaza,Western Bye Pass, Minna, Niger state 

[email protected]