Why African Proptech needs to build infrastructure first before innovation

When Nigerian proptech startups attempted to disrupt the longstanding annual rent tradition, there was an obvious pain point they were trying to solve. Annual rent locked people out of housing because of the upfront cost, especially in cities like Lagos and Abuja.

Monthly payments felt like the humane alternative, and that logic powered a wave of startups that tried to sit between tenants and landlords by paying landlords upfront while collecting rent in installments.

Most of them did not survive or have struggled since. Not because they were wrong about the problem, but because they were wrong about their approach to the solution.

In a previous article, I argued that annual rent persists because it transfers risk cleanly. Pay upfront, and the landlord stops worrying. If you attempt to remove that certainty, the system demands a replacement, and it has to be structural.

As Sokari Gillis-Harry, founder of tenant verification platform Tenalet, puts it, “the monthly model treated rent like consumer lending, but without the underwriting infrastructure that makes consumer lending work.” What looked like a proptech product was, at its core, a balance sheet business.

This is the unit economics trap Nigerian proptech keeps falling into. Monthly rent only works if someone carries the risk of default. If that someone is the startup, the business quickly becomes too expensive to sustain. If it’s the landlord, there has to be a compelling reason to accept that risk beyond goodwill or technological promises.

The breakdown happens at three predictable points. First, the acquisition cost per tenant exceeded the lifetime value because repayment periods stretched beyond projections in an inflationary environment. Then, default rates rose faster than pricing could adjust. When the naira devalued in 2023, tenant repayment capacity collapsed while landlord expectations remained dollar-indexed. Third, there was no exit ramp. Once you’ve paid a landlord annual rent upfront, you’re locked in regardless of the tenant’s payment behavior.

What landlords actually want

The proptech graveyard suggests founders misunderstood the core problem. They assumed landlords only wanted liquidity when landlords also wanted certainty, and those are fundamentally different things.

Landlords didn’t adopt monthly rent. They adopted subsidised annual payments through intermediaries.

That distinction matters because without a way to replace the certainty annual rent provides, flexibility was always going to be temporary, expensive, and fragile. It explains why rent financing often feels like progress without real change. The structure of the market stays the same while the tenant simply takes on a new obligation, now with interest and fees layered on top.

Startups with the monthly payment model offered to preserve that certainty by guaranteeing landlords their annual sum while they handled tenant collections. Landlords took the deal because the terms were better than what they had before. Additionally, they got their money upfront with none of the monthly collection headaches while the startups absorbed all the risk. Then the startups started to struggle under the weight of that risk.

If landlords are ever going to accept monthly rent directly without an intermediary carrying the risk, the incentive has to be stronger than sympathy for tenants or faith in technology. It has to be economic.

The trust problem that still persists

Nigeria’s rental sector operates in a low-trust environment with weak enforcement mechanisms. The biggest fear landlords have is default, having to chase tenants around for money, or dealing with someone who can’t pay but won’t leave. Everything landlords do flows from that fear.

Bridging this trust gap requires proper infrastructure. If monthly rent is going to work sustainably, it has to be built around affordability assurance rather than just financial cushioning. In other words, prove beyond reasonable doubt that the tenant can pay before the lease is signed rather than subsidizing the gap after they move in.

But how do we truly define affordability, especially in a country like Nigeria, where inflation keeps rising while salary increments don’t follow suit? In a country where even income declaration isn’t enough for some landlords, the phrase affordability can’t be arbitrary. It has to be measurable.

Affordability assurance in this case should focus on pattern-based verification. Stable income over time rather than one-off payslips. Reasonable rent-to-income ratios that suggest sustainability. Evidence that rent isn’t competing with unsustainable debt obligations that could force hard choices later.

Verification still has its limits

Verification has clear boundaries that matter. It doesn’t solve the housing shortage that gives landlords all their negotiating power. It doesn’t help tenants who genuinely can’t afford rent, and it doesn’t protect against macro shocks that render previous financial stability irrelevant.

Then there’s the question of informal workers who remain difficult to assess unless their income touches the banking system regularly. Cash-based earnings that never get deposited stay invisible to any verification system, no matter how sophisticated.

And verification doesn’t change the fundamental power dynamic in the market. Nigeria needs over 28 million more housing units, and when supply is that tight, landlords hold all the leverage. They don’t need to offer monthly payments or accommodate tenant preferences. Every decent flat has multiple applicants competing for the same keys.

No screening model fully protects against macro shocks. If Nigeria’s economy swings sharply and someone loses their job, a screening report from three months prior becomes partially obsolete. This is true everywhere. Even US landlords faced the same problem during COVID layoffs.

What verification provides is layered protection rather than guarantees.

Tech’s role in Nigeria’s rental market

Strip away the product language and marketing pitch, and Nigerian renting is still a stranger-to-stranger transaction in a low-trust environment. Landlords rely on family referrals, personal networks, and upfront payments to bridge this trust gap because formal institutions don’t provide reliable alternatives.

Technology doesn’t need to disrupt this reality or pretend it doesn’t exist. Gillis-Harry explains that “tech’s real job is to create verifiable trust. A landlord should trust a verified stranger the same way they trust someone their brother recommended.”

Creating that verifiable trust requires four specific capabilities. Identity verification that confirms a person is who they claim to be, which BVN and NIN make possible at scale. Income verification that confirms someone can afford rent based on actual bank records, not documents they created. History verification that shows how someone behaved in previous rental relationships, building a portable reputation. And enforcement infrastructure that makes default consequential beyond a single transaction, creating incentives for good behavior.

Without fixing the infrastructure that can improve trust between strangers, innovations like monthly rent become just a nicer interface sitting on the same fragile structure. The foundation remains weak even if the coating looks modern.

This also explains why monthly rent will not take over the entire market in any realistic timeline. Gillis-Harry estimates that even in a decade, it may only penetrate 15 to 25% of premium urban rentals. This would include high-income professionals with stable salaries, diaspora landlords managing properties remotely, and institutional property managers whose systems already handle monthly collections. People whose income is stable enough to verify and whose margins can absorb higher screening costs without making the economics unworkable.

That’s not a failure or a sign that technology isn’t working. It’s segmentation, which is how most markets actually evolve rather than through wholesale disruption.