Between 2000 and 2030, the number of people living in cities will jump from fewer than 3 billion to approximately 5 billion and almost all the population increase will be absorbed by the Third World cities. The resultant effect of rapid urbanization in developing world is excessive demand for housing. A vast body of research has been conducted on housing demand but those ones credited to residential real estate in developing economies are still sparse. Also, none of the studies has been able to empirically establish the relevance of different residential density area peculiarities to housing demand. This study aims at estimating residential real estate demand in a Third World megacity of Lagos, Nigeria. Specifically, the study will investigate the main determinants of residential real estate demand in different residential neighbourhoods; and estimates income and price elasticities of the demand for residential real estate by owners and renters in those residential neighbourhoods. The neoclassical consumption theory will provide the theoretical framework on which this study will be anchored. The data for this research will be obtained from both primary and secondary sources and multinomial logit model will be used to analyze simultaneously tenure choice and residential real estate demand decisions in the various residential neighbourhoods identified. The need for this study becomes crucial given the fact that policymakers and executors in Nigeria have a genuine lack of understanding about the operations of the urban residential real estate market. Knowledge of the residential real estate demand parameters is one of the critical elements in designing residential real estate projects and inaccurately foreseeing their impact.