Mortgage Banking Association of Nigeria (MBAN) is currently seeking ways to improve access to credit for real estate recovery and provision of affordable houses for the citizens.
Consequently, the association is mulling an agreement with the Central Bank of Nigeria (CBN) and the National Pension Commission to allow investment of over N7.5 trillion pension funds in the mortgage market. The anticipating agreement, according to the President of MBAN, Mr. Adeniyi Akinlusi, is aimed at improving access to credit in order to solve the nation’s housing deficit of over 17million units.
According to the MBAN boss, the proposal would help free up money held by pension fund managers, which is estimated at around N7.5 trillion ($20.9 billion) as at the end of 2017, according to the National Bureau of Statistics. Of these funds, he noted that 69.2 per cent is invested in either Federal Government bonds or Treasury bills, with the balance sitting with the stock market, banks or corporate bonds.
If the application to regulators is successful, expectation is that it would free up liquidity for investment in individual projects or real estate investment trusts. Meanwhile, low returns on investment, illiquidity of real estate as an asset class, poor and unreliable real estate assets valuation have been listed as some of the factors limiting investment of pension fund in real estate sector.
According to one of the administrators of fund raised from contributory pension scheme (CPS), who is the Managing Director, AIICO Pension Managers Limited, Longe Eguarekhide, an estimated eight per cent annual return and about five per cent annual rental yield did not make real estate an attractive investment asset class.
Besides, he said that real estate assets could not be converted easily to cash when the need arises. However, he confirmed that discussions were on-going between pension fund administrators and primary mortgage operators on how contributors to the pension scheme could access part of their retirement savings for use as equity contribution for mortgage loans.
According to the CEO, IBTC Pension Managers, lack of political commitment and differing approaches between sovereign and sub-national entities were also part of the policy challenges.
He cited the National Housing Fund (NHF) managed by the Federal Mortgage Bank of Nigeria (FMBN), which had a total collection of well over N2 trillion, but was yet to fully realise its goal.
Another regulatory challenge, as cited by the CEO, was the Land Use Act of 1978, which rests the power to allocate and revoke land on the state governors.
This, he said, was slowing down process of obtaining titles to ownership of land and also making property registration not only costly, but also difficult.
Contributory pension scheme came into being in 2004. Contribution has been quite significant and has progressively grown from N5.4 trillion a couple of years ago to N7.5 trillion at the moment, coming from contributors who represent a little above four per cent of the country’s 170 million population.