Housing Microfinance is an interesting innovation appropriate for the Nigerian market. It functions by providing small, short-term loans to match step-by-step housing construction that the lower-income segment can afford. Technical support ensures that people get the best possible housing for their investments.
With a population of over 70 million low-income people and an almost non-existent mortgage market, the opportunity for a housing microfinance business model is evident. Nigeria’s housing finance sector depends on the active participation of both the public and private sectors.
The following recommendations are broken down into issues affecting
(a) Policy and Regulation
(b) Financial Sector
(c) Capacity Building and Knowledge Gap
(d) Housing Sector
POLICY AND REGULATION
• Difficulty in procuring consents for transfers, title deeds and very high processing costs.
• State governments should make administrative amendments to the Land Use Act to delegate endorsement of consent to Commissioners. At the national level, a Director of lands should do this
• Simplification of land title registration and revision of procedures and cost structure. Revised fee schedule should be capped at 0.5%. Subsequent land transactions should NOT require Governor’s Consent but mere registration of title
• Policies and programmes should be aimed at the low income segment focusing on assisting them to acquire, build or improve their homes through easy accessibility to land and securing of title documents
• Lack of access to funds by potential homeowners and PMIs. There also exists absence of synergies for generating construction and mortgage finance
• Low funding base and poor corporate governance of PMIs
• Absence of secondary market
• FMBN’s poor capital base
• High down payment percentages
• Sectoral illiquidity issues
• Inadequate investments by pension funds
• Housing microfinance for the low-income population is critical and resources should be committed to researching and understanding this emerging sector. There should also be concerted technical assistance programs and housing support services to be administered by the government
• The CBN should direct PMIs to recapitalize to position them to finance big ticket transactions and to provide long term funding to developers and end users. The CBN should also encourage Mergers and Acquisitions among PMIs.
• Institutionalize a code of corporate governance in the management of PMIs
• CBN should issue a 20-25 year bond in collaboration with the Debt Management Office and use the proceeds to refinance eligible mortgages
• FMBN should be given adequate resources by the government to strengthen its financial and operational capabilities
• Government should provide a form of security to financiers/home buyers, for example securing a percentage of the total amount in case of default through a mortgage insurance scheme. This security should be targeted and removed after a certain period so that the mortgage insurance scheme can operate independent of government. This would help to reduce current down payment percentages required from home buyers.
• Development of liquidity facilities framework for refinancing qualified mortgage assets of Deposit Money Banks and PMIs to fund affordable housing
• Review existing provisions and allocation framework to allow for more participation of Pension funds in long term finance for housing
CAPACITY BUILDING AND KNOWLEDGE
• Absence of data
• Lack of trained and skilled housing finance personnel
• The CBN, FMBN, Housing Finance Professionals Association of Nigeria (HoFPAN), CIBN and Mortgage Bankers Association of Nigeria (MBAN) should collaborate to institutionalize training leading to the certification of professionals in the mortgage and housing finance sectors. The National Universities Commission (NUC) should be encouraged to offer courses on housing finance at Universities
• A Real Estate Information Centre that will warehouse data and information on the real estate and housing market should be established. The centre will be the repository of market information on key data in the housing sector
• Capacity development and training for real estate professionals should be done through local and international training programs, seminars, workshops and study visits
• Infrastructure challenges
• Affordability and cost issues
• The Federal Government should set up a Housing Infrastructural Development Trust Fund to provide incentives to participating State Governments to induce provision of housing related infrastructure in their states.
• Basic building materials should be given tax and duty relief and government should develop incentives to encourage both the public and private sectors to use indigenous building materials
• State and federal governments should engage housing finance experts to develop viable framework for public private partnership for housing and infrastructure
• Government, developers and financiers should work together and come up with strategies that can make housing affordable especially to the low income segment. Strategies may include granting tax holidays to developers and providing free land to them to reduce the cost of producing houses