Housing Finance

Real Reasons Why FG Established Family Homes Funds

Against the backdrop of the widening housing gap in the country, new partnerships and initiatives supported by the federal and state governments to address the housing shortfall, are being put in place, thereby raising the hope that government can actually help bridge the housing deficit in the country in the next 15 years.

The Family Homes Fund Limited is one of such new initiatives. The Fund is a partnership between the Federal Ministry of Finance and the Nigerian Sovereign Investment Authority as founding shareholders. The Fund is the largest affordable housing-focused fund in Sub-Sahara Africa, leveraging its significant capital (in excess of N1trn by 2023) to facilitate access to affordable housing for millions of Nigerians on low to medium income groups. Through strategic partnerships with various players in the sector and some of the world’s main Development Finance Institutions, the Fund has an ambitious commitment to facilitate and supply 500,000 homes by 2023.

The key priority for the Fund is to take advantage of the opportunity a large scale house building programme offers to create jobs which are sustainable and offer families security, improved quality of life and hope.

The fund is providing construction financing facility for private and public sector developers, promoting good quality homes targeted at people with low income.

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To be eligible for selection as a partner to work with Family Homes Funds,partners will be either public or private sector concerns, including co-operatives with credible track record of building homes. Although, Family Homes Funds will not be providing financing for individuals, all partners will  be required to meet the following eligibility requirements:

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You must be registered with the Corporate Affairs Commission to carry out housing development and related business or in the case of public sector borrowers, possess appropriate authorisation and or approval to enter into a loan agreement

You must be required to have previous experience or demonstrate ability or access to capacity required to execute a housing development project of the nature and scale being contemplated

You must be able to show proof of your financial capacity to meet project costs not covered by FHF financing particularly pre-development, pre-sale and statutory approval costs

The project land will meet FHF Site Selection Criteria and be  transferable to FHF simultaneously on completion of a Loan Agreement;and where necessary,evidence of compliance with relevant statutory requirements including tax returns.

 

FHF will provide financing to match their objective of providing homes which are affordable to people on low income. Pricing is determined from time to time and comprises of three elements: A base rate which is related to the cost of funds, administrative spread and a risk margin. For guidance only, Family Homes Funds expects to keep  pricing below 10% pa.

The Fund will also complement existing mortgage financing facilities by providing targeted assistance to people on low income through the  Home Loans Assistance Fund – Help to buy as part of the Governments’ Social Intervention Programme. The assistance will be in the form of a deferred loan for up to 40% of the cost of their home with no payments for the first 5 years.

Most Nigerians aspire to own their own home. However, for those on low to medium income this aspiration is often outside their reach. As a result, they are forced to rent and in many cases make do with poor housing conditions and a lack of security. They can be forced to move at the whim of a landlord which can disrupt their employment prospects and the education of their children.

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The assistance will be in the form of a deferred loan for up to 40% of the cost of their home. For the first 5 years of the loan, no payments need to be made. From the 6th year, monthly payments will be made to start repaying both interest and capital to assist the purchaser. The amount paid starts low and increases each year in gradual steps (average 6.5% per annum) in order for the HTB loan to be fully repaid by the 20th year,the same year the mortgage is expected to be fully repaid. To qualify, households will have earnings between N600k to N1.2m per annum and the new home must cost less than N7.5m. An exception is made in Abuja, Lagos, Port Harcourt and Kano where the cost of a new home can be as high as N9m. Households benefiting from Loan Assistance will not not be owners of  a suitable home and will include one income earner who is under 35 years of age and does not have to be one of the people applying for the scheme or the loan but must be available to help with repayments.

Many Nigerians on low income are unable to buy a home either because they do not have sufficient savings for a deposit or are currently unable to meet requirements for a mortgage. The Family Homes Funds intends to set up a Rental Housing Fund to give Nigerians on low income a first step on the housing ladder. When the Fund is launched, eligible beneficiaries will be able to lease a decent home for a monthly cost not exceeding 40% of their household income including an option to buy the home at any anytime.

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From March 2019, Family Homes Funds will be providing financial support for land and infrastructure development opportunities to bring forward clean adequately serviced land for affordable housing developments.To achieve this,Family Homes Fund will work in partnership with public and private landowners to tidy up titling issues and other encumbrances necessary to make land ready for development directly or through third party developers. The Fund will also finance the provision of neighbourhood infrastructure to help  improve the quality of new neighbourhoods.

Affa Dickson Acho

 

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