Housing Finance

Flexible rent payment – A way to solve housing shortages

Nigerians within the low income bracket have contended with the exploitative tendencies of estate agents for several years. The system has never been streamlined and the last time Lagos State tried to do so suffered a backlash. Even the flexible rent system its government tried to experiment was resisted by landlords who refused to play by the rule. This stalled the policy of making payment of rents flexible in Lagos State. This kind of endangered a flexible market in the renting system, which does not hold any landlord liable to any system employed in renting his house.

This also increased because some rents are paid in foreign currencies thereby making such market very explosive.

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If you have ever lived in a rented apartment in Lagos, you will agree that it can be a long, painful and intricate process. This is true, especially with the bureaucratic way landlords demand exorbitant rental fees for one or two-year periods, coupled with the associated agreement/agency fees, which are usually demanded by some of the landlords, even though they are letting their property without the help of real estate agents. For years, tenants in Nigeria have been unable to access affordable housing with flexible payment options as it is done in developed countries where monthly payments are accepted for apartment rentals.

According to the Federal Authority Mortgage Bank, the property market in Nigeria is in crisis due to the default rate on rented properties which had risen to 71 per cent and vacancy rate to 74 per cent in prime property locations. That is why RentSmallSmall, in order to eliminate the complexities that are associated with finding suitable, affordable apartments in Nigeria decided to launch its site, RentSmallSmall.com, first in Lagos, before expanding to other cities. This  model works in a way that a landlord gives the base rent of the property on annual basis and then marks it up by a certain little percentage and with that mark up, they are broken down into monthly payments.

Because some landlords demand rents in forex, tenants began to demand for flexible forex. In simple terms, a flexible forex market is one that allows the exchange rate to float freely and to find its equilibrium without any form of intervention from government. Indeed, globally, governments rarely operate a clearly defined exchange rate regime.

What is obtainable is a situation where the market operates a model that hovers between the polar opposites (fixed or floating) depending on the level of government intervention. Thus, a regime that witnesses a lot of government intervention is considered relatively fixed while one which witnesses minimal interventions would be defined as flexible. Also, the extent of such intervention is limited by the size of the government’s foreign reserves.

RentSmallSmall is a property firm that recently unveiled a flexible rent solution initiative for low and average income earners in Lagos. The Managing Director of RentSmallSmall recently, in a speech, said the package would enable Lagosians to choose convenient way of paying their house rent. According to him, the company’s package is contrary to the annually or two years rental payment by Lagos landlords as it allows for monthly, quarterly and bi-annual rent payment as the case may be. The owner of the renting company explained that the organisation’s objective is to make it possible for home seekers to find property within their budgets, make flexible rent for tenants for a month to a year and also make flexible payment that is monthly, quarterly or bi-annually based on one’s choice.

The RentSmallSmall boss disclosed that the company is in partnership with Axa Mansard, NedcomeOAKS, Estate links, Furnisure, Northcourt and Rydal Mews to create easy access to insurance, furniture and appliance rentals.

The difficulty in accessing affordable housing in the country therefore has exerted pressure on experts in the built environment who have advocated an overhaul of the rent system in the country. The experts who are not comfortable with the system in operation at the moment argued that the housing deficits will not be done with if the modus operandi is not done away with.

One of the real estate operators from South Africa, while discussing the rent system in Nigeria, tried to compare it with what obtains in South Africa and other African nations. The operator noted that the system in the country indicates that government is not interested in remedying the housing deficits scourge. He stated that if government had started with the system introduced during the Festival of Arts and Culture Programme of 1977, the problems would not have degenerated to the level it is today. He feared that if nothing is done at the moment, the present condition would be a child’s play compared to what would be seen in the nearest future.

He noted that many home seekers who are mid/low income earners are faced with problems of finding affordable houses within their budget. He added that many property owners demand rents of one to two years upfront and agents demand additional fees and payments. From statistics in circulation, about eight million people are involved in urbanisation per year, with a vacancy rate in Abuja’s Central Business District (CBD) areas of 72 per cent and 130 million Nigerians living in rented houses and RentSmallSmall is creating a platform to provide suitable and affordable homes for home seekers, influence the conception and birth of new homes to boost the livelihood and productivity of Nigerian youths, and help homeowners to make their property rentable and profitable.

Prospective home seekers and property owners interested in the new initiative were asked to visit the company’s website for further details. This implies that interested home seekers and homeowners should log on to the company’s website and sign up. The platform will allow property owners to give info about their property. This is the way the battle to reduce housing shortage in the country will be won. People should help home seekers to reduce the amount of time spent searching for perfect property, find property that are closer to their workplaces and with flexible duration and payments.

If there is a flexible payment system, a decent downpayment of about 15 per cent of the home value usually lowers the interest rate that one will have to pay. Let’s say you dole out $40,000 as downpayment when you are buying your home, this $40,000 is like an investment you make in an asset (your house), hoping that the asset will appreciate. If you were to invest $40,000 in an online savings account, you could earn 5 per cent interest (risk-free) every year. If one invests in equity and is lucky, the returns could be even higher.

Source: Maduka Nweke

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