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The Untold Story of the slow growth of the Nigerian Mortgage Sector

Most Nigerians outside the financial system who have interest in the country’s mortgage sector have always heard that the sector’s slow growth find explanation in the inaccessibility and unaffordability of mortgage loans due to high cost of funds reflected in high interest rate, and demand for high equity contribution from borrowers by lenders.

 But there are more to the causes of the slow growth of this sector which are almost always not talked about. Essentially, little or no note is taken of these other contributors to this slow growth among which are the huge stress which mortgage lenders pile on borrowers and the often non-existent partnerships which some of the mortgage lenders deceive home seekers into believing that they have with developers,  giving the borrowers baseless hope and false impression that they are just a few steps away from home ownership.

Part of the statutory functions of primary mortgage banks (PMBs) and mortgage institutions generally, is to provide housing finance or loan to those who need same to build, buy or renovate existing houses. But, in more cases than one, those who apply for loans from these lenders hardly get them and where they do, they are often subjected to harrowing experiences through near-impossible requirements that leave the borrowers stressed out and almost frustrated.

Many have been cajoled by developers into subscribing to their houses through mortgage only to get in and find out that the invitation is a mere cover shielding the stress and pain in accessing   loans for their dream houses. “My experience with one of these lenders is better imagined than expressed”, says Israel Okafor, a staff of an oil company who applied for mortgage loan from one of the PMBs.

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Okafor explains that he was “deceived” by the PMB into believing that it was in partnership with a developer who was building over 500 housing units of various house-types at relatively low prices for  mid-low income earners. “The PMB told me that it was also financing and marketing the estate and, at the same time, providing mortgage for prospective buyers. My attraction was not as much in the financing and marketing aspect as it was in the comparatively low interest rate of 17 percent and 10-year loan repayment period which the bank dangled to me”, he said.

According to Okafor, the bank demanded just 20 percent equity contribution from him for any of the housing units that he wanted to buy from the estate selling for between N5million and N8 million per unit, adding that as a demonstration of his readiness to take up the mortgage and buy the house, he made an equity contribution in excess of 30 percent of the cost of the house.

“Over six months down the line, the developer, the mortgage bank and I have been on a Round Robbin, occasionally stopping at the middle of nowhere only to discover that, in all of this, it has been motion without movement. It has been one story after another”, he fumes.

Ayodeji Adediji, is an ex-banker who worked with one of the big names in the industry, but resigned because “I want to do my own thing and see what impact I can make on the economy from this point”.

He also has a similar experience, differing only in the approach adopted by his own lender who, he said, has kept his N5 million which he paid as equity for the house he wants to buy from a developer who is also in another phantom  partnership with the same mortgage bank.

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“As I speak to you, my money has been with the mortgage bank since the past eight months; I am told it is in escrow account in which case it is not yielding any interest for me; the developer is very slippery and insincere with delivery date for the estate. Every day, like a fraudulent referee, he shifts the goal post. By the last count, he has shifted the delivery time three times and still counting”, he lamented.

A banker, who does not want his name mentioned also shared his experience, saying he came close to losing his money to developers over unrealistic delivery dates, lamenting that on each occasion, his money was given back to him after he had nurtured and came close to realizing a home ownership dream.

People with these experiences will hardly ever seek mortgage facility, nor will they encourage any of their relations or friends to have same experience and this is a major factor that can slow the growth of the mortgage industry.

Not too long ago, in a move aimed to address the housing problems in Nigeria, some notable  PMBs and real estate developers entered into another strategic partnership aimed to provide housing and mortgage for prospective home buyers. That partnership which, it was hoped, would in 24 months deliver a residential community comprising 554 housing units is yet to make any impact.

This is a worrisome development that may continue to stultify the growth of this all important sector. The setting up of both the Federal Mortgage Bank of Nigeria (FMBN) and the National Housing Fund(NHF) were well intentioned, but their operations have left them mired in mucky waters with poor capital base.

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