For Nigerian property developers, mortgage operators, analysts, real estate investors and potential home owners, infrastructure and workable policies are their top priorities and expectations as Babatunde Fashola is reappointed Minister of Works and Housing.
The former governor of Lagos state was one of the 14 ministers from Buhari’s first term who were reappointed last month by the president for his second term in office.
“The biggest problem in the sector is high cost of mortgage available. If they can develop a policy to ease housing finance, it will be impactful,” Wole Olabanji, the CEO of CoBuildIT, a real estate firm, said.
Nigeria has more than 17 million housing deficit and over 90 percent of new homes built in the country are funded from personal savings.
Nigeria ranks 149 on the Ease of obtaining Construction Permit and requires 17 procedures, 118 days, and 27.5 percent of property value, a factor that encourages more informal construction of properties and increases risks in the real estate sector.
Commenting on the areas Fashola should pay close attention in his next four years as the Minister of Works &Housing, Abiodun Akanbi, Head of Strategy at Infinity Trust Mortgage Bank, said it should be in infrastructure, specifically on good road network, explaining that road network gives value to housing.
According to the National Infrastructure Master Plan, Nigeria needs to spend $3 trillion and five percent of its GDP annually to bridge the infrastructure gap. From roads to bridges, down to power and railways, the country’s infrastructure has recorded significant depletion in the last 20 years, owing to poor maintenance culture, lack of sufficient funds and corruption.
In his first coming, Fashola noted that while the housing deficit was a problem that mainly afflicts urban centres like Abuja, Lagos and Kano, as a result of migration, there were empty houses in both rural and urban areas, but they did not meet the needs of most buyers.
“This has led to the government’s decision to develop a pilot housing project that is currently running in 34 states, responding to different buyer needs, financial capabilities and cultural attitudes to housing, as well as the different categories of land,” he pointed out.
“We are now at the infrastructure stage, and many of the houses are already finished. We are building roads within and between cities in every state in the country, increasing access and connectivity,” he added.
Fashola has been relieved of the Power ministry, leaving him with Works and Housing. It is was a daunting task for him as minister in charge of three major ministries which is why it is expected that relieving him of one ministry will give him more time to do more.
“It is very tempting to see financing as the main problem of the housing sector. However, we believe that we should focus on a well implemented programme, and financing will follow closely,” Fashola said, noting that it is only when banks see the viability of real estate projects that they will become interested in financing such projects.
In the first quarters of 2019, sectorial credit allocation to real estate shed 0.2 percentage points quarter-on-quarter and 2.49 percentage point year-on-year.
“Finance is the key strategy to everything, the reason prices of properties are high is because the funding comes at a huge cost,” Adekunle Adbul, Managing Director of Metro & Castle Homes, said.
“Even if I make N3million from one house, I won’t mind as long as it is bought as I construct but in a situation where you don’t know when the house will leave the market and the cost of finance is high, we have to make provision,” he added.
A key culprit for the housing challenges in Nigeria is the mortgage rates. Typical mortgage interest rates in Nigeria range between 7-10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15-25 percent for commercial mortgage institutions, making it one of the highest in the world.
“If I can get an apartment to buy or rent at an affordable price on the Island where I have my office, I will be very grateful for his (Fashola) reappointment, because I have never benefited from any of the government housing schemes,” Mariam Maduka, manager at a Lagos-based catering company lamented, adding that cost of accommodation is a huge problem for her and some of her colleagues.
In advanced economies, the mortgage industry makes significant contribution to economic development with single digit interest rates while also making it easy for people to acquire properties.
Nigeria has one of the world’s lowest mortgage-to-Gross Domestic Product (GDP) rate at 0.6 percent. This lags Ghana’s 2 percent, South Africa’s 30 percent and crawls after the U.S and UK rates of 60 percent and 70 percent respectively.
“With the help, support and cooperation of our staff, under the leadership of our permanent secretaries and directors, we have delivered on the agenda I set out at the 2015 press briefing,” the housing minister said.
He pledged that his administration will “set out to develop a model national housing programme to ascertain what Nigerians find acceptable and affordable as a prelude to a more aggressive roll-out of the national housing schemes that we are sure that Nigerians accept and can also afford.”
“I want to urge the housing minister to look into the housing deficit in the country and roll out an initiative that can provide mass housing,” Emmanuel Obasuyi, an Architect at Design Ratio Consultants.