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World Bank to FG: Reform Now To Stop Further Slide Into Extreme Poverty

•It’s a wake-up call for Nigeria, says Rewane

Samuel Awoyinfa, Ihuoma Chiedozie and ’Femi Asu

The World Bank has said the number of Nigerians living in extreme poverty may increase by more than 30 million by 2030 and the country will be home to 25 per cent of the world’s destitute people if the government fails to revive economic growth and create jobs.

It warned that the country could slide back into recession if crude prices fell by 25 per cent to $50 a barrel.

The international oil benchmark, Brent crude, traded around $61 per barrel on Monday.

The bank gave the warning in its 2019 Nigeria Economic Update Report, which was released on Monday.

It said, “Economic and demographic projections highlight the urgent need for reform.

“With population growth (estimated at 2.6 per cent) outpacing economic growth in a context of weak job creation, per capita income is falling. Today, an estimated 100 million Nigerians live on less than $1.90 per day.

“Close to 80 per cent of poor households are in northern Nigeria, while employment creation and income gains have been concentrated on central and southern Nigeria.”

According to the report, Nigeria’s economy is expected to grow by 2.1 per cent in 2020 and 2021, compared to an annual population growth rate of 2.6 per cent.

It noted that Nigeria’s economy was recovering gradually from the 2016 recession, with growth projected to pick up from 1.9 per cent in 2018 to two per cent in 2019.

The World Bank, however, warned that the projected growth outlook “is vulnerable to external and domestic risks, including geopolitical and trade tensions that may affect inflows of private investment.”

“Nigeria has the opportunity to advance reforms to mitigate these risks amid growing public demand for greater economic opportunities,” it said.

The World Bank urged President Muhammadu Buhari to increase domestic revenue, remove trade restrictions and improve the predictability of economic policy.

It also advised the Nigerian government to remove expensive fuel subsidies and reduce lending to targeted sectors “that crowd out banks.”

Failure to take actions would see more Nigerians falling into extreme poverty, the bank warned.

“The cost of inaction is significant. Under a business-as-usual scenario, where Nigeria maintains the current pace of growth and employment levels, by 2030, the number of Nigerians living in extreme poverty could increase by more than 30 million,” the bank said.

About 50 per cent of Nigeria’s almost 200 million people live in poverty, according to the World Bank.

Last year, Nigeria overtook India as the country with the highest number of people in extreme poverty.

A report by the Brookings Institution said data from the World Poverty Clock showed that Nigeria had over 87 million people living in poverty.

The World Bank report, titled ‘Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments’, showed that Nigeria created about 450,000 new (net) jobs in 2018, partially offsetting the loss of 700,000 jobs in the previous year.

“Nigeria’s labour force is growing rapidly, and in 2018, over five million Nigerians entered the labour market, resulting in 4.9 million more unemployed people in the last year,” it said.

The report stated that “positive news are emerging from some states that are creating enough jobs to keep up with the growth of their labour forces.”

It said, “In the year following the recession (between the first quarter of 2017 and the first quarter of 2018), 10 states saw some positive job creation, but the number of new jobs was not enough to absorb the new entrants into the labour force.

“The situation improved by the third quarter of 2018, as four states (Lagos, Rivers, Enugu, and Ondo) created more jobs than the entrants to the labour market, and as a result, these states reduced unemployment.”

According to the report, the signing of the Africa Continental Free Trade Area agreement shows that Nigeria is now more willing to become a driver of continental growth and integration.

The World Bank Country Director for Nigeria, Shubham Chaudhuri, said, “Reforms would help achieve faster, more inclusive, and sustained growth with jobs.

“Building on recent efforts, going forward, we recommend actions in priority areas, such as increasing fiscal revenues and improving the quality of spending to manage oil-sector volatility, investing in much-needed human capital and infrastructure, and improving the business climate to unlock private investment and tackle Nigeria’s jobs challenge.

“Investing in people and removing barriers that make it difficult for new firms to compete and grow will encourage entrepreneurship and innovation, spur job growth, and ultimately reduce poverty.”

The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr Bismark Rewane, said the country’s GDP growth had been hovering below the population growth in the past few years.

He told one of our correspondents in a telephone interview that the country “is not prepared for another recession.”

Rewane said, “The challenge is: how do we get the economic growth to exceed the population growth? The economy has been growing below the population for the past five years, and Nigerians have become poorer.

“It is a wake-up call, and not a panic button. If we do nothing, we are bound to fail. If the economy continually grows sub-optimally, then the World Bank’s forecast will come to pass. But if we reform the economy – do the right thing – there is a chance that we will succeed.”

He added that the consequence of a failed economy was not a pleasant thing.

Professor of economics at Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sheriffdeen Tella, said the industrial sector was not growing and the government had failed to properly fund education.

Tella said that the two sectors were critical to providing employment and developing the human capital of the nation.

He added that since these two sectors had not been properly funded, the World Bank forecast might come to pass.

“Government should have a long-term plan of 20 years to 30 years, stating where the nation should be,” he said.

Head of Social Action, Abuja, Vivien Bellonwu-Okafor, told one of our correspondents that the forecast was not rocket science but obvious.

She said,  “The GDP growth being below population growth and with feeble investment in infrastructure, the World Bank’s projection is obviously bound to happen.

“For the country to escape this gloomy projection, it needs consistent investment in education – a minimum of 26 per cent of annual budgets.”

The nation must also apply itself to assiduously working to achieve consistent GDP growth, she added.

Source: Punchng

Court Orders Senators to Refund Pensions Collected as Ex-Govs

A federal high court in Ikoyi has asked the federal government to recover pensions and allowances received by former and serving senators as ex-governors.

The Socio-Economic Rights and Accountability Project (SERAP) disclosed the ”landmark judgement” in a tweet on Wednesday.

The group sued the federal government in 2017 over its “failure to stop former governors from receiving double pay and life pensions”.

It also sued the government for failing to seek the recovery of over “N40bn unduly received by the former governors” who are now serving senators and ministers.

Individuals named by SERAP as beneficiaries of this policy are Bukola Saraki, Godswill Akpabio Rabiu Kwankwaso, Theodore Orji, Abdullahi Adamu, Sam Egwu, Shaaba Lafiagi, Joshua Dariye, Jonah Jang, Ahmed Sani Yarima, Danjuma Goje, Bukar Abba Ibrahim, Adamu Aliero, George Akume, Biodun Olujimi, Enyinaya Harcourt Abaribe, Rotimi Amaechi, Kayode Fayemi, Chris Ngige and Babatunde Fashola.

The court made an order directing Abubakar Malami, the attorney-general of the federation to institute appropriate legal actions to challenge the legality of states’ laws permitting former governors, who are now senators and ministers to enjoy governors’ emoluments while drawing normal salaries and allowances in their new political offices.

The court adjourned till February 3, 2020, for a report of compliance with the judgement by the federal government.

Recently, the Zamfara state house of assembly abolished a law that allowed the payment of pension and other allowances to former governors and their deputies.

SERAP says it will not relent until the judgement is fully enforced and all state governors abolish the life pension law in their states.\

Source: thecableng

Fashola Housing

FG Undertaking 524 Highways, Bridge Projects Nationwide – Fashola

The Minister of Works and Housing, Babatunde Fashola, SAN, has updated the Federal Executive Council on the ongoing road and bridge construction/rehabilitation projects nationwide, highlighting 80 of them as priority projects scheduled for completion in the 2020-2021 fiscal year.

Fashola, who gave the updates in a presentation he made before the Council, said a total of 524 road and bridge projects were currently going on across the country, adding that every State in the Federation, including the FCT has at least three such ongoing projects.

He listed those on priority to include 27 financed with Sovereign SUKUK Fund, 47 scheduled for substantial completion in 2020/2021 and other priority projects, two roads leading to the ports and four major bridges.

Giving reasons for the prioritization of the 80 projects, the Minister who explained that it would improve the ease of doing business in the country, declared, “The projects on completion will bring about reduced travel time, lower vehicle operating costs and improve the comfort of road users as well as improve the ease of doing business in the country and ultimately boost the Nigerian Economy”.

He noted that Federal roads and bridges (categorized from A1 to A9) are major arterial routes that connect all states in Nigeria including the Federal Capital Territory, adding that the routes and bridges linked cities with high economic activities and carried majority of Heavy Goods Vehicles which gradually dispersed through the link routes to different parts of the country.

The Minister listed the roads to include Lagos-Ibadan-Ilorin-Jebba-Kotangora-Jega-Sokoto-Niger Border as A1; Warri-Benin-Lokoja-Abuja-Kaduna-Kano-Daura-Niger Border as A2; Port Harcourt-Aba-Umuahia-Okigwe-Oturkpo-Makurdi-Akwanga-Jos-Bauchi-Maiduguri-Gamboru as A3 and Calabar-Ikom-Ogoja-Katsina Ala-Jalingo-Yola-Bama-Maiduguri as A4.

Also listed are Lagos-Otta-Abeokuta-Ibadan as A5; Onitsha-Ihiala-Owerri—A.3 Junction at Umu Uyo as A6; Chikanda, Kosubosu-Kaiama-Kishi-Ilorin as A7; Mayo Belwa-Ganye-Serti-Mayo Selbe-Gembu as A8 and Jibiya-Katsina-Kano as A9.

Prioritized road projects being funded through the Sovereign SUKUK Fund, Fashola said, include Abuja-Abaji Road(Section 1,International Airport Link Road Junction-Sheda Village Junction), Abuja-Lokoja Road Section IV (Koton Karfi-Lokoja), Dualisation of Obajana Junction-Benin Phase 2: Section 1 (Obajana Junction to Okene) , Construction of Oju/Loko-Oweto Bridge to Link Loko and Oweto with approach roads, Reconstruction of Bida-Lambata Road in Niger State and Dualization of Suleja-Minna Road Phase 11 in Niger State.

They also include Kano-Maiduguri Road (Section ii, iii and iv), rehabilitation of outstanding section of Onitsha-Enugu Expressway: Amansea- Enugu State Border, Dualization Of Obajana Junction-Benin Phase 2: (Section ii, iii and iv), Rehabilitation of Enugu-Port Harcourt Road Section iv: Aba-Port Harcourt, and Dualization Of Yenegwe Road Junction-Kolo-Otuoke-Bayelsa Palm (20km).

Others include Dualization of Ibadan-Ilorin (Section ii) in Oyo State, reconstruction of the outstanding Sections of Beni-Ofosu-Ore-Ajebandele-Shagamu Expressway Phase iii, pavement strengthening and asphalt overlay of Ajebandele- Ijebu Ode-Shagamu Road in Ogun State.

Some of the projects scheduled for substantial completion in 2020/2021 and other priority projects, according to the Minister, include rehabilitation of Alesi-Ugep (Iyamoyung-Ugep) Section in Cross River State, construction of Yenegwe-Okaki-Kolo-Nembe-Brass Road and completion of rehabilitation of Ada-Okere-Ukoni-Amedokhiom Old Road, Uromi, Edo State.

Also included are the rehabilitation of Odukpani-Itu-Ikot Ekpene Road in (Section i) and Odukpani-Itu Bridge Head in Cross River State, construction of Bodo-Bonny Road with a bridge across the Opobo Channel, in Rivers State, rehabilitation of Odukpani Junction-Akpet Central Section of Calabar-Ikom-Ogoja Road in Cross River State, rehabilitation of Oshogbo-Ilesha Road in Osun State, Dualization of Abeokuta-Ibadan Road, and reconstruction of Apapa-Wharf Road in Lagos State, among others.

The four bridges under the priority projects are construction of Ibi Bridge, completion of construction of Chanchangi Bridge along Takum-Wukari Road in Taraba State, construction of Ikom Bridge in Cross River State and emergency rehabilitation/maintenance of Third Mainland Bridge in Lagos, while the two roads leading to ports are the construction of Agaie-Katcha-Barro Road in Niger State and construction of Baro Port to Gulu Town in Niger State.

The brief also provided a detailed record of ongoing road and bridge projects in the 36 states of the Federation and the Federal Capital Territory.

Some of the tertiary institutions where the Ministry is currently intervening on roads, according to the report, include the University of Benin where work is ongoing on the rehabilitation and Asphalt Overlay/Construction of Reinforced Concrete Drains and Kerbs and Asphatic Surfacing of three Car parks of 1.1KM Internal Road.

Similar work include the ongoing Rehabilitation and Asphalting at Bayero University, Kano State, Federal University Oye Ekiti, Ekiti State, University of Maiduguri, in Borno State, Federal University Lokoja, Kogi State, Federal College of Education, Katsina, Katsina State, Federal University of Technology, Owerri and the University College Hospital, Ibadan, Oyo State.

Others include Kaduna Polytechnic, Kaduna State, Internal Road at Federal University Gashua, Yobe State and rehabilitation and asphalt overlay of 2.3 km Internal Road at Federal University Otuoke, Bayelsa State, among others.

The Minister, however, told Council that in order to accomplish the objective of completing the prioritized projects in scheduled time, an additional N255.6 billion would be needed to close the funding gap for the projects, pointing out that the amount was the difference between the appropriation for the project in the 2020 Budget, which stands N157.05 billion and the actual estimate for the completion of the projects which stands at N412.64 billion.

Source: pmnewsnigeria

Nine Key Skills People In Real Estate Should Possess

The real estate industry can be competitive. Getting started in the field can be intimidating, and even the most confident and seasoned professionals out there must continually hone some core skills to stay relevant.

To help you truly shine in this industry, we asked members of Forbes Real Estate Council to share which skills are particularly critical to the success of real estate investors or developers.

1. Understanding The Human Experience

A great real estate developer is one who recognizes that the whole can be exponentially greater than the sum of its parts. A building has the potential to bring value to those who inhabit it, the community that surrounds it, and the lives of all who come into contact with it. A developer who understands this—that the way space is utilized can shape the human experience in immeasurable ways—is one who has the power to bring about positive social impact and community transformation. – Benjamin Katz, Haven Coliving

2. Analyzing The Bigger Impact

Anyone in real estate needs to be able to not only analyze the property on paperwork, but also look at what the ancillary impacts will be. For instance, will you be spending more money in municipal red-tape (hidden costs)? What is the full impact of having this investment? Since real estate is not as liquid as a stock or bond, entering any one market or neighborhood should have more than an “on paper” review. – Christopher Long, Radius Realty

Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

3. Making Informed Decisions

It’s easy to get distracted by vanity numbers or vanity metrics when looking to invest. Instead, focus on disseminating the available information and analyzing it thoroughly to be able to make a more informed decision. After you understand the options and the risks involved, follow your gut confidently. Remember, no good can come from you deviating from the path that you were destined to follow. – Rodolfo Delgado, Replay Listings – Apartments for Rent in NYC

4. Mall Mapping

Successful real estate investors need to have to ability to do something called mall mapping. When you go to a new mall for the first time, you always locate where you are, then look for the location you want to find, then create the shortest and simplest path between the two. Real estate investing is exactly the same. You need to first be honest about where you are, then know exactly where you are wanting to go, then you create the simplest, and most effective path to get from here to there. That may mean deferring short-term benefit for long-term gain, but it also means you have a better shot at mitigating risk, and achieving success. – Kevin Clayson, Done For You Real Estate USA

5. Delegation

People must understand how to effectively delegate. If they can’t let go and let others do their job, or they want to micromanage every minute detail, they will lose. – Tony Acosta, Real Team Realty

6. Grit

Grit is that ability to get knocked down and keep getting back up again, over and over. It’s the ability to quiet the voices in your head and tune out the voices of everyone out there telling you that you can’t do it, or it can’t be done. Grit is the difference between those who make it, and those who quit and go back to selling mortgages or being just a realtor. – Matt Motil, The Marie Paul Companies

7. Patience

Have exceedingly high levels of patience. Real estate transactions, for the most part, never happen quickly and it requires a high degree of analysis and underwriting to properly execute an investment or development transaction. – Jecoah Byrnes, National Healthcare Realty

8. Creativity

Getting out of the box puts you in the right place to find the unique deals that are highly profitable and puts you where everyone else is not. It keeps you from being part of a herd mentality – Mike Mcmullen, Prominence Homes

9. Discipline

Discipline, along with the ability to analyze elements that will seriously impact a property, are all highly important. When analyzing an investment property, people need to be objective and navigate by the numbers without the interference of personal preferences. This means they need to apply a disciplined approach, use realistic comparables and research the trend in values, vacancies and listing volume, along with the other factors that could have an impact on their goals. – Michael Daniels, Rental Technologies LLC

Source: forbes

What to do to Stand Out in Business—Interswitch Boss

Speaking on Thursday, November 28, 2019 during a Breakfast Chat series at the Co-creation Hub (CcHUB), Yaba, Lagos, Mr Elegbe stressed on the importance of identifying the reason for embarking on a business venture – to solve a problem or make money.

He explained that to stand out in business, it is important to identify problems and develop solutions to them.

He said: “The key is thinking critically. You will be surprised at the kind of challenges you will discover and find solutions to. Problem-solving is what will stand you out and ensure you become indispensable. That should be your mindset”.

Sharing tips on building a globally sustainable business, Mr Elegbe advised that entrepreneurs should run their businesses with the mindset that they can be fired. He also urged business owners to be disciplined, explaining that there are some businesses meant for mere survival but cannot scale to the next level.

Speaking on behalf of the participants, Mr Francis Sani, Acceleration Programmes Manager at CCHUB, expressed his appreciation to Mr Elegbe and hoped that the participants took notes of nuggets needed to push their businesses to a higher level.

Thirty-five young entrepreneurs across various industries attended the series. Held monthly, the breakfast chat is an exclusive chat series for entrepreneurs to network, address pressing business issues and discuss possible solutions to their business challenges.

Source: Businesspost

Obaseki Advocates Long-Term Financing for Housing Sector

With housing deficit in the country estimated at 17 million, Governor of Edo State, Mr. Godwin Obaseki has advocated a long-term financing model that will give room for single digit interest rate in the housing sector.

This is just as experts in the estate and surveying industry reiterated the need for a robust mortgage system in the country, flexible for every citizen to own a house.

The Governor, stated this at the send fourth and investiture event organised by Knight Frank, Nigeria, for its outgoing and new Senior Partner/Chief Executive Officer (CEO), held over the weekend in Lagos.

Obaseki, stressed that the challenge facing the country was finance and high interest rate. He called for a reduction of interest rate to single-digit to support affordable housing.

“I do not think the problem is in building, but in long term financing required for off-takers.

“If we find a situation where whatever you pay as rent today could be substituted for your mortgage payment, i am sure you will own your home.

“But for us to achieve that, interest rate has to be at certain level, which is beyond the control of the state.

“Is important that household names in whatever industry – real estate or financial services – to be present in Nigeria because they help set those standards, because there is huge demand for real estate. Having a global name like Knight Frank is key and significant,” he said.

On his part the incoming CEO, Knight Frank, an independent residential and commercial property consultancy firm, Mr. frank Okosun, stated his desire to increase the level of professionalism in the company and take it to the next level in the industry.

In addition, he said the firm would focus on capacity building and train more young people to become professional surveyors.

With Nigeria’s housing deficit growing at 20 per cent yearly, according to the World Bank, he noted that reducing the figure would be his focus as the new CEO.

“Our focus is to reduce the housing deficit in the country, which can be achieved by increasing more development in all the areas of the states; putting more property in the market and ensuring that there are mortgages for the young ones to own houses,” he stressed.

The outgoing president, Chief Albert Orizu advised the new CEO to resolve clients’ complaints within the shortest time, saying people remains central to the firm’s business.

“The main problem we have is providing affordable housing because mortgages are not working very well in Nigeria and the housing cost is very high.

“There is a lot of room for the government to try as much as possible to participate more in the low income and middle income housing because that is where the main problems are, once we are able to make land available and get a good mortgage system, then it would be easier for the middle class to be able to have their own houses,” he added.

Source: Thisdayng

Real Estate Basics: What is a Conveyance Deed?

A conveyance deed is an essential document required for the purchase of a property. We explain its importance and what a home buyer should look out for, when signing the document

‘Conveyance’ refers to the act of transferring the title, ownership, rights and interests in a property, from one entity to another. The term ‘deed’ refers to an instrument, like a written document that is signed by all the parties to a contract, in this case, the seller and buyer. It is a binding contract that is enforceable in a court of law. A conveyance deed is, therefore, a contract in which, the seller transfers all rights to legally own and keep a property. The purchase of a property is not complete without a valid conveyance deed.

The terms conveyance deed and sale deed are often used interchangeably and while they refer to the same contract, there is a subtle difference between the two. All sales deeds are conveyance deeds but conveyance deeds can also include gift, exchange, mortgage and lease deeds.

It is important to note the difference between an agreement for sale and a sale/conveyance deed. An agreement for sale contains a promise to transfer a property in question in future, on satisfaction of certain terms and conditions. An agreement for sale does not, in itself, create any interest in or charge on a property. Therefore, the sale of a property is not complete without a conveyance deed.


A valid conveyance deed must contain the following:

  1. The actual demarcation of the property.
  2. Other rights annexed to the property and its use.
  3. The full chain of titles, that is, all legal rights up until the present seller.
  4. The method of delivery of the property to the buyer.
  5. A memo of the consideration, stating how it has been received.
  6. Any further applicable terms and conditions for the full transfer of ownership rights.

Important points to consider, to ensure smooth purchase/sale of a property

  1. The seller is required to certify that the property is free of any legal encumbrance.
  2. If a loan was taken against the property in question, then, the mortgage must be cleared before the deed is signed. Buyers have the option of having this checked at the local sub-registrar’s office.
  3. The conveyance deed should state the exact date on which the property will be handed over to the buyer.
  4. Within four months of the execution of the deed, all the original documents related to the sale of the property, need to be produced for registration before the local registrar.
  5. The deed is required to be signed by at least two witnesses.

Source: housing.com

MBAN Retreat:Femi Adewole Calls for ‘Different Approach’ in Addressing Housing Shortage in Nigeria

The Managing Director of Family Homes Funds, Femi Adewole has called for the adoption of a different thinking in addressing the housing deficit in Africa’s largest economy.

Speaking at the 3-day Mortgage Banking Sub-sector CEOs’ annual retreat organised by Mortgage Bankers Association of Nigeria (MBAN) in Lagos from November 29 – December 01, 2019, Adewole said the current approach adopted by stakeholders in the housing sector cannot deliver the expected results except a change is made to it.

‘’The truth is, in terms of what we need to do, the results we need to get, and the level of home ownership and access to housing that we need to attain, the result that all of us are achieving is way off the mark. We have barely registered a dot. That calls for a different kind of thinking. I understand the conversations about improvement. But my little knowledge of business processes and strategies suggest that there are contexts where improvements are inadequate. You must look at a total transformation and a totally new business model, and I think that as you discuss succession, digitalization, and human capital, you need to think and ask to what end. Is it to do more of the same? Or towards a fundamental rethinking of our approach to home ownership?’’ he quizzed.

The annual MBAN retreat focused on ‘’Critical Success Factors for Continuity and Viability of the Mortgage Banking Sub-Sector in Nigeria: Mortgage Digitization, Human Capacity Development and Management Succession.’’

The Family Homes Funds boss also congratulated MBAN for the strides they have and continue to make.

‘’The fact that you are still here in what is an extremely challenging environment; carved a niche for yourself in the housing market in Nigeria; the fact that you remain a reference point in terms of consultation around policies in Nigeria is a testimony to your success and I wish you many more years.

‘’The truth is that you are making a difference in institutions that are your members and in the lives of many people; through the institutions and infrastructures that you enable to happen. Particularly I am forever grateful for the intellectual rigor and the ideas that seem to be spilling out of MBAN almost on a yearly basis. That speaks volume to the future of this association,’’ he said.

Offering goodwill from the Family Homes Funds, Femi Adewole said there is a significant amount of potential for them to work together with MBAN.

‘’With the small traction we have begun to make across the country in terms of significant investments, it provides very strong opportunity for us to work together and to advance the common cause of ensuring that Nigerians have access to housing that is both decent, secure and affordable to them. MBAN should be assured of our good will, partnership and collaboration at all times,’’ he said.

He went further to throw a couple of challenges to the association and its members on how to make the new approach for housing development possible in Nigeria.

‘’One of the things Family Homs Funds has committed itself to and I think we will like MBAN to be part of that is sponsoring some kind of centre for innovation for housing finance. We need to think of a solution that speaks to our context, culture and macro-economic circumstances, which is unlikely to change in the short term. If anything, we will probably expect a medium term deterioration and therefore the discussion must be about what transformation is needed to achieve the results that we have to in the face of urbanization. I can’t think of any better set of people to address that change agenda than the people at MBAN,’’ he said.

Here’s Why You Should Buy a Life Insurance to Cover Your Home Loan

We look at why home buyers should buy a separate life insurance policy to cover the home loan liability and how to go about it

The amount of home loan availed of to buy a house, generally constitutes a significant portion of the monthly income of the household. If something happens to the bread-winner, it becomes almost impossible for the family to run the household, leave aside being able to service the home loan in such a situation. It is almost impossible to pay off a huge home loan amount from one’s savings, especially during the initial years of the tenure.


Why life insurance policy is needed to cover the home loan

As a basic principle of financial planning, experts advise their clients to buy life insurance, to cover all their financial liabilities. When you take a home loan, a new financial liability comes into existence. Taking a life insurance policy to cover the home loan liability, will ensure that the legal heirs inherit the house and not the home loan liability. In the eventuality of death, the insurance company pays the lender the outstanding loan amount. This helps the dependent family members to avoid the pain of losing the house. This life insurance policy should be over and above the regular life insurance cover that you may have already bought, to cover your other financial obligations, to protect your family members in case anything happens to you.


Do you have to buy the home loan protection plans from the same home loan lender?

Neither the banking regulations, nor any other law, mandate that the home loan borrower has to buy a life insurance policy to cover the home loan. However, in order to avoid the hassle of taking possession of the property and having to auction it, to recover the outstanding home loan amount, lenders generally insist that the borrower buy a term plan to cover the home loan. Moreover, as most of the banks that provide home loans either have their life insurance associates or have arrangements with some life insurance companies to sell their product to enhance their income, these lenders also insist that the life insurance policy be bought through them, which is not mandatory for you.

Since the term plan is a simple product, the basic offerings of different insurance companies are generally similar. So, you can refuse to oblige the lender if the life insurance policy offered by your lender is not the cheapest. If the lender still insists you to buy the insurance product from them, you can ask them to furnish, in writing that it is mandatory to buy the life insurance policy from them as a precondition for giving you the home loan. Since the lender cannot give this to you it in writing, they will agree even if you buy a life insurance policy from another insurance company and assign it to them.


How to buy life insurance policy to cover a home loan

A basic advice that financial planners give, is never to mix insurance and investment and to buy a term plan life insurance policy only and not to go for any other insurance product. This advice applies here, as well. If you are tech-savvy, you can buy an online term plan directly from the life insurance company, without involving any insurance advisor. Online term plans are cheaper by around 25%-35%, as compared to regular term plans with no difference in the product. This is because the life insurance company does not have to incur the expenses of commission and marketing of the product.

The tenure of the life insurance policy to be bought for this purpose, should be equal to the tenure of the home loan.

Lenders generally insist on single-premium term plan policies, which are tailor-made for home loans, where the amount of insurance premium is recovered upfront and is included in the home loan. This component of life insurance premium is recovered from you over the tenure of the home loan, through enhanced EMIs. However, I would advise against buying a single premium policy. Instead, opt for an annual premium payment policy, where you can discontinue the life insurance policy any time when you want. This is because, in most cases, home loan borrowers do not run their home loan for its entire tenure but generally prepay the home loan to become debt-free, as and when they accumulate enough funds. In such a situation, the portion of premium already paid under the single-premium policy goes down the drain, because the insurance policy either may terminate or may run when there is no corresponding liability outstanding for which it was purchased. Some life insurance companies offer term plans, where the insurance amount gets reduced, in line with the outstanding home loan amount. In case you are able to get such a reducing insurance policy, you should opt for the same. This will make your life insurance cheaper and more affordable.

Source: housing.com

Everything you Want to know About Appraisal of Commercial Property

The appraisal of a commercial property can be a very complex process but it can also be a necessary step in the process of buying or selling a commercial property. Here are answers to some common queries about the process.

An appraisal of a commercial property is a complex procedure and involves a lot of paperwork and some legal formalities. It can seem even more complex if you have never had it done it before. There can be several visits by the appraiser to your property and several rounds of discussion with various parties involved. The nature and scope of work also vary from property to property and the appraiser may adopt various techniques for appraisal depending on the type and location of the property.

Here are some of the most common questions and their answers related to the appraisal of a commercial property:

Q 1: What is a commercial property appraisal?

Ans: An appraisal is a procedure to determine the value of a property through well-established norms.  The property can be of any type-shopping mall, office complex, hotel, factory or a warehouse. The appraisal can help in the process of buying or selling, taxes and various other purposes.

Q 2: Who conducts an appraisal?

Ans: A professional appraiser, who is usually a real estate company, can assess the value of a property. The historical data and value of other properties in the area are taken into account, apart from various other factors. There is a scientific approach in the collection of various data and their analysis. An appraiser requires a license to operate in many Western countries. However, there is no such requirement in India.

Q 3: What is an appraiser required for?

Ans: There are occasions when an appraisal is required. When the property is to be sold, the seller wants to have the maximum possible price for it and may initiate an appraisal process. The buyer of the property may start an appraisal if the amount asked by the buyer is too high in his/her opinion. There are times when the government wants to assess the value of a property to ask for the correct taxes or for compensating the owner if the property is being taken over for public good.

Q 4: Who can initiate an appraisal of a commercial property?

Ans: The owner or the manager of a commercial can initiate an appraisal process for the property. Sometimes, the buyer of a property on sale can also initiate the process with prior permission from the seller. Sometimes even the government can begin an appraisal. It is to be noted that the government does not need prior permission from the owner of the property.

Q 5: Who pays the appraisal fee?

Ans: The party which is initiating the appraisal process will have to bear the appraisal fee. However, there are cases when the buyer of a property on sale passes on some or all of the appraisal costs to the owner, especially when the owner also wants to get a fair valuation done.

Q 6: How to look for a professional appraiser?

Ans: The first step towards finding an appraiser is looking at your own needs for appraisal. Sometimes, you may want to know the value of your own property (such as when you want to sell it). When you have decided what kind of property is to be appraised, then you must conduct a thorough research as to which appraisers are capable of carrying out the appraisal process for such a property. Internet research can help you somewhat in that. Once you have shortlisted a few appraisers, then a physical visit to their office and getting quotes of their fees will help you further decide whom to settle for.

Source: housing.com

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