How technology disruption in real estate is cutting jobs, creating new opportunities

 

As it happens in other sectors of the economy, technology has penetrated the real estate sector and has disrupted the status quo, contracting jobs and creating new opportunities, especially for the millennials.

In many parts of the world, the disruptive impact of technology in real estate is quite evident and many real estate practitioners and professionals have accepted it as the new way to go.

A recent KPMG survey on 130 real estate decision makers from 36 countries shows that 86 percent of respondents see digital and technological innovation as an opportunity, but there is a snag here. Only 24 percent of the respondents has a clear digital and technological strategy.

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The survey indicates further that 30 percent of firms in Americas and Asian Pacific (ASPAC) think the impact of property technology (proptech) will be significant with 64 percent in Europe, Middle East and Africa (EMEA) countries agreeing to that. But only 13 percent felt Blockchain, which is a technological tool that aids registering property, would improve speed of transaction due to technological innovation will have the biggest impact on sector.

In Nigeria, the impact of these innovations is already being felt, though not as deep and pervasive as it is in the Western world. Technology based (online) property platforms like Lamudi which has now rebranded to Jumia Houses, PropertyPro.ng, Real Estate Market, estate intel, etc have brought technology to bear on real estate transactions, making listing, leases and sales a lot easier.

“While using property portals is a common practice in developed markets, it is a relatively new phenomenon in emerging markets where internet penetration remains low but rising fast”, noted Obi Ejimofo, former managing director of Lamudi (Jumia Houses), disclosing that a survey of local brokers revealed that 91 percent of all professionals observed a significant increase in online inquiries while 59 percent of those surveyed cited online listing platforms as their channel of choice to advertise properties.

This shows that as an innovative and transformational tool, technology has taken position in the real estate sector, accounting for the significant changes which increased data availability and information has brought into market transactions and development processes.

“With an innovative tool like Proptech, there is already a movement driving a mentality change with the real estate industry and its consumers regarding technology-driven innovation in the data assembly, transaction, design and management of buildings and cities”, noted Luqman Edu, CEO, Filmo Realty, at the one-day Real Estate Unite Summit in Lagos.

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Proptech is a collective term used to define startups offering technologically innovative products or new business models for the real estate markets. Because of this, the market is already experiencing wave of innovation, investment and entrepreneurial activity.

The implication of this is that there will be job losses because work that five to six people would do manually, technology would employ just one person to do it and do so efficiently at much lesser time. This means too that real estate firms that are not ready to make the switch may not be favoured by the bright future of real estate that will be driven by technology.

Proptech companies are starting to develop solutions that solve problems that the real-estate market wants solutions for, but in spite of its inefficient processes and unnecessary transaction costs, real estate is one of the last industries to adopt technology which is why there is a clash of generations where start-ups (proptech) are generally aimed at millennials while real estate leaders are generally from an
older generation.

Whereas Blochain has the potential to aid land registration, real estate transactions, title ownership, due diligence and building maintenance records without need for human interface and intermediary costs, fin-tech comes in as a platform which supports transactions (sales or leasing) of real-estate; gives more information; is transparent and faster.

This means that in Lagos State, for instance, where land transaction is not only tortuous, but also expensive, the introduction of Blockchain in its land administration will make a clean sweep of the many exploitative ‘tables’ that registration files have to pass through and ‘something’ given.

“Transactions will be direct, properties will be smart buildings, there will be flexible use and flexible ownership of such properties where technology drives real estate”, Edu noted, recalling that in Q4 2016, Trulia, an online property platform, had an average of 140 million monthly unique users and “45 percent of these visitors, in the last 12 months, are planning to buy/sell a house in the next 12 months”.

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There are however, inherent opportunities in all these developments. Apart from the rise and rise of technology firms that offer these products and services, new jobs are being created for people with the requisite skills. Opportunities are also be created for vendors and tech equipment manufacturers.

It is estimated that 3-6 percent of the cost of real estate goes to legal, valuation, structural due diligence, contracts, advisory, and agency fees. Efficient storing of lease information, it is hoped, opens possibility of greater liquidity.

For investors and developers, there are also opportunities that call for increased investment in real estate. “The future of real estate anticipates unmanned, robotic buildings such as in 3D printing and warehousing”, Edu observed, adding, “there will be smart buildings that will be able to run wholly remotely such as in driverless cars and delivery vehicles or bots for logistics and real estate”.

Smart cities which will be driven by technology will integrate multiple information, communication technology and internet of things (IoT) solutions for a whole city. People will be engaged to make all these happen.

Technology has brought the world to a point where people should worry less over basic necessities of life. With crowd-funding, for instance, it does not make sense any longer for property buyers to put down 30 percent equity and take management issues when they can invest in rental cash-flow online.

Chuka Uroko

Experts advocate strategic innovations to boost estate agency practice, kick against foreign competitors

 

Against the backdrop of the unhealthy competition from foreign players in the country’s estate agency practice, members of the Nigerian Institution of Estate Surveyors and Valuers, NIESV, have advocated strategic innovations as a way of remaining relevant in business and to boost the sub-sector of the economy.

This was the outcome of the one-day seminar on Prospects and Challenges of International Competition in the Business of Real Estate, organised by the Estate Agency and Marketing Business Division of NIESV in Lagos last week.

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Leading the discussion, Mr. Bode Adediji, Chairman, Bode Adediji Partners, and past President, NIESV, noted that the sector is presently faced with so many challenges among which are the impact of recession, ignorance and complacency and lack of capital for investment and marginalisation as well as international competition among others. And surviving in a situation like this according to him, would require practitioners to make clients have greater degree of trust in the services rendered to them, just as there must be expertise and confidence in the services rendered to customers.

The former NIESV boss who said it has become obvious that the most crucial and disruptive aspect of the international competition is particularly reflected in the premium and eyebrow segment of the real estate market, added: “Domestic practitioners must, as of necessity, understudy the composition and modus-operandi of international competition so that the required change in the conventional attitudes, practice and emphasis can be effected pragmatically and not merely symbolically as is prevalent now. “Recapitalisation, innovation, technology among others, are sacrosanct, if the local firms hope to survive the audacity and the scourge of the foreign competitors in Nigeria.”

Mr. Gboyega Fatimilehin of Diya Fatimilehin & Co, a firm of estate surveyors and valuers, who spoke on The Need to Raise the Bar in Line with Best Practice, attributed the incursion of foreign players in the industry to the nation’s increase in Gross Domestic Product, technology disruptions and the observed investment opportunities in the country.

Advising NIESV to consolidate for growth by putting in place continuous training and workshops for members to build competence as well as confidence in their operations, Fatimilehin stated that for the Nigerian real estate industry to be competitive and attract investment, real estate practice must have higher standards, stressing that this will remove constraints in the market and allow local practitioners to compete with the global real estate firms that have entered Nigerian market.

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NIESV’s President, Mr. Rowland Agbonta, in his remark, said the recent pronouncement by the court that lawyers have no business in property transaction has brought a new ray of hope to practitioners, stressing that it is high time that quacks in the profession were fished out and punished. According to him: “Agency practice has become an important area of real estate business and so everything that needs to be done to protect that arm of the profession must be put in place.”

In his remark, the Chairman, Faculty of Estate Agency and Marketing, NIESV, Sam Eboigbe, said the seminar was to draw attention of estate agency practitioners nationwide to the professional embarrassments of surrendering the larger chunk of its cake to foreign competitors. “The battle for the soul of estate agency has been largely local in nature and the faculty some years ago, championed the establishment and the approval of a body called Association of Estate Agency of Nigeria. This became necessary as a result of the poor public perception and image of estate agents, which has negatively impacted the profession and institution.

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The question now on the lips of concerned colleagues is, will there be another association that would be dedicated to foreign competition? he asked. Earlier, while speaking, Mr. Joe Idudu, a former president of NIESV expressed worries that the industry has become an all-comers affair for those who ordinarily don’t have business in the sector because of its lucrativeness.

He posited that the incursion of foreign players in Nigerian real estate has worsened the ability of local players to survive in the country. In a lecture titled: A well structured partnership, a case study of a flourishing firm of estate surveyors and valuers, Idudu challenged members to be innovative in structuring their firms, imbibe the culture of honesty and sincerity of purpose in dealing with clients and colleagues in the profession.

Kingsley Adegboye

 

Rivers displaces Lagos as top investment destination

RIVERS State dislodged Lagos State as the number one foreign investment destination in Nigeria in the first half of 2018,according to an investment profile report by the Nigeria Investment Promotion Commission (NIPC). Rivers received 35% of the $45.74 billion invested in 42 projects in nine states and the Federal Capital Territory (FCT) during the period, the NIPC said. It was followed by Bayelsa and Lagos states with 26% each.

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The sectoral analysis of the investment profile shows that mining and quarrying accounted for 61% of the total investment and manufacturing 28%. Other sectors are transportation and storage, five per cent; real estate, three per cent; and the remaining sectors accounting for three per cent.

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The report also showed that the investments were from investors in 11 countries, with French companies accounting for 35% of the value, closely followed by Nigerian companies at 31%. The report said the UK’s investment stood at 20%; Luxembourg seven percent and the remaining eight percent were from the other countries. “The top 10 announcements accounted for 43.1 billion dollars, representing 94 per cent of the value of the announcements,” the report read.

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The NIPC however said the report was based only on investment announcements cited in NIPC’s newsletters from January to June 2018 and might not contain exhaustive information on all investment announcements in Nigeria during the period. “Nevertheless, the report gives a sense of investors’ interest in the Nigerian economy in the first half of 2018,” it said. “NIPC did not independently verify the authenticity of the investment announcements but is working on tracking the announcements as they progress to actual investments.”

BCPG tasks artisans on safety in construction sites

To curb death of building artisans on construction site, the Building Collapse Prevention Guild (BCPG) Lagos State Chapter in collaboration with Lagos State Safety Commission has trained over 400 artisans in the built sector on the imperatives of adopting standard safety measures/insurance.
The one-day workshop titled, “Measures and application on building construction site” held at Alausa, Lagos, brought together, Carpenters, concrete caster association, bricklayers, welder association, block makers, among others.
Speaking at the workshop, the chairman of Lagos chapter of BCPG, Solomon Ogunseye stated that going by the reality of vulnerability of the building artisans during construction process, there was the need to enlighten them on basic safety precautions that would preserve their health and well being.
According to him, from available statistics, it has been established that artisans who are Carpenters die more than any other personnel during construction work because their jobs take them much higher to the roof of a building project.
He said there was the need to educate on observing safety regulations like wearing the helmets to prevent head injury during construction, not working barefooted on site to prevent nail and tetanus attacks and the need to be educated on insurance which would take care of any accident that leads to serious injury or death.
Ogunseye said, “Some artisans still use the bamboo scaffolding which has been outlawed by government. This people don’t care because they are hungry. Even if the bamboo has been there for three months, they will still climb and the thing would collapse on them and so we need sensitise the artisans. Carpenters rank among highest casualty figure during construction. You can’t see an architect die on the site nor engineers. The Carpenters and some other artisans are the most vulnerable. We have invited insurance experts to talk to them that we want to enforce in conjunction with Lagos State government that there must be a certificate of safety on construction site”.
In his presentation on, “ Imperative of material testing in building construction”, the Acting General manager of Lagos State Materials Testing, Ajani Olalekan said gone are the days whereby the society attributes building collapses to witches and wizards as the causes of such incidents in modern time failure to carry soil investigation before construction on site, poor quality of concrete/ right mix, the quality of sand and gravel use in building, the quality of water and steel samples standards.
According to him, the essence of soil investigation is to provide sufficient information for design for the most safest and practical design of foundation, which must be to BS 5930:1999 specifications.
He said, “It’s important to get the right mix for your concrete to enable you check the strength, workability, density and other properties of concrete, you should test the pre-cast beam, water must be potable and steel sample must be tested according to specified standard before use.
Olalekan told participants to be wary of the influx of sub-standard iron rods that has found their way into the market particularly in Ikorodu axis of Lagos stressing there are plans to mobilise and ensure that producers of such materials are brought book.
He disclosed that through Non-Destructive Testing (NDT), the agency is to carry out some investigations on the structural integrity of Lagos State buildings in Alausa without destructing them with the use of specialized equipment in order to advice government on what to do.
Speaking on Design and Construction Practice for Building Collapse Prevention and Safety, the Secretary of the Nigerian Institute of Architects (NIA), Lagos state branch, Mr. Samson Akinyosoye, explained that three things stages contribute to building collapses from the architectural perspective. These he said include, the design, construction, and post construction stages. According to him, any failure to put in place right mechanisms to reinforce the structural balance and integrity of the building could make the structure to collapse.
He noted that quality of building materials and workmanship should be given adequate attention to avert collapse stressing that if a component of a building is not functioning, such a structure is bound to deteriorate and collapse.
Victor Gbonegun

A new U.S. city tops the list as hottest housing market

Las Vegas is the hottest housing market in the country.

The monthly Case-Shiller home price index released on Tuesday showed Las Vegas overtook Seattle to become the hottest housing market in the nation.

Las Vegas had a 13 percent increase in single-family home prices in June compared to last year.

“Population and employment growth often drive homes prices,” David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said in a release. “Las Vegas is among the fastest growing U.S. cities based on both employment and population, with its unemployment rate dropping below the national average in the last year.”

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Seattle, which was dethroned, saw a 12.8 percent increase, according to The Seattle Times.

“The Case-Shiller numbers don’t reflect the full scope of the slowdown yet: Partially because it includes a three-month moving average through June (things have cooled even more since then), and also because it reflects the entire metro area,” according to The Seattle Times.

Meanwhile, San Francisco, which landed as the third-highest price gain, saw a 10.7 percent increase, according to King5 News.

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Before the recent turn of events, Seattle topped the country for 21 months straight, which was the second-longest streak in the report’s 31-year history.

Portland, Oregon, topped the list for 23 months in the early ‘90s.

Herb Scribner

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Housing : Our destination in the next decade — Joseph Ogeh

Commissioner for Housing, Delta State, Architect Joseph Ogeh, has revealed the go-getting programmes of Governor Ifeanyi Okowa in multiple joint ventures with African Development Bank, ADB, Sovereign Wealth Fund, National Housing Fund, NHF and cement manufacturer, Lafarge Cement Company to turn civil servants in the state into property-owners as well as provide reasonably priced houses for the populace.

Architect Joseph Ogeh Ogeh, who listed the star projects of the government, critically examined the measures and concluded that if the tempo was sustained, the state would have no problem meeting the United Nations standard on shelter in the next 10 years.

The Commissioner, speaking to Saturday Vanguard, asserted: “The civil servants are happy about it because before we started, we had meetings with the Nigeria Labour Congress, NLC, Trade Union Congress, TUC, Nigerian Civil Service Union, NCSU, and the Head of Service. It was a flamboyant idea.”

“For some of them, the housing component in their salaries was just N15, 000 or N20, 000, but they pay as much as N40, 000 monthly on rent. The advantage they have is that today this is your house but we are going to be taking N20, 000 from your salary every month. So you have a house and rather than paying N40, 000 for rents, they are taking N20, 000 from your salary,” he said.

Ogeh said the government was using the Delta State Mortgage Bank as a vehicle to achieve the objective, adding: “We now have to partner with the Delta State Mortgage Bank, which in recent times has been repositioned for better performance to really live up to its expectation as a mortgage institution.”

Workers’ inventory

“They have taken inventory of all civil servants and have registered as mortgage up takers. The issue is that if a civil servant is allocated a house through the mortgage, all you have to do is that the housing allowance in your salary will be deducted at source every month, but from day one, you are already a landlord. “It will be deducted gradually within the next 20 years or so. Deductions will continue until you finish paying it but on day one you have packed into your own house,” he said.

According to him, “The entire civil service workforce in the state is about 60,000. Our desire is provide a minimum of 10,000 housing scheme within this period. We are partnering with Shelter Afrique, which is the housing development unit of the African Development Bank with headquarters in Nairobi, Kenya. You know Nigeria is the highest shareholder of the bank and that is why Nigeria will always nominate who will become the Managing Director. We have had Okonjo Iweala,Obi Ezekwesili, Aruma Oteh and presently Femi Adesina former Minister of Agriculture in Nigeria as the Managing Director.”

“The process is ongoing and any moment from now, the ground breaking will commence to build 1,000 housing units in Asaba, including all infrastructures (road network, schools, hospitals, drainages, electricity etc). You know anywhere you have a 1,000 housing scheme, you will be thinking of about 5,000 people. It is going to be a community of its own. It is a pilot scheme. By the time they finish the pilot scheme, they will go to other centres to replicate what they have done in Asaba.

“We also have the one that is being funded by the Sovereign Wealth Fund. It is a 600- housing unit by Issele- Asaba Road, along the Benin Expressway. We also have the one by cement giant, Larfarge through GreenField. They are funding it and they have already started the first 1,000 unit by Illah near Asaba. The total package is going to be 10,000 housing units. They are doing 1,000 in Asaba and will spread the rest in the three senatorial districts. One thing we are trying to do is how these civil servants can access these houses”, he said.

Not exclusive to govt workers

He clarified that the scheme was not meant for civil servants alone, adding: “There are members of the public who have verifiable businesses that are recognized and once they are registered, they are qualified and there are some businessmen who would want to pay in three installments and clear their mortgage within two years.” “When we are talking of civil servants, who will pay in 10 years, there are people who will say how much is the mortgage? Say N10 million, they will say I will deposit N2 million today. So it is an open thing, but housing delivery is not a profit- making thing to government. It is government duty to provide shelter to its citizens. So, in our planning and delivery of houses, we are not thinking of how to make money out of it. The important thing is delivering affordable houses to the people,” he informed.

New secretariat building to house all govt agencies

The Commissioner said government decided to tackle public buildings when it came in because the amount expended on rent of offices is ridiculous. He asserted: “In fact, three quarters of government agencies are on rented apartments .The amount we pay in a month if you calculate that in one year, I do not think any human being will do that even for his own business.”

“So, the first thing this government decided to do was to develop what we call Delta central secretariat building, which will house 28 agencies that are on rented apartment. It is a seven- floor building. Put in a layman’s language, it is the size of two football fields and the width is 60 meters, which is more than half a football field. Once completed in the next 20 months, every agency will relocate to the new secretariat building.

“The advantage is that the state will save the money it has been paying on rents. Delta state is 25 years plus but what the state has paid in just 15 years on rent is more than what it takes to build that secretariat two times. All that money will be saved and two, there is ease of doing government business. Let me give you a typical example, my office as Commissioner for Housing is located at Summit Road, while the Ministry of Lands, which is a related ministry, is at Ibusa Road. Another related ministry in terms of C of Os and all, which is the Ministry of Justice, is at Ibusa Road.

“So when you carry a file looking for the Commissioner for Lands and Survey to confirm the details of land, you have to carry the file to different places and in the process, certain papers could be missing. So ease of doing business will be one of the great advantages of that project. You carry your file and access the next ministry which is on the other floor by taking a lift. Within a couple of minutes, you are done,” he stated.

Commissioner Ogeh hinted: “They have finished sub structure. A lot of companies bided for it but was finally awarded to North China Nigeria Limited-a Chinese company. We hope in the next 20 months, the project will be completed and we would have saved the state a lot of money.”

Next 10 years in Delta

Looking at the housing sector in the state in the next 10 years, he said: “If this tempo is maintained in the next 10 years, we will be able to accommodate a lot of Deltans to meet with the standard demanded by the United Nations in terms of shelter.” His words: “We are collaborating with the National Housing Fund, but the Delta Mortgage Bank is keying into the Sovereign Wealth Fund to deliver houses to Deltans .The National Housing Fund operates with the Sovereign Wealth Fund. As we speak now, if you go to Asaba, they are working. In fact, it is a pilot scheme in Delta, Ogun and Adamawa states.”

“The National Housing Fund actually relates more with state mortgage banks, which is why for you to key into the scheme; the state must have a vibrant mortgage institution. Realizing the importance of mortgage, the state governor immediately restructured the Delta State Mortgage Bank on assumption of office to a vibrant institution.

Star projects

Speaking on star projects by Governor Okowa besides the secretariat building, he said: “The secretariat is one of the major star projects of this government but there are other star projects. For the first time, we are building a Trauma Centre which is first of its kind in the whole of the south- south. There is only one in Ondo state; it is going to be sited along Agbor-Asaba Expressway.”

“It is an emergency medical centre that will be fully equipped. We are also developing the first Teachers Development Centre to train teachers in the state. Today there is lack of self development. I think the type of teachers that taught me in those days is not the same type of teachers we have today. We felt the only way to strengthen the educational sector is to develop the teachers.-a kind of train the trainer programme. That is another star project of this government. There are things that are completely new.

“Asaba is usually flooded during the rainy season but if you go to Asaba now, it is wearing a new look. Major sewage not just gutters are being erected in Asaba. We are starting the Okerenkoko new town project, which began under the former governor, Dr. Emmanuel Uduaghan regime. Part of it will serve as residential quarters for the Nigerian Maritme University. You remember the place was completely destroyed. So, there are a lot of star projects we are embarking on that we can show to justify his re-election in 2019,” he stated.

Okowa has done well

The Commissioner, who expressed satisfaction with the performance of his boss, told Saturday Vanguard: “If we are sincere with ourselves, there are states that owe salaries. As we speak, some are up to six or seven months or thereabout. With destruction of oil facilities by the Avengers in the early part of this government, Governor Okowa has proved himself to be a good manger of resources. Delta state has not owed civil servants salaries. He managed the state in a way that we are able to pay salaries and still able to do many things.”

“We came into partnership with a lot of partners. Most of them have been doing well. He has employed lots of strategies to manage the little resources in the state. In Isoko for example where I come from, there are a lot of things I can point to. My people are aware because development is physical. For example, if I want to talk of human capital development, the YAGEP and STEP programmes have helped a lot of people in my area. Not to talk of road infrastructure and many other things he has done. There are many reasons to tell people to allow him go back for a second term. If he can manage the little, he can manage the much, that is what the Bible says. It is also said if you cannot be faithful with little, you cannot be faithful with much.

Emma Amaize

Kaduna, Sterling Bank seal N5b mortgage deal

Towards providing mortgages at single-digit interest rate, the Kaduna State Government has launched a N5billion fund with Sterling Bank to facilitate home ownership.
Under the scheme, the parties would each contribute 50per cent of the mortgage fund, which is billed to reach N5 billion for onward lending to aspiring homeowners. The fund will require beneficiaries to make security deposits of between 15 to 30per cent of the value of the houses while all mortgages must be liquidated within 10 years.

READ:ABUJA INTERNATIONAL HOUSING SHOW – THE LARGEST HOUSING AND CONSTRUCTION EXPO IN WEST AFRICA

About 50 per cent of the mortgages will be used to support house purchases below N20 million, while home purchases valued up to N30 million will get 30 per cent of the funding.

The balance of 20per cent will be used to support home purchases above N30 million up to a limit of N60 million. Successful bidders in the sale of government houses programme can apply for the mortgage facility to help pay for the houses.

This was made known through representatives of the state government and Sterling Bank at a press briefing in the States’ capital.

Speaking on behalf of the government, the Special Adviser on Economic Matters to the governor of Kaduna State; Umma Aboki, said that the state is facilitating investments in the provision of mass housing.

He said: “To encourage more people to own homes, we also have to support the demand side through mortgage financing.”

Also speaking, the Group Head of Non-Interest Banking of Sterling Bank, Garba Mohammed said the bank has executed a Memorandum of Understanding (MoU) to provide the mortgages at 9.5 per cent per annum.

Mohammed disclosed that government is sacrificing the interest on its own part of the deposit, to achieves the single-digit interest rate on the mortgage product.

Social housing as antidote to Nigerian housing challenges

On July 31, 2014, the Federal Government, in Abuja, launched the first 10,000 mortgages for affordable homes scheme. The then Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, stated that the Federal Government’s 10,000 mortgage scheme was inspired by former President Goodluck Jonathan’s pledge on January 16, 2014 when he launched the Nigerian Mortgage Refinancing Company (NMRC) with a view to making mortgage accessible to Nigerians to enable them purchase and own their own homes.

READ:ABUJA INTERNATIONAL HOUSING SHOW – THE LARGEST HOUSING AND CONSTRUCTION EXPO IN WEST AFRICA

Through this scheme, Nigerians were assured of being pre-qualified for 10,000 mortgages to be provided by lenders most of whom were present at the launch. The NMRC was set up as a re-financing vehicle to provide mortgage lending institutions with increased access to liquidity and long-term funds, since the ability of banks to deliver mortgage services is limited by the fact that 80 per cent of all bank deposits are for 30 days only. Housing has a longer gestation period than commercial loans can accommodate. The NMRC, in ensuring greater access to finance for tenure of up to 20 years, was to accelerate the growth of the mortgage market for all income levels. The 10,000 mortgages scheme has been derailed by inconsistency of government policies in Nigeria.

On November 21, 2013, former President Goodluck Ebele Jonathan stated that Nigeria needs N56 trillion to bridge the country’s 17 million housing units deficit. Jonathan stated this at the 53rd General Assembly of the Nigerian Institute of Architects (NIA) in Abuja. The shortfall alone minus infrastructure, according to the former President, would require more than N56 trillion, at an average cost of N3.291 million per housing unit to remedy our housing situation. 10,000 homes out of the required 17 million homes are a far cry from our housing need and a child’s play. If 10,000 units of three bedroom bungalows are built every year, it will take one thousand and seven hundred years for the country to meet her housing need assuming demand for housing remains constant. Ifeanyi Onuba of The Punch on Sunday, August 10, 2014, page 25, reported that the Federal Mortgage Bank of Nigeria (FMBN) has disbursed a sum of N100.5 billion for building projects under the National Housing Fund (NHF). The NHF is a Federal Government scheme in which every Nigerian above the age of 21 in paid employment is entitled to a low interest government funded loan for a housing project. At a conservative cost of N3.5 million per three bedroom bungalow on a free land, this amount could only provide 287, 714 houses. With the way funds are managed in Nigeria, about 70 per cent of this grant will be expended on administrative expenses by the managers, while about 30 per cent will be disbursed as mortgages. This amount will deliver 86,314 units of three bedroom flats at N3.5 million per unit. Our zero infinitesimal delivery approach in housing, despite its recorded successes in helping to develop economies, is our major bane. This also means that we are still not serious from considerably reducing our housing needs.


The second problem with the above scheme is patronage by Nigerians. Demand for housing is a factor of income. In a country were over eighty per cent of the adults are either not employed or under-employed, one wonder how the mortgage will be repaid. In countries with higher employment rates like United States of America and United Kingdom, mortgage repayment still pose a problem, how much more Nigeria where over 80 per cent of the workforce are not employed or underemployed. In 2006, Professor Gbenga Nubi of the Faculty of Environmental Sciences of University of Lagos, established the fact that unless most senior civil servants in Nigeria perpetuate fraud, they cannot afford to purchase a two bedroom flat with their salaries with the attendant costs of feeding, transportation, electricity, telephone and medicals, in Housing finance in Nigeria: A need for Re-engineering. He suggested alternative financing approaches like integrated rural development, compulsory housing savings scheme, securitization and housing bond. Pension fund reserve in Nigeria which is now over N6.0 trillion, according to the Pension Commission, can also be used for housing provision. The potent solution to our housing problem is the development of social housing as housing should not be a poverty index. In a country with over eighty per cent of people within the poverty threshold, housing cannot be viewed as an economic good only. It is equally a social good. Housing is a right and several local and international covenants guarantee the right of people to social protection that will help to eliminate the worst manifestations of poverty. Chapter II of the Nigerian Constitution expressly provided, among other provisions, for the social protection of all. Convention 102 of the International Labour Organisation (ILO) (1952) on social security minimum standards emphasizes the following nine (9) specific social protection factors: medical care, sickness, unemployment, old age, employment injury, family allowances, maternity allowances, invalidity and survivors. Food and housing are considered as given.

The Universal Declaration of Human Rights (1948), Article 22 provides that Each person, as a member of society, has a right to social security, each person is entitled to obtain satisfaction of her/his economic, social and cultural rights, inherent to her/his dignity and to the free development of her/his personality, by the national effort and by international cooperation, taking into account the organisation and resources of each country. Without housing, nobody can fully enjoy his/her right to the free development of his/her personality. Adequate public infrastructure provision is a veritable tool of ensuring sense of belonging of the people and of reducing poverty and crimes. Housing infrastructure development, due to its nature, can be used to develop an economy. Housing construction generates high level of employment, involves great number of participants, does not accommodate class discrimination and is gender-friendly.

The right to housing is founded, deeply rooted and recognised under international laws. It was enunciated under Article 25 (1) of the Universal Declaration of Human Rights. The right to adequate housing has been codified in other major international human rights treaties. Article II (1) of the International Committee on Economic, Social and Cultural Rights (ICESCR) provides that states parties to the present covenant recognise the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of his living condition. The problems with Nigeria housing include the fact that some houses are over-designed in terms of space and quality. Most developers do not pay adequate taxes on their property development to the appropriate government authorities to redistribute wealth. Many developed houses do not have approved building plans, so revenues were not generated on the houses by governments. In some cases, because of the level of poverty versus the degree of aspiration to have a house, a lot of people develop houses with low quality materials and workmanship to save cost. This has often times resulted into building-collapse. Inheritance taxes are not paid after the demised of the owners of properties by the heirs and inheritors.

Some unnecessary features are included in the houses of the rich just because they have access to free funds. Some houses are finished, mostly in branded areas, and are not occupied due to outrageous rents being demanded by the landlords and/or their agents. There is no law in place to tax vacant properties more than the occupied to encourage occupation and market dynamics. Some people have more than one house at no extra cost to them. Nigeria has more than her share of abandoned housing projects due to problematic cash flow. In a country with over 911,000 kilometre square of land mass, oceans, rivers and lagoons are being sand-filled to create housing estates. These and many more cause capital sink. The first house of any man is basic and should be assisted or subsidised. Any other one is investment and should be heavily discouraged through taxation. There must be register of property owners in Nigeria to know each person’s holding capacity. A house is a basic need that shelters people and gives them comfort. It is a place where people strategise, plan their future, and train their offspring. It also serves as working and resting place. A house is a status booster and the notion of owning a house bestows confidence on its owners irrespective of class. According to Professor Tunde Agbola of Department of Urban and Regional Planning, University of Ibadan, housing is a bundle of joy. Renters and homeless go through moments of stress, distress and uncertainties. A house is a common good that every adult who is working, either as a business man or in paid employment (formal and informal workers), should have. Proper housing can reduce health problems and crime. Since health is wealth, effective property taxation and housing development can be used to redistribute wealth and reduce poverty.

The 10,000 homes mortgage launched in 2014 by the Federal Government is good and welcome. Recent plans by the federal authorities of President Muhammadu Buhari to adopt sustainable housing programme, promote alternative energy in projects, stimulate jobs for the low income earners and partner state governments in the process of housing provision is also laudable. With the new housing policy, the federal government will employ Lagos housing model (Laghoms) by constructing 40 blocks of housing in each state and the Federal Capital Territory (FCT). Each state is expected to provide land of between 5-10 hectares for a start, with title documents, and access roads or in lieu of access roads, a commitment that they will build the access roads by the time the houses are completed. This exercise will lead to potential delivery of 12 flats per block and 480 flats per state, and 17,760 flats nationwide. Human beings, generally by their nature, exhibit multi-territoriality. This means that the beneficiaries are definitely going to be those with one or two houses before. The number of flats to be delivered is also negligible and will not affect the graph of housing demand versus provision in Nigeria. Also, the Shehu Shagari era federal housing experience shows that some states may decide to donate disuse and bad land to make the scheme unpopular considering the adversary between states and federal governments in some areas. Most states are finding it difficult now to cope with infrastructure provision, especially payment of salaries and pension. They may therefore, not be able to provide infrastructures in the estates.

Government has no excuses for abdicating its duty of care for the downtrodden and the vulnerable in Nigeria. Oil subsidy can be eradicated and in its place should be social housing development and agricultural grants. It will go a long way if the governments can declare state of emergency in housing provision in Nigeria and provide minimum of 500,000 houses every year as social housing for the poor in our major cities.

Oyedele, a Housing professional wrote from Osogbo.

A Comparative Analysis of Housing Indicators in China and Nigeria

In our previous review of “Nigeria’s journey towards sustainable housing provision”, we highlighted several housing indicators in the areas of housing deficit, mortgage interest rate, mortgage down payment rate and repayment period, policy reforms, cost of housing, which were used to explain the current state of the housing in Nigeria. In this second edition of the review, a simple comparative analysis of housing in China is done to further explain the dire need for the complete overhauling of Nigeria’s housing sector.

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China is a socialist state, with a government with crystal clear vision of its role. China is the most populated country in the world with a population of about 1.4 billion people. Given this population, one would assume that China would suffer from extreme housing deficit, but the numbers in China’s housing sector are fairly good. While Nigeria has a housing deficit of 17 million, 90% of families in China own their homes and 80% of these families acquired the homes outrightly, without mortgages or loans.

 

China has seven of the world’s top ten most expensive cities for residential property. The prices of houses in China are very high when compared to their income, price-to-income ratio (PIR). This however, does mean that the country is in a severe housing situation, the system can be said to have been managed almost effectively by forces of “government policies” and “way of life”.

The process and qualification for getting mortgages in China is relatively straight forward and low, respectively. At most, the mortgagor will need to have a monthly salary that is at least twice the monthly repayment rate of the loan. The outcome of this is that mortgages perform well in China, and in 2013, default rate was a mere 0.17%. Usually, a down payment of 30% is made on mortgages, which is 5% higher than that of Nigeria. However, interest rate on mortgage in China is about 6%, almost 4 times lesser than Nigeria’s. It is important to recall that mortgages are uncommon in Nigeria due to high interest rate and the arduous process of getting a mortgage.

Majority of the Chinese don’t mortgage, just 18%, as earlier mentioned 80% of homeowners acquire their homes outrightly. Hence, mortgages contributed 15% to China’s GDP in 2012. This is still higher than Nigeria’s 0.5% mortgage contribution to GDP in 2012.

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China also has a Housing Provident Fund. In a way, the Fund works like the Nigerian pension system in which employees and employers co-contribute to a pension account. A part of the Housing Fund, included a savings plan initiated by the government in which employees are given the option to contribute a portion of their monthly wages and have it matched by their employer to assist them with buying a house. This has contributed positively to mortgage acquisition in China, as prospective home owners are able to make the required 30% down payment.

Just like Nigeria, China has had several housing policy reforms, but so far, the difference in both countries has been the approach. While Nigeria’s style is for each administration to come up with a policy that can be attributed to the office holder, without good reference to learning points from previous reform(s) as every effective policy reform should do, China has transitioned from one policy reform to another with the soul aim of scaling up successful practices and downscaling non-performing ones. For China, policies have resulted from current realities. Among the latest drive by the government of China, is to regulate the rising rent cost in cities.

 

The success story of housing in China is as a result of an interplay between culture and systemic and intentional policies driven by its government to ensure sustainable housing provision for its citizenry. The government has largely charted housing in the country onto a sustainable path. Housing policy reform after reform, the government’s aim has simply been to provide adequate housing for its people. As for culture, the Chinese treasure home ownership, to many of them it could be their lifetime’s biggest achievement and they would work diligently towards saving up to buy one. Parents go out their way to support their children in getting their own homes, owning a home is somewhat of a yardstick for being fully prepared for marriage.

We have seen where Nigeria stands from the comparison; we can also deduce who/what the major actors in China’s housing sector have been. The last article in this series will be released in two weeks from today and will basically feature solutions to Nigeria’s housing woes. It will involve a mix of adoptable policies, low cost housing option and many others, till then, please stay tuned.

Finintell

Study Reveals Housing Microfinance Can Become Major Offering For Financial Institutions

A new study from Habitat for Humanity says that housing microfinance can and should become a mainstream offering for financial institutions in Sub-Saharan Africa.

READ:ABUJA INTERNATIONAL HOUSING SHOW – THE LARGEST HOUSING AND CONSTRUCTION EXPO IN WEST AFRICA

Housing microfinance consists of small, non-mortgage backed loans starting at just a few hundred dollars that can be offered to low-income populations in support of incremental building practices.

The business case study, released today, is entitled “Building the Business Case for the Housing Microfinance in Sub-Saharan Africa.”

It builds on a project carried out over six years in Kenya and Uganda called “Building Assets Unlocking Access”.

The project was a partnership between Habitat’s Terwilliger Center for Innovation in Shelter and the Mastercard Foundation.

So far, the project has reached over 47,000 households and mobilized more than $43 million in capital to benefit over 237,000 individuals.

The business case study argues that housing microfinance, small non-mortgage backed loans for short terms, can become a mainstream offering in the market to address growing housing needs in the region, incremental building patterns, and the land tenure realities of low-income households.

There are an estimated 1.6 billion people in the world living in substandard housing. This figure is climbing, especially as the world becomes more urbanized and people migrate to cities for economic opportunity.

In Sub-Saharan Africa, however, as much as 99 percent of people do not have access to formal financing – credit, savings, mortgages – that can let them start building or improving their homes. Traditionally, they build homes gradually as their resources allow.

Developer-built, bank-financed homes are rare in Africa, serving fewer than five percent of households in most countries.

“Solving the housing challenges in Africa will require a massive amount of capital investment and most of that will need to come from the private sector,” said Patrick Kelley, Vice President of Habitat’s Terwilliger Center for Innovation in Shelter.

He said, “Financial institutions of all kinds have a role to play, especially those already deeply embedded in communities and who understand people with informal sector livelihoods.”

Habitat’s Terwilliger Center for Innovation in Shelter partnership with the Mastercard Foundation sought to motivate local financial service providers in Kenya and Uganda to develop housing microfinance loans to fund the incremental building process common among low-income households.

The results have proven that there is demand for housing microfinance among families or individuals earning as little as $5 a day who are seeking to build, extend, or renovate their home.

“At the Mastercard Foundation, our focus is on helping economically disadvantaged people, especially young people in Africa, to find opportunities to move themselves, their families and their communities out of poverty,” said Ruth Dueck-Mbeba, Senior Program Manager at the Foundation.

“This project has provided access to appropriate finance for decent housing. We believe that decent housing can provide more than four walls and a roof over one’s head. It offers people hope, dignity, and a place in their communities.

This report should help financial service providers to scale these products, which would benefit their enterprises as well as the lives of many poor people in Africa,” she added.

Financial institutions in the region that have ventured into housing microfi­nance have often reported it to be a popular product with their clients.

To understand the demand side factors, the value proposition of these products, the competitive advantage of financial service providers offering it, and the differentiated features that make housing microfinance a strategic product, the business case study surveyed the work of two financial institutions: Kenya Women Microfinance Bank, or KWFT, and Centenary Bank in Uganda.

The study argues, through the lenses of these two institutions in different geographies, that success and profitability of a housing microfinance product relies on a number of factors: connection with the financial service provider’s mission, good marketing, a clear pricing structure, understanding of land tenure realities, an opportunity to attract new clients, and secure long-term capital to fund the expansion of such portfolios.

“Financing incremental housing solutions is a natural step in the progress of greater financial inclusion. Centenary and KWFT are providing a great example of how financial institutions will benefit from understanding their clients and developing products that serve them well,” said Patrick Kelley.

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