Credit allocation from commercial banks to real estate industry has maintained a steady drop in over one year.
Loans from commercial banks to the real estate industry, which began to drop over a year ago, have maintained the downward trend.
From N784bn in the first quarter of 2018, credit to real estate dropped to N596bn out of the total loan of N15.21tn extended to the private sector in the first quarter of 2019, according to data obtained from the National Bureau of Statistics.
The N596bn which accounts for 3.92 per cent of the total credit to the private sector in Q1 of 2019 showed a difference of N188bn or 24 per cent year on year drop when compared with the same period of 2018.
The industry got about N622bn out of the N15.13tn credit to private sector in the last quarter of 2018, lower than the N710bn recorded in the third quarter of 2018.
In the first and second quarters of 2018, N784bn and N744bn, respectively, were the loans given out by banks to the industry.
The first quarter of 2018 saw growth in credit allocation to the industry when the amount rose to N784bn, up from the N753bn recorded in the last quarter of 2017.
From the NBS statistics, real estate appears to be the only sector with a downward credit allocation trend when compared to other sectors.
Agriculture recorded an increase from N501bn in the first quarter of 2018 to N638bn in the same period of 2019. Oil and gas, and manufacturing also increased from N3.42tn to N3.49tn and N2.07tn to N2.2tn in the first quarters of 2018 and 2019, respectively.
The real estate sector, however, recorded a decrease in the amount of non-performing loans, dropping from N170bn in April 2018 to N68.87bn in April 2019.
Stakeholders in the industry said it had become increasingly difficult to access commercial banks’ loans for investment in real estate.
According to some of them who spoke with The PUNCH, commercial banks are no longer interested in financing real estate projects, and have not been putting their money in the industry for due to a high level of default.
The Deputy President, Real Estate Developers Association of Nigeria, Mr Akintoye Adeoye, said many banks that had their fingers burnt had become wary of extending credit to the sector.
The President, REDAN, Mr Ugo Chime, told our correspondent that a lot of factors had slowed down real estate activities and in turn affected response to credit facilities.
He said, “During election period like the one we went through in the first quarter of this year, the demand for real estate is usually low because most people use their money for elections which is common in most countries of the world. This is due to the measure of uncertainties during such times.
“It is understandable that a number of financial institutions will not be willing to give out money at such times or allow developers to take money from them.
“So, a combination of factors have made it possible that there would be low activities in the industry but we hope that in the coming quarters, starting from next month, we will have increased activities.”
Chime said the state of the economy had created a situation where people had become more concerned with feeding and other endeavours than investing in real estate.
“But we believe that if we have the increase in salary for civil servants and other things that are being put in place by the Federal Government, there would be more activities which will have impact on the real estate industry,” he said.
He stated that stakeholders in the industry had been advocating that the only way to stimulate activities in real estate sector would be for the government to increase mortgage and access to it.
“The purchasing power of most Nigerians cannot afford housing at this time except through mortgage,” he added.
The Head of the Nigeria Housing Finance Programme of the Central Bank of Nigeria, Mr Adedeji Adesemoye, stated that several interventions were being put in place by the apex financial institution to increase homeownership in the country.
According to him, one way for the government, especially at the state level, to address the challenge is to sign the Mortgage Model and Foreclosure Act into law.
He explained that many states were at different levels of implementing the law which would help to correct some of the shortcomings of the Land Use Act, which had limited access to land and housing.
“For people to be able to have better access to funding for investment in housing, mortgage culture must be encouraged to grow in the country,” he said.
Adesemoye said financial challenges had hindered the growth and progress of affordable housing in the country, adding that the CBN would reverse the situation through regulations, funding, policy frameworks, partnerships and many other initiatives.
According to him, the CBN has accepted the responsibility of driving reforms at many levels of housing financing.
He said, “The CBN supervises commercial and primary mortgage microfinance banks that have had various interventions in provision of housing funds across the landscape. So they need a supervisory framework that is robust to be able to do this.
“We need to have institutions that are well capitalised and well managed and supervised to be able to give back the right confidence to the people so that they can satisfy their finance needs.”
He added that the apex bank had moved further from being a regulator to implementing catalytic projects that would open up the financial landscape.