Are You Aware of These 6 Costs When Buying Property?

It is interesting to note how so many buyers and investors at large experience a total blackout when it comes to the transaction fees related to buying property. When you get to the point of buying a house, the devil is in the detail. You need to be aware of the amount of money you will spend throughout the entire buying process. Apart from the sale price, there are other real estate transaction fees you should keep in mind: mortgage fees, paying for a lawyer, and taxes related to property. Not forgetting to mention the hidden costs you might not be aware of.

These pointers will help you make the right decision when the time to buy a house comes. In turn, you will make the right investment decision knowingly. What fees should you keep in your mind when buying property in Kenya?

You Have to Get a Lawyer

The importance of getting a lawyer is like having oxygen: you can’t do without one. Lawyers in Kenya are regulated by an Act of Law known as the Advocates Remuneration Order. Sometimes, the fees that the lawyers charge are regulated by ethical principles and rules. The general rule of thumb is that the buyer will pay for these fees because the transaction benefits him. The Seller will also pay his Advocate such fees for representation, the initial due diligence process and drafting.

The percentage fees range from 1%-2% of the purchase price but the minimum payable is Kshs. 35,000. If the price on the purchase is low, the costs are higher. The converse is true; if the purchase amount is high, the costs will be low. You should note that it is illegal for your Advocate to charge you lower fees. Therefore, refrain from bargaining too much.

Who Does the Property Belong To?

Before you buy any property, you need to do a title search to know the rightful owner of the land. A title search will also help you know if the title has been charged, if it has a caveat or if there are any outstanding land rates to it. Performing a title search is a digital process offered by the government through the eCiziten platform. A title search costs Kshs. 500.

How Much Mortgage Will You Pay?

If you purchase property on mortgage, you will the capital with an interest rate capped at 14% p.a together with the ancillary costs which vary depending on the financier. You will pay evaluation costs which are approximately 0.2% of the assessment and 1% commitment fee to the bank. The duty payable for a mortgage is 0.1% of the mortgage amount.

Stamp All Your Documents

Once the Agreement for Sale is executed, the Seller’s Advocates will present it for stamping with duty at Kshs. 200/- for the original and Kshs. 20/- for each counterpart at the lands office. This fee is vital because in the event of a dispute, the court of law won’t accept any documents which haven’t been stamped.

Taxes Must Be Paid

Stamp Duty: In Kenya, this rate varies depending on the location of the property. Agricultural lands are charged 2% while land in urban areas is charged at 4%. If the property is registered as a company and the transfer is by way of shares rather than a title, then the stamp duty will be 1%. As a buyer, you will need an authorization slip from KRA to show that you have paid.

Capital Gains Tax: This is the final tax in the buying process which is usually at 5% of the value of the net gain. This is the excess amount of the transfer over the cost of the property which was adjusted.

Extra Costs Will Come Up

Depending on the firm and the development, other costs you will incur as a buyer include registration costs, valuation costs, proportionate cost of incorporation of the management company and the cost of transfer of reversionary interests.

More costs include electricity meter connection costs, water meter connection costs, purchaser’s share of reversionary transfer, cost of purchase of share in the management company, advance service charge which ranges from 3-6 months plus one (1) month’s service charge, secretarial charges and fees for filing return of allotments, notice of change of directors and Annual Returns.

Buying a house is a huge investment. You need to make sure that you follow each step correctly without any hiccups. Keeping these costs in mind will help you budget appropriately without denting your pocket.

Source: BuyRentKenya.com

4BN Maitama market inaugurated in abuja

The Federal Capital Territory Administration has inaugurated the remodelled Maitama ultra-modern market in Kubwa, a satellite town in FCT, two years after the project took off.

The N4bn market which was constructed by H & I Construction Limited, consisted of 1,467 shops, warehouses and cold rooms of various sizes.

Speaking during the ceremony, the Chairman, Bwari Area Council, Mr Musa Dikko, explained that the idea of building the market was conceived about 10 years ago.

He commended the contractor for delivering the project within two years.

Director of H & I Construction Limited, Mr Rabiu Sa’id, said that facilities in the new market include generous parking space, a police station, bank, and 50 toilets located at strategic locations in the market.

He disclosed that his firm would soon commence the remodelling of Mpape Market in conjunction with Bwari Area Council, adding that the modernisation of the Utako /Jabi Motor Park and Utako Market would take-off in two weeks.

Sa’id said, “We will also commission the first phase of the modernisation of Utako Market in FCT in about two weeks from now, while on the same day, we will perform the ground-breaking ceremony of the modernisation of the Utako/Jabi Motor Park, Abuja.

“The second phase of Garki Market modernisation will also be done in conjunction with Abuja Market Management Ltd before the second quarter of this year.”

Sai’d further said the company had built a new palace for the district head of Kubwa, noting that work had also commenced on the construction of a new town hall for the community.

Source: Adelani Adepegegba

National Housing Bank plans stronger capital norm for housing finance companies

The draft amendments has proposed raising the CAR to 15% in a staggered manner by March 2022, while suggested a higher cap on borrowing.
KOLKATA: National Housing Bank (NHB) is planning to raise long term capital requirement for housing finance companies (HFCs) to guard against their liquidity and solvency risks.

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The housing regulator has proposed to raise their capital adequacy ratio to 13% by March 2020 from 12% now as a fallout of the IL&FS-led crisis which forced several specialised home loan lenders, especially the smaller one, to slow down business to preserve liquidity.
The draft amendments has proposed raising the CAR to 15% in a staggered manner by March 2022, while suggested a higher cap on borrowing.

“HFCs are exposed to risks arising out of counterparty failures, funding risks and risks pertaining to liquidity and solvency as any other financial sector player. There is thus a need for a review of the regulatory framework of HFCs,’ NHB said in a note to stakeholders.

Most of the bigger HFCs carry sufficient capital to meet the proposed norm, experts tracking the sector said.

NHB has sought comments on the proposals by March 31.
The regulator also wanted to reduce borrowing limits for HFCs in graded way. It proposed the cap on borrowing at 14 time of net-owned fund by March 2020, 13 time of NOF by March 2021 and 12 times by March 2022.

“This was not unexpected following the IL&FS crisis. The regulatory restriction will now shape how much leverage housing finance company or NBFCs can take. This may impact smaller HFCs or those with high leverage ratio,” HDFCNSE 0.20 % chief executive officer Keki Mistry told ET.

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He however said that HDFC would not be impacted for the next seven/eight years the the nation’s largest housing finance company has about 19% CAR and as far as leveraging is concerned, its debt-equity ratio was 4.7 times as on December.

“Most of the HFCs would be able to meet the revised norms on CRAR, as most of the HFCs which are nearing 15-16% CRAR and would have adequate cushion to raise Tier II capital and shore up the CRAR, if required.” said Supreeta Nijjar, ICRA’s head for financial sector ratings.
“Also, the capital adequacy for HFCs is supported by the lower risk weights on smaller ticket size home loans which is the growth area for most HFCs,” she said.

Expect a 15% growth in housing loan disbursements

The yields have gone up as compared to last year and this has also translated into a good growth in our net interest income also, said Vinay Shah, MD & CEO, LIC HousingNSE 1.15 %, in an interview with ET Now.

ABUJA INTERNATIONAL HOUSING SHOW – THE LARGEST BUILDING AND CONSTRUCTION EXPO IN AFRICA. TO READ MORE CLICK HERE

Edited excerpts:

Given the heightened liquidity concerns over the past couple of months, how do you assess the entire situation vis-à-vis what we saw in October?
The liquidity position as compared to October-November has eased quite a lot. We are finding that it has eased both in the short tenure as well as longer tenures funds. But in October also, getting money was not a problem for our company as being a AAA rated company we are getting money though at slightly higher rates. Now it has eased substantially. Every year during the second fortnight of March, there is some tightening because of advance tax payments and other things but that is an annual thing. Now the position is fairly good.
Calculated spreads have also declined. What led to this decline and especially the decline that one has seen in the yields for LIC Housing Finance?

On the contrary our spreads have been stable. Last year starting April onwards till the 1st of January, we increased our lending rates by 70 bps and this has been transferred to whole of our back book. About 80-85% of the book is on floating basis. We have had similar spreads and we did not have much of decline as far as the spreads go.
Can you just tell us what the outlook is on your borrowing mix change? Given the high proportion of NCDs, how do you see borrowing costs in your spreads shaping up?

Borrowing cost have gone up from last year levels. We have to see if going ahead, the rates remain stable. There has also been some benefit from the RBI repo rate decrease also. If the rates remain stable, the margins would be at the same level or they may improve also. The yields have gone up as compared to last year and this has also translated into a good growth in our net interest income also.

There has also been sharp increase in the builder loan growth despite high delinquencies. What is the rationale for this high growth given the high stress scenario in real estate?

During current year, builder growth looks very high. The main reason is that we are operating at a very small base and out of about 246 odd accounts which we are servicing, four or five accounts constitute the major chunk of the delinquent NPAs.

Secondly, the full book of our builder loan portfolio is only about 6%. In the NPAs also I see resolution coming in most of them. It may take some time in between but we are very sure that the resolutions will come. The comforting fact is that there is the underlying security that we have. Recently in Q2, we had made one recovery wherein we recovered the full principal and not only that the major part of the interest.
There has been some signs of struggling growth in home loans. When can we expect a pickup?

The real estate sector in the last two-three years has faced many challenges starting from demonetisation, RERA, GST followed by liquidity crunch in Q3. But of late, things are picking up. We expect better growth throughout the country because of two reasons – one is the lowering of the GST rates on under construction projects and the number two is the continuity of housing subsidy which the government has now extended till March 2020.

I expect a good pickup there. The market sentiment is improving and going ahead, I would still see a growth rate of around 15% in housing loan disbursements.

How mortgage system helped home ownership in Saudi Arabia

Housing Minister Majid Al-Hogail: The private sector’s contribution to mortgage financing did not exceed 35 percent in the past whereas it has reached 100 percent today

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RIYADH: The second edition of the Saudi Housing Finance Conference concluded in Riyadh on Wednesday.
Housing Minister Majid Al-Hogail stressed that the mortgage finance sector in the Kingdom will play a significant role in increasing the ownership rate, reaching 70 percent by 2030.


He emphasized that the mortgage finance sector is undergoing significant growth; last January, more than 9,000 housing finance contracts worth more than SR4.7 billion ($1.25 billion) were signed.
He said: “The private sector’s contribution to mortgage financing did not exceed 35 percent in the past whereas it has reached 100 percent today. We also aspire for the investments in the mortgage finance sector to reach SR60 billion this year, which will facilitate ownership, benefiting from the available financing facilities for citizens.”
He noted the policies of the housing program where 16 government agencies work together to overcome obstacles that prevent their initiatives giving citizens the ability to own houses, especially policies related to financing and housing support.

10 cities where mortgage payments are cheaper than rent

Many financial experts say owning rather than renting a home is a good way to build wealth.

If you’re in that camp, there’s some good news: Personal finance website LendingTree found that in many desirable U.S. cities — including Miami, Dallas, Denver and Las Vegas — the area’s median monthly mortgage payment is less than the median monthly rent.

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Overall, the analysis found that 20 out of the 50 metro areas looked at had lower median monthly mortgage payments than rent. Four of the top 10 are in Florida, where low wages and too few rental units are major factors in Florida’s “rent affordability crisis,” according to LendingTree.

It’s important to note that LendingTree’s analysis did not take into account down payments, saving for which can be one of the biggest obstacles aspiring homeowners face. As CNBC reported based on a 2018 analysis by HotPads, “for the average renter buying the median-priced home in America, it will take about 6½ years to save for a 20 percent mortgage down payment.”

But if you’re planning or looking to buy, here are the US metro areas that boast cheaper median monthly mortgage payments than median monthly rent payments, according to LendingTree:

10. Charlotte, North Carolina
Median rent: $1,121
Median mortgage: $1,037
Difference between rent and mortgage: $84

9. Riverside, California
Median rent: $1,369
Median mortgage: $1,280
Difference between rent and mortgage: $89

8. Jacksonville, Florida
Median rent: $1,140
Median mortgage: $1,048
Difference between rent and mortgage: $91

7. Washington, D.C.
Median rent: $1,819
Median mortgage: $1,727
Difference between rent and mortgage: $92

6. Las Vegas, Nevada
Median rent: $1,198
Median mortgage: $1,102
Difference between rent and mortgage: $96

5. Denver, Colorado
Median rent: $1,362
Median mortgage: $1,252
Difference between rent and mortgage: $110

4. Tampa, Florida
Median rent: $1,192
Median mortgage: $1,072
Difference between rent and mortgage: $120

3. Virginia Beach, Virginia
Median rent: $1,318
Median mortgage: $1,163
Difference between rent and mortgage: $155

2. Orlando, Florida
Median rent: $1,263
Median mortgage: $1,036
Difference between rent and mortgage: $227

1. Miami, Florida
Median rent: $1,477
Median mortgage: $1,215
Difference between rent and mortgage: $262

Other cool cities that have a lower monthly median mortgage payment include Houston, Phoenix, Salt Lake City, Atlanta, San Antonio, Austin, Memphis and Dallas.

LendingTree used U.S. Census Bureau data to determine the median cost to own and rent in the nation’s 50 largest metro statistical areas.

 

BY Sarah Berger

Short let rentals profit plunges as liquidity crisis deepens

Rents are falling faster in short let residential property markets, creating a “draconian dilemma” for investors that sought an escape route to high vacancy rates, following a massive over-supply of apartments in the nation’s major cities.

The phenomenon, which was not new in the real estate business, is touted to be a more cost- effective and convenient solution to the high vacancy rates conundrum.

For instance, residential vacancy rate in Lagos is put at about 33 per cent, 28 per cent in Abuja and 13 per cent in Port Harcourt.

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Although, it was not known in Nigeria few years ago, short let apartment was accepted that even landlords saw the concept as an easier way to recoup investment on property.

It opened up a potentially lucrative market as they can command around 30 per cent higher rates than long-term rentals. Short lets also offer greater flexibility to extend tenancy contracts weekly or monthly at the landlord’s discretion.
Short lets also give customers opportunity to stay in a private property that offer a more personal and comfortable experience than a serviced apartment or hotel.

The phenomenon also increased and assumed popularity with about 30 per cent increase in letting. However, that popularity and profitability, which short let rental business previous enjoyed is waning because of what experts attributed to continuous negative growth in the real estate sector as a result of liquidity issues.

Recently, the economic crunch has badly hit the short let apartment business; hence the prospect is now nose-diving. Consequently, operators are not recording expected turnovers, as they should, thereby reducing their profits.

For instance, investigation by The Guardian showed that a one-bedroom in Shonibare Estate, who previous goes between N35, 000 to N40, 000 per day has come down to N30, 000, while two-bedroom apartment came down from N50, 000 to N45, 000.

The same goes for three-bedroom apartment for N65, 000 from N75, 000 per day.

In Ikeja GRA, a three bedroom, which formally goes for $150 per day is between $100 to $120, while a three bedroom in Victoria Island, who goes for N2 million per month, is charged from N1.5 million and N100, 000 per day from the initial N200, 000.

Likewise, a luxuriously furnished and serviced three-bedroom penthouse with all rooms en-suite located at Maryland, Ikeja, Lagos, which formally goes for N90, 000.00 per day has been reduced to between N80, 000.00 and N85, 000.00.

Also a fully furnished super luxury two-bedroom short-let apartment now goes for about N45, 000 in Maitama, Abuja.

Similarly, in Lekki Phase I and 1004 estates, the price of a moderate three bed room flat on short – let goes between N100, 000 to N40, 000.

Speaking on this trend, the Group Managing Director and Chief Executive Officer of Luxury Villas Group, operators of “Apartment 13-13”, located at Admiral Way, Lekki Phase 1, Lagos, Mr. Tommy Odama, attributed the situation to the challenging economic situation that affected business generally in Nigeria.

According to him, it is understandable because short let patronage is a function of influx of foreigners and non-foreigners migrating from countries and other states largely outside the country and this only happens with a booming economy.

“Unfortunately, we all know the state of our economy”, he added.
An operator of a short let apartment in Maryland, identified simply as sola said he is considering closing shop because of the downturns in business.

According to him, the initial influx of expatriates into Nigeria for one form of business or the other has reduced, hence patronage has reduced apart from the Yahoo guys, who often come around.

Also, the operator of Haute Apart, Ikeja, Mr. Oluwafemi Ebenezer said the economic impact is relative as those with strategic position are still recording patronage despite the economic crunch in Nigeria.

According to him, clients, who normally come from outside the country prefer to stay where they can get all the amenities like mall, cinema and nightclubs.
He disclosed that in a short-let apartment, clients have the three-bedroom, four-bedroom all with the same facilities like internet, swimming pool, gym, exquisitely furnished kitchen and other facilities with that of the hotel but the difference is that it is a ‘home away from home’ where the client enjoys unlimited privacy and fully furnished apartment without having to go through the hassle of buying furniture or any form of household materials.

Ebenezer explained that most of clients are expatriates who have similar short-let business in their country and book online with the operators in Nigeria.
In addition, he disclosed that government officials in the country also patronise the business when they have important functions to attend in area where there are short-let operators.

He also stressed that operators whose clients come from corporate may be the worse hit as their patronage is dependent on their business but not those who want to enjoy home from home and do not want to stay in conventional hotel.

The hash economic climate is real and evident but it has not really impacted on my business, because of my relationship with my clients and the environment where I operate from”, he added.

Another operator of Short-let in Lagos Island, Seyi Ekanem said the business allows prospective clients to pay for an apartment for short-stay for a period of one-year, one- month or on a daily basis while the billing system is per day just to satisfy the needs of those who want to have a better deal away from the normal hotel, where they are usually offered a one room with a bed.
He disclosed that the business is not isolated from the liquidity problem affecting other businesses and the real estate sector in the country.
According to him, some of his clients are people come from abroad and the location of the apartment matters a lot to them because it is very important to patronage.

Ekanem explained that the future of the business is very bright as most clients that patronise them are expatriates who have similar short-let business in their country and book online with the operators in Nigeria.

In addition, he disclosed that government officials in the country also patronise the business when they have important functions to attend in area where there are short-let operators.

Also, Mausi Bababunmi of Mausi Realty, Magodo observed that the business which is fast gaining its pride of place in the real estate sector is hinged on the principle of ‘the location, determines the price’ and prices are charged per day from N35, 000, N50, 000 and above, depending on the company.

“It is another industry and opportunity under the real estate sector where interested persons explore avenue to make money. There are some people who don’t like the regular hotel at all, and so they prefer the short-let where they can cook by themselves and enjoy their own escapades and privacy”, he added.

By Bertram Nwannekanma

How to speed up your property transfer

Time is money – and transfer delays can be costly

In complex, protracted transactions like property sales, delays are not only frustrating, they can also be extremely costly and may even torpedo the deal completely. However, while some delays cannot be foreseen, it’s possible to exponentially reduce the risk by doing one’s homework and having all one’s ducks in a row from the onset.

This is according to Jill Lloyd, veteran agent and Area Specialist in Rondebosch and Claremont for Lew Geffen Sotheby’s International Realty, who says: “Essentially there are two primary types of delay; the first relating to the confirmation of the sale and those that occur once the sale has been confirmed and hold up the transfer.

“Property transactions are known to be lengthy processes with multiple steps and reams of documentation, and once the potential minefield of suspensive conditions and contractual obligations has been successfully navigated and the deal is finally done, many people breathe a sigh of relief. But the expected downhill cruise to transfer can still become an uphill battle if one isn’t careful.”

 

Lloyd explains how this can happen:

“One of the main reasons for delayed transfers is that the timeline is out of sync, especially when two or more deals are linked and money from one sale is needed to purchase the next property and so on. I once brokered a transaction with seven linked deals all dependent on the sale of a Rondebosch East home and we had to pull out all the stops to get the house sold in time.

“It is also very important for buyers to budget for the transfer costs of the new property they are buying or have an access bond in place on their current home, otherwise when the attorney calls for bond cancellation that bond account will be frozen and they will not be able to access the funds.”

She adds that not giving the required 90 days’ notice of cancellation of the existing bond can also cause delays as well as avoidable late cancellation fees.

“If a homeowner is seriously thinking about selling, they should give notice to the bank holding the bond. In doing so, they are not committing to selling, merely notifying the bank of the possibility and they can keep on renewing the cancellation if they don’t sell timeously or revoke the notification if they change their minds.”

Craig Guthrie, Partner at Guthrie Colananni Attorneys says: “One of the transferring attorney’s key roles is to coordinate and control all the role players involved in a transfer, including SARS (transfer duty), the municipality (Rates Clearance Certificate) and the bank.

In order to do this as seamlessly as possible, it is essential that both the buyer and seller submit all the necessary documentation in time, as per the legal requirements and without omissions. This is especially important if either party resides in another country or is otherwise difficult to contact for information and signatures.

 

Guthrie says that although hiccups and stumbling blocks can occur at any point of the transaction, they most commonly occur at the following stages:

  • Bond Approval
  • Bond Cancellation
  • The signing of transfer documents
  • Obtaining valid compliance certificates
  • Issues encountered at lodgements requiring the removal of notes by the Registrar of Deeds
  • Transfers which are unusual and more complex, such as estate transfers which require an endorsement of the Master of the High Court, which can cause a delay

Most of these delays can easily be avoided, through prompt co-operation with the transferring attorney and the paralegal handling their transfer or, if they are outside of South Africa, by giving a valid power of attorney to a person within South Africa who can sign the necessary documents and act on their behalf.

 

“It’s vital that the client is completely up front with the agent regarding their financial situation,” says Lloyd. “We can then facilitate and expedite the process by having our bond broker at ooba, South Africa’s largest mortgage originator, prequalify them and the thorough credit check will reveal any potential snags.

“This step is particularly important for buyers who are self-employed as banks are very strict about the documentation that they require for a bond application. At this stage I always advise all my clients to avoid making any expensive purchases that could negatively impact their affordability.”

 

Lloyd concludes: “Experienced estate agents will guide their clients every step of the way and as long as they are upfront with their realtors, there should not be too many problems to circumvent.

“I also recommend appointing an accomplished conveyancing attorney who is really on the ball. It is all very well allowing your best friend to handle the transfer, but you could end up being enemies if they make a complete hash of it and that happens more often than I like to remember!

“And, as the transferring attorney and agent work closely together behind the scenes to ensure a smooth transfer, it is always an advantage if they already have an established working relationship.”

 

Source: Private Property

States’ economies sees improvement as Fund’s intervention targets 500,000 home and 1.5m jobs

The intervention by the Family Home Fund (FHF) in the Nigerian housing sector to deliver affordable housing to low-income earners in the country will significantly improve the GDP and economy of the states where the intervention is already yielding fruits, people familiar with the Fund have said.

EchoStone is a property development firm that deploys an innovative technology which allows rapid and scalable construction of houses. It is currently building 2,000 housing units beginning with 250 units of two-bedroom detached bungalows in Idale Badagry, Lagos. FHF is to build 20,000 housing units in Lagos.

So far, about six state governments including the FCT have donated land for the development of various numbers of housing units, including Ebonyi State which has donated land for developing 1,200 homes.

Kaduna State has also donated land for its millennium city which promises about 650 homes; the ancient city of Kano has 757 homes; Asaba, Delta State, about 620 homes; Ogun State, about 1, 074 homes; FCT, about 580 homes, while Akwa Ibom has donated land and signed MoU with the fund for the construction of 5,000 low-income houses.

There is an expectation that through a combination of these housing development activities, 1.5 million jobs will be created for both skilled and unskilled labour that will be working at the construction sites.

Analysts say the creation of 1.5 million jobs will have significant impact on the economies of the states, more so with the multiplier effect of job creation.

“When you give job to one person, you shall have impacted the lives of about four or five more persons,” noted Johnson Chukwuma, a civil engineer.

He explained that, one way or another, part of the income earned by these workers goes to the state government by way of paying taxes or other levies, stressing that a state with healthy citizens is, by implication, a wealthy state.

FHF, which is arguably the largest affordable housing-focused fund in sub-Saharan Africa, was in Lagos recently and, according to Femi Adewole, its managing director, its mission to Lagos was to explore a potential partnership for a large-scale affordable housing scheme with a specific focus on Lagosians on low income.

“Alongside good quality homes, the programme will be looking to create jobs for Lagosians. Other aspects of the scheme include a commitment that we are not just to build housing units; we also need to look into the environment and climate change issues which now stare us in the face,” Adewole said.

He assured of the fund’s commitment to the provision of affordable housing, disclosing that they had invested over N20 billion in housing projects to support Nigerians who are earning below N100,000.

“We are also providing financing for developers who will build homes ranging between N2.5 million to N5 million,” he said.

Besides providing funding for the product suppliers, the Fund also aids the demand side by assisting house buyers, giving them a deferred loan for up to 40 percent cost of the houses.
The Fund supports local content in the house-building process and Adewole disclosed that their long-term objective was to ensure that up to 80 percent of manufactured inputs were locally produced.

 

Source: Chuka Uroko

Tackling illiquidity burden in mortgage system

A consummate finance expert, Ogundimu is no new comer in NMRC. He has seen and known it all and, therefore, has a couple of things to say about this secondary mortgage institution.
“We have been able to address the liquidity challenge in the mortgage system”, Ogundimu says, despite experts’ strong view that some primary mortgage banks (PMBs) are still struggling over liquidity issues. He insists that “PMBs that are not liquid are those that are not doing well who cannot access our funds”, pointing out that the high interest rate in the mortgage system is a function of the macro-economy which is beyond their control.

This is simply a testimonial that NMRC is achieving part of its statutory mandates. In Nigeria, the inequality created by lack of affordable housing places a moral obligation on all housing stakeholders to use every tool at their disposal to find solutions to the problem of accessing sustainable and affordable housing finance.

Nigeria has heavy housing burden with an unchanging deficit estimated at 17 million units. It also has low home-ownership level put at a little above 10 percent. All these easily find explanation in the country’s mortgage system that has remained a fledgling, liquidity-squeezed and unable to fund even low cost housing.

The coming of the NMRC, A private sector-led company with the public purpose of developing the primary and secondary mortgage markets by raising long‐term funds from the domestic capital market as well as foreign markets for providing accessible and affordable housing in Nigeria, was aimed to address this problem.

Government’s attempts at addressing the country’s housing problem with the establishment of both the Federal Mortgage Bank of Nigeria (FMBN) and National Housing Fund (NHF) to provide low interest rate mortgage for people to build or buy houses, have been anything but successful.

But there have been spirited efforts by the refinance company to not only reposition the country’s mortgage sector, but also to break down barriers to home ownership by providing liquidity, affordability, accessibility and stability to the housing market.

The company has the vision to be the dominant housing partner in Nigeria by providing liquidity and access to affordable housing finance and, in line with that, it has come out with some innovative initiatives aimed to improve mortgage market transactions and also fast-track affordable housing delivery.

When the company was established, part of the mandate given to it was to promote wider spread of home ownership, accessibility and affordability which explains the setting up of what it calls ‘Housing/Mortgage Market Information Portal (MMIP)’ aimed to enable it to gather data for intelligence and profiling of federal, states civil servants and informal sectors (off-takers) for affordable housing.

This is an effective policy and decision making tool on land allocation, infrastructure and concessions. MMIP enables decisions on creating polycentric cities in order to decongest major urban centres.

Another initiative the company has come up with is the NMRC Mortgage Market System (MMS) which is a transformational change that integrates the entire housing market, covering construction finance, primary and secondary mortgage.

The system which is available to all players in the housing industry has the benefit of removing duplications of effort in gathering data and documents; improving the turnaround time, reducing the cycle time of transactions and helping in making homes more affordable.

Described as a world class system that brings all players in the mortgage and housing market into a centralised technology ecosystem, MMS allows a systematic market to operate and concentration of activities to take place.

What the system seeks to achieve, besides bringing credibility and attracting investors to the mortgage market, is also to let players and sundry individuals know what is going on in the market; the system creates a marketplace where there is information flow and people can see what is going on.

The system is a national market that is not only about mortgage but also the entire housing finance and so it allows people to see the pipeline projects and know who is bringing what to the market. It also allows NMRC, as a refinancer, time to determine when to go to the market to raise bonds.

MMS also allows market operators to track all the activities within the construction industry. With it they can see which developer is doing what and in which location. It also allows them to begin to compare prices and know which property is being sold and in which location. This way, the developers will begin to be more competitive in the way they do their thing.

For the mortgage banks, the new system allows them to begin to manage their own systems by themselves using the uniform underwriting standards which NMRC has produced and, with that, they can evaluate their applications based on the underwriting standard.

It is hoped that the use of these systems, especially the MMIP, for federal and state governments mortgage asset registry will reduce cost of homeownership; eliminates breaks in the chain of title; improve hard naira savings on each loan for homeowners and lenders, and reveal identity of servicer and investor available to homeowners via phone or internet.

Chuka Uroko

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