Flexible rent payment – A way to solve housing shortages

Nigerians within the low income bracket have contended with the exploitative tendencies of estate agents for several years. The system has never been streamlined and the last time Lagos State tried to do so suffered a backlash. Even the flexible rent system its government tried to experiment was resisted by landlords who refused to play by the rule. This stalled the policy of making payment of rents flexible in Lagos State. This kind of endangered a flexible market in the renting system, which does not hold any landlord liable to any system employed in renting his house.

This also increased because some rents are paid in foreign currencies thereby making such market very explosive.

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If you have ever lived in a rented apartment in Lagos, you will agree that it can be a long, painful and intricate process. This is true, especially with the bureaucratic way landlords demand exorbitant rental fees for one or two-year periods, coupled with the associated agreement/agency fees, which are usually demanded by some of the landlords, even though they are letting their property without the help of real estate agents. For years, tenants in Nigeria have been unable to access affordable housing with flexible payment options as it is done in developed countries where monthly payments are accepted for apartment rentals.

According to the Federal Authority Mortgage Bank, the property market in Nigeria is in crisis due to the default rate on rented properties which had risen to 71 per cent and vacancy rate to 74 per cent in prime property locations. That is why RentSmallSmall, in order to eliminate the complexities that are associated with finding suitable, affordable apartments in Nigeria decided to launch its site, RentSmallSmall.com, first in Lagos, before expanding to other cities. This  model works in a way that a landlord gives the base rent of the property on annual basis and then marks it up by a certain little percentage and with that mark up, they are broken down into monthly payments.

Because some landlords demand rents in forex, tenants began to demand for flexible forex. In simple terms, a flexible forex market is one that allows the exchange rate to float freely and to find its equilibrium without any form of intervention from government. Indeed, globally, governments rarely operate a clearly defined exchange rate regime.

What is obtainable is a situation where the market operates a model that hovers between the polar opposites (fixed or floating) depending on the level of government intervention. Thus, a regime that witnesses a lot of government intervention is considered relatively fixed while one which witnesses minimal interventions would be defined as flexible. Also, the extent of such intervention is limited by the size of the government’s foreign reserves.

RentSmallSmall is a property firm that recently unveiled a flexible rent solution initiative for low and average income earners in Lagos. The Managing Director of RentSmallSmall recently, in a speech, said the package would enable Lagosians to choose convenient way of paying their house rent. According to him, the company’s package is contrary to the annually or two years rental payment by Lagos landlords as it allows for monthly, quarterly and bi-annual rent payment as the case may be. The owner of the renting company explained that the organisation’s objective is to make it possible for home seekers to find property within their budgets, make flexible rent for tenants for a month to a year and also make flexible payment that is monthly, quarterly or bi-annually based on one’s choice.

The RentSmallSmall boss disclosed that the company is in partnership with Axa Mansard, NedcomeOAKS, Estate links, Furnisure, Northcourt and Rydal Mews to create easy access to insurance, furniture and appliance rentals.

The difficulty in accessing affordable housing in the country therefore has exerted pressure on experts in the built environment who have advocated an overhaul of the rent system in the country. The experts who are not comfortable with the system in operation at the moment argued that the housing deficits will not be done with if the modus operandi is not done away with.

One of the real estate operators from South Africa, while discussing the rent system in Nigeria, tried to compare it with what obtains in South Africa and other African nations. The operator noted that the system in the country indicates that government is not interested in remedying the housing deficits scourge. He stated that if government had started with the system introduced during the Festival of Arts and Culture Programme of 1977, the problems would not have degenerated to the level it is today. He feared that if nothing is done at the moment, the present condition would be a child’s play compared to what would be seen in the nearest future.

He noted that many home seekers who are mid/low income earners are faced with problems of finding affordable houses within their budget. He added that many property owners demand rents of one to two years upfront and agents demand additional fees and payments. From statistics in circulation, about eight million people are involved in urbanisation per year, with a vacancy rate in Abuja’s Central Business District (CBD) areas of 72 per cent and 130 million Nigerians living in rented houses and RentSmallSmall is creating a platform to provide suitable and affordable homes for home seekers, influence the conception and birth of new homes to boost the livelihood and productivity of Nigerian youths, and help homeowners to make their property rentable and profitable.

Prospective home seekers and property owners interested in the new initiative were asked to visit the company’s website for further details. This implies that interested home seekers and homeowners should log on to the company’s website and sign up. The platform will allow property owners to give info about their property. This is the way the battle to reduce housing shortage in the country will be won. People should help home seekers to reduce the amount of time spent searching for perfect property, find property that are closer to their workplaces and with flexible duration and payments.

If there is a flexible payment system, a decent downpayment of about 15 per cent of the home value usually lowers the interest rate that one will have to pay. Let’s say you dole out $40,000 as downpayment when you are buying your home, this $40,000 is like an investment you make in an asset (your house), hoping that the asset will appreciate. If you were to invest $40,000 in an online savings account, you could earn 5 per cent interest (risk-free) every year. If one invests in equity and is lucky, the returns could be even higher.

Source: Maduka Nweke

FG to provide loans to developers for public officers’ houses

The Federal Government on Thursday said it would provide loans at single digit interest rate to developers to build housing units for public officials.

The Head of the Civil Servants of the Federation, Mrs Winifred Oyo-Ita, made this known in Abuja while giving the scorecard of her office in the past three years.

She noted that efforts were concentrated on restructuring the civil service in the past three years in order to achieve integrity and dignity of the civil service for improved service delivery.

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She added that senior government officials were sent to Rwanda to study the country’s public administration and learn from its recovery after the genocide which the country experienced.

She said 10,735 federal civil servants were promoted during the period, 872 converted and 4,527 awaiting result of 2018 promotion examinations.

Oyo-Ita said that already, more than 8,000 civil servants had benefitted from Federal Government’s housing policies initiated to improve on the welfare of public servants.

She also revealed that her office played an important role in the agitation for the N30,000 new minimum wage and the Presidency’s transmission of an executive bill on it to the National Assembly.

She said, “The Federal Government Staff Housing Loan Board is in talks with Family Homes Fund to increase the pool of fund to the Housing Loans Scheme at a single digit interest rate. Also, under the partnership, reputable estate developers who are into partnership with the FGSHLB and Federal Integrated Staff Housing programmes will be considered to access funds at single digit interest rate to build houses for federal public officials.

“Under the FISH programme, which is a strategic initiative to provide quality and affordable housing for public servants, a total of 9,503 units are under construction while 342 units had been allocated. A total of 4,167 members of staff across the service benefited from the FGSHL scheme under the partnership with the Federal Mortgage Bank of Nigeria. Also, 2,077 staff benefitted from the Home Renovation Loan of N1m implemented by the office in partnership with the Federal Mortgage Bank of Nigeria between 2016 and 2018.”

Source: Olufemi Atoyebi

Real Reasons Why FG Established Family Homes Funds

Against the backdrop of the widening housing gap in the country, new partnerships and initiatives supported by the federal and state governments to address the housing shortfall, are being put in place, thereby raising the hope that government can actually help bridge the housing deficit in the country in the next 15 years.

The Family Homes Fund Limited is one of such new initiatives. The Fund is a partnership between the Federal Ministry of Finance and the Nigerian Sovereign Investment Authority as founding shareholders. The Fund is the largest affordable housing-focused fund in Sub-Sahara Africa, leveraging its significant capital (in excess of N1trn by 2023) to facilitate access to affordable housing for millions of Nigerians on low to medium income groups. Through strategic partnerships with various players in the sector and some of the world’s main Development Finance Institutions, the Fund has an ambitious commitment to facilitate and supply 500,000 homes by 2023.

The key priority for the Fund is to take advantage of the opportunity a large scale house building programme offers to create jobs which are sustainable and offer families security, improved quality of life and hope.

The fund is providing construction financing facility for private and public sector developers, promoting good quality homes targeted at people with low income.

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To be eligible for selection as a partner to work with Family Homes Funds,partners will be either public or private sector concerns, including co-operatives with credible track record of building homes. Although, Family Homes Funds will not be providing financing for individuals, all partners will  be required to meet the following eligibility requirements:

You must be registered with the Corporate Affairs Commission to carry out housing development and related business or in the case of public sector borrowers, possess appropriate authorisation and or approval to enter into a loan agreement

You must be required to have previous experience or demonstrate ability or access to capacity required to execute a housing development project of the nature and scale being contemplated

You must be able to show proof of your financial capacity to meet project costs not covered by FHF financing particularly pre-development, pre-sale and statutory approval costs

The project land will meet FHF Site Selection Criteria and be  transferable to FHF simultaneously on completion of a Loan Agreement;and where necessary,evidence of compliance with relevant statutory requirements including tax returns.


FHF will provide financing to match their objective of providing homes which are affordable to people on low income. Pricing is determined from time to time and comprises of three elements: A base rate which is related to the cost of funds, administrative spread and a risk margin. For guidance only, Family Homes Funds expects to keep  pricing below 10% pa.

The Fund will also complement existing mortgage financing facilities by providing targeted assistance to people on low income through the  Home Loans Assistance Fund – Help to buy as part of the Governments’ Social Intervention Programme. The assistance will be in the form of a deferred loan for up to 40% of the cost of their home with no payments for the first 5 years.

Most Nigerians aspire to own their own home. However, for those on low to medium income this aspiration is often outside their reach. As a result, they are forced to rent and in many cases make do with poor housing conditions and a lack of security. They can be forced to move at the whim of a landlord which can disrupt their employment prospects and the education of their children.

The assistance will be in the form of a deferred loan for up to 40% of the cost of their home. For the first 5 years of the loan, no payments need to be made. From the 6th year, monthly payments will be made to start repaying both interest and capital to assist the purchaser. The amount paid starts low and increases each year in gradual steps (average 6.5% per annum) in order for the HTB loan to be fully repaid by the 20th year,the same year the mortgage is expected to be fully repaid. To qualify, households will have earnings between N600k to N1.2m per annum and the new home must cost less than N7.5m. An exception is made in Abuja, Lagos, Port Harcourt and Kano where the cost of a new home can be as high as N9m. Households benefiting from Loan Assistance will not not be owners of  a suitable home and will include one income earner who is under 35 years of age and does not have to be one of the people applying for the scheme or the loan but must be available to help with repayments.

Many Nigerians on low income are unable to buy a home either because they do not have sufficient savings for a deposit or are currently unable to meet requirements for a mortgage. The Family Homes Funds intends to set up a Rental Housing Fund to give Nigerians on low income a first step on the housing ladder. When the Fund is launched, eligible beneficiaries will be able to lease a decent home for a monthly cost not exceeding 40% of their household income including an option to buy the home at any anytime.

From March 2019, Family Homes Funds will be providing financial support for land and infrastructure development opportunities to bring forward clean adequately serviced land for affordable housing developments.To achieve this,Family Homes Fund will work in partnership with public and private landowners to tidy up titling issues and other encumbrances necessary to make land ready for development directly or through third party developers. The Fund will also finance the provision of neighbourhood infrastructure to help  improve the quality of new neighbourhoods.

Affa Dickson Acho


What Nigerians need to know about the rent-to-own concept

Most Nigerians probably haven’t heard about rent-to-own housing. Unlike in developed countries, this arrangement is pretty rare in Nigeria. While the concept is foreign to our current real estate investment legal framework, it is nevertheless important for us to discuss and understand this concept.

Rent-to-own is an alternative route to home-ownership for those who can’t obtain financing due to poor credit or because they don’t have enough money for a down payment (or both). The idea is that you rent a home for a certain period of time with the goal of buying the property at the end of your lease. If all goes according to plan, by then you’ll have repaired your credit and/or saved enough to secure a mortgage.

How rent-to-own works

Rent-to-own agreements, also called lease-option agreements, can take many different forms.

The truth is there are very limited options for several individuals and families seeking to own properties. In order to encourage home ownership and real estate investment, there is the need to provide options that will make it easier for individuals to achieve their dreams of owning a property.

The normal pathway for a homeowner in Nigeria is to have cash and to purchase a property or to build. Access to mortgage is limited and those who are fortunate enough to secure one have to pay double digit interest rate that significantly increases their cost. The need for a more inclusive system is definitely creating the opportunity for some property developers to introduce innovative options that could attract buyers or off takers to their projects.

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The initial trend was to give their clients the opportunity to pay for land in installments. Another option some are now offering is the rent to own option.

Rent to own could also be referred to as a lease-option scheme that enables a purchaser to buy the property by installment. The buyer is allowed to rent the property for between one and three years with the option to buy the property outright at the end of the lease term subject to meeting some additional terms and conditions that are agreed upon at the inception of the agreement.

Most rent to own schemes target those who cannot meet the stringent lending conditions of the banks by giving them the opportunity to prepare themselves financially to buy a property later.

A typical rent to own agreement will include terms such as option money, purchase price and rent. The rent is calculated on a monthly basis and is usually higher than the normal rent of the property. There are two basic reasons for this. The first is the time value of money which makes paying for something by installment more expensive. And the second is the fact that most rent to own also factor in an amount that goes to defray part of the cost when it comes to the time for paying the final purchase price.

The option money is a deposit that is made at the inception to secure the lease option. It is normally a percentage of the purchase price and is similar to a down payment but usually lesser.

The purchase price is normally determined at the beginning of the lease so that the buyer has a fair idea of the amount that he is expected to pay but this could also be left until the option is to be exercised. At that time, the current market price or higher could be used as the benchmark.

The first method is actually better for the purchaser since it prevents the seller from arbitrarily changing the price or in a rapidly appreciating real estate market, from paying a significantly higher purchase price.

The way these agreements are structured, the tenant is obligated to buy the property and if he or she fails to meet up with any condition of the agreement could lose all the deposit already made. The seller could approach the court to compel the buyer to fulfill his or her part of the deal. In some cases, the parties may agree to allow the right to pass subject to the payment of cost in addition to losing his or her option deposit.

At the agreed time, the buyer is expected to pay the purchase price in full either through mortgage or personal savings. If he or she is unable to meet up then the consequences are activated.

The terms and conditions that are standard in these transactions could be quite technical and as such it is recommended that you engage the services of a legal practitioner to help you navigate them before you sign.

While this may be an option for some, for several others the risk of losing money due to their inability to meet up with the various terms is simply not worth it.

The major advantages that the rent to own scheme provides is that you can move into the property whilst getting your financial acts together. You can also lock in the purchase price in order to avoid significant price differential at a future date.

In our context, property developers that are using this scheme should also realise that they are taking significant risk since there are no specific legislation that back this scheme in Nigeria. Some of these arrangements will go sour. They should keep in mind the constraints of our legal system in the area of possession and enforcement of judgment.

Affa Dickson Acho

How I bought a house without mum and dad

According to a report published yesterday, Tuesday 4th December 2018, buying a home is almost impossible for young people without access to the bank of mum and dad. 

House prices may have risen by 173% over the last two decades but there are still some millennials who have managed to buy homes without money from their parents. Here’s what a few young people have to say about how they got their homes.

Brad Pugsley, recruitment agent, 30, Fleet

“I was 26 when my wife and I bought a two-bedroom house for £245k.

“I moved out of home when I was 18 and learned quickly to always put money aside.

“When I was 21 I moved in with my girlfriend. We were renting a one-bed for about £800 a month and both earning about £23k a year.

“Despite not having much money over four years we managed to save about £17k. This was enough to cover a 5% deposit we needed as the bank gave us a 95% mortgage.

“I cannot understand how people cannot afford a property, especially with first-time buyers not having to pay stamp duty and only having to put 5% down as a deposit.

“Saving while renting takes a long time, eats into social life, but having your own house is like passing your driving test… having freedom and independence.”

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Agata Suwala, engineer, 30, Rugby

“I was 28 when I bought my flat after working for four years and earning less than £29k.

“I’m Polish and came to the UK in 2011 for university. I started working in 2012 and rented a room in Coventry for £380 a month. I saved around 40% of my salary each month and still went on holidays.

“I saved up around £14k after around four years. Through Help to Buy I got a 15% loan from the government which got me to the 20% deposit so I could buy a flat for £150k.

“House ownership doesn’t come from earning money – it comes from saving it. Unfortunately British people don’t learn how to do that. It’s spending money they learn, that’s why a majority of people don’t have money to cover an emergency bill, but probably have a leased car or a massive TV.

“Work out what your priorities are. If you want a house don’t go out every Friday but at the end of the day you have your income and what you do is up to.”

Chris King, civil servant, 29, PrestoING

“I bought my first house at 23 years old in 2012 whilst on a £15k salary.

“I dropped out of university in Bristol and got a job back in Preston as a payments officer in the NHS where my take-home pay was around £1,000 a month. I lived at home with my parents and paid them £200 a month in rent.

“I saved £500 each month until I reached 10% deposit for a mortgage.

“I bought a two-bedroom terraced house in an ‘OK-ish’ neighbourhood for £70k. A quick check on Zoopla shows me the value of the house now is still about that.

“I felt really proud which feels weird to say. It was really good to have that independence and to have accomplished something early in life.

“But I think buying a house should support what you want to do in your life rather than being a goal in itself.

“If you want a good career you’ll need to live in a big city to get the best opportunities to progress, and that often means the houses you would want or need to buy are too expensive, and the cost of renting in that big city diminishes your saving power to get that deposit too.”

Source: BBC UGC and Social News Team


640 FRSC officers get N640m FMBN loan to renovate homes


The Managing Director of the Federal Mortgage Bank of Nigeria (FMBN), Arc. Ahmed Dangiwa, recently in Abuja, presented cheques for loans totaling N640million to 640 officers of the Federal Road Safety Commission (FRSC) for the purpose of renovating their homes.

Arc. Dangiwa disclosed that N1.8bn was approved to 196 officers of the FRSC nationwide to purchase homes as well.

He explained that the new disbursement marked a total N1.2bn given to 1,207 beneficiaries in the FRSC across the country.

Dangiwa said the mortgage loan was to assist the officers to purchase their personal houses as well renovate existing homes.

Dangiwa noted that all Nigerians could benefit from the scheme so far as they contributed to the National Housing Fund (NHF).

In his remarks, FRSC Corps Marshal, Dr. Boboye Oyeyemi, said upon assumption of office, he vowed to ensure all staff of the FRSC had their personal homes.

Section 14 (2) of the NHF Act Cap N.45 of 1992 stipulates that a contributor to the fund can access a loan from the fund for the purpose of building, purchasing or renovating of existing homes.

Source: Malikatu Umar Shuaibu

Africa and Middle East to spend more on smart cities by 2022

The amount spent by smart cities on technology is set to double in the coming four years within the Middle East and Africa (MEA) region.

The total spending is anticipated to increase from $1.3bn to $2.7bn during the review period, according to a recent report released by KPMG.

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The report, titled ‘The Rise of Smart Cities – Digital Transformation in the Public Sector’. Dr Samer Abdallah, Head of Digital Transformation at KPMG Saudi Arabia, announced that the leaders in smart city development are Riyadh and Dubai.

“Given the Saudi government’s move to embrace digital transformation in alignment with Vision 2030 and the National Transformation Program 2020, information technology (IT) spending in the kingdom is slated to grow by at least 14 per cent each year,” Abdallah stated.

Smart city spending across the world is expected to expand from $81bn in 2018 to $158bn by 2022, Abdallah revealed using statistics from the International Data Corporation.

“As Saudi Arabia makes great strides to build a sophisticated digital infrastructure under its Vision 2030, cloud computing will be a catalyst for digital transformation,” Abdallah said at the “Race to the Cloud: Present and the future of cloud platforms in fuelling Artificial Intelligence’ presentation.

Source: globalconstructionreview

FMBN to retrieve N43bn housing loan, says N5.4bn recovered in 2yrs

THE Federal Mortgage Bank of Nigeria (FMBN) has unfolded plans to recoup N43billion housing loan debts from its debtors within the next 18 months.It said so far, it has been able to recover over N3billion in 2018 in addition to the initial N2.4 billion recorded in 2017.

The bank’s Managing Director, Ahmed Dangiwa who made the disclosure at the 2018 Annual Management Retreat themed“Improved Transaction Turnaround Time: Getting it Done,” held in Kano said this was in line with its loan recovery drive.

The MD stated that already, the bank  is working in partnership with the Special Presidential Investigation Panel for the Recovery of Public Property; “in a move that is likely to recoup N43billion from the Bank’s debtors within the next 18 months.”

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He maintained that the Bank was strengthening its collaboration with its key stakeholders, especially the labour unions, whose members constitute the bulk of contributors to the National Housing Fund Scheme.

“This has culminated in the commencement of a need-targeted housing delivery program across the country – the National Affordable Housing Delivery Programme (NAHDEP) for Nigerian workers, in collaboration with the Nigeria Labour Congress (NLC), the Trade Union Congress (TUC) and the Nigeria Employers’ Consultative Association (NECA).

“Groundbreaking ceremonies have been done and construction work has commenced in earnest in five states, spread across the six geopolitical zones of the country. Others are in the pipeline as we intend to cover every State across the country. Part of the central focus is to establish a template for affordable housing delivery in Nigeria.

“Accordingly, the implementation concept is unique with the housing designs and bill of quantities (BoQ) directly commissioned by the Bank to ensure the profit motive is greatly minimised. This template has given us the leverage to guarantee that the selling prices for the housing units range between N3.1m and N8.3m for 1, 2 and 3 bedroom dwellings,” he said.

Dangiwa further noted progress in its strategic plan to reform and reposition the Institution as a more effective provider of safe, decent and affordable housing for Nigerians despite many challenges.

He revealed that after twelve years of failed attempts at institutional restructuring, Management’s proactive stakeholder engagement drive has resulted in the successful passage of key amendments to the Laws establishing the Institution and the National Housing Fund (NHF) by both chambers of the National Assembly.

According to him, the amended laws when assented to by the President would birth a new, more independent and financially stronger FMBN with a robust capital base of N500 billion.

He added that additional liquidity and operational flexibility will greatly enhance FMBN’s capacity to more effectively deliver on its mandate to provide access to affordable mortgage finance for home ownership by Nigerian workers.

Mortgage refinance applications hit 18-year low

With no major move in interest rates and continued weakness in home affordability, there was not a lot of incentive for homebuyers to make a move last week, and there was even less for homeowners looking to save money on their mortgages.

Total mortgage application volume moved 0.1 percent lower last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 22 percent lower than a year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 5.16 percent from 5.17 percent, with points decreasing to 0.48 from 0.55 (including the origination fee) for loans with 20 percent down payments.

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With rates still at the highest level in eight years, mortgage applications to refinance a home loan continued their downward spiral, falling 5 percent for the week to the lowest level since December 2000. Refinance volume was 40 percent lower than a year ago. The refinance share of mortgage activity decreased to 38.5 percent of total applications from 39.4 percent the previous week.

“Treasury rates declined last week, as equity markets continued to see large swings amidst investor concerns over global economic growth,” said Joel Kan, an MBA economist. “As a result, mortgage rates inched back across most loan types, including the 15-year fixed-rate mortgage, 5/1 ARM, and 30-year jumbo mortgage rate. The 30-year fixed-rate mortgage also declined, stopping a run of six straight weekly increases.”

Mortgage applications to purchase a home increased 3 percent from one week earlier but were 5 percent lower than the same week one year ago. Rising interest rates combined with still-rising home values have pushed affordability to the lowest level in a decade. While the inventory of homes for sale is beginning to rise, it is still painfully low, especially given strong demand.

Monthly housing data for October so far has come in weaker than expected. Single-family housing starts as well as homebuilder sentiment made sizable swings lower, and mortgage applications to purchase a newly built home also fell.

“Every single data point is now extending to ‘what does this mean for the Fed,’ and rate-hike odds past one more in December continue to shrink,” said Peter Boockvar, chief investment officer with Bleakley Advisory Group. “Calibrating monetary policy from here in order to achieve a rare soft landing will not be easy, as it never is.”

Source: Diana Olick

Challenges of Mortgage Finance And The Way Forward

Housing is one of the basic necessities of life. However, basic to any development, housing inclusive, is finance.

Of all the problems of housing development in Nigeria, the problem of finance is very critical and decisive. The best programmes of government, no matter how grand and viable in scope and content will remain a day dream, unless there is sufficient capital to concretise it. Despite various pronouncements, regulations and deregulations, and all financial implementation policies of this country, the challenge of accessing sufficient funds for an effective housing delivery system remains an issue.

In Nigeria, mortgage financing has been a major area of concern, identified as one of the most formidable constraints in the housing sector. The recognition of the critical importance of finance in housing delivery led to the establishment of the Nigerian Mortgage Refinance Company in June 2013.

The NMRC was set up to bridge the funding cost of residential mortgages and promote the availability as well as the affordability of good housing to Nigerians by providing increased liquidity in the mortgage market through the mortgage and commercial banks.

Policies of various arms of government in Nigeria had been unstable over the years due to frequent changes and instability in the nation’s system. This instability can be attributed to the government’s failure to develop a viable and sustained housing finance system either because of lack of expertise, lack of knowledgeable industry leaders especially in making policies, and lack of funding for relevant institutional agencies.

Mortgage financing, has been confronted with numerous challenges that have impeded the attainment of its policy objective of acting as a catalyst for the provision of affordable housing in Nigeria.

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In 2014, the Nigerian Deposit Insurance Corporation (NDIC) highlighted some of the challenges being encountered by Mortgage banks in its annual report.

The report outlined some the challenges which include:

Delay in accessing NHF funds/dearth of long term funds. Most of the PMBs continued to find it difficult to provide the required bank guarantee to access the NHF.

Due to lack of understanding of the nature of business of PMBs by the public, it had been difficult for the PMBs to mobilise deposits to finance their housing projects which were usually long term in nature. The public prefer to open savings/current accounts with deposit money banks (DMBs) rather than with PMBs whose operations were considered to be too complicated.

Another challenge is the Land Use Act, which had made the process of perfecting title to landed property burdensome, slow and costly. That had affected negatively the foreclosure procedures on the properties pledged as collateral.

Also, under-developed Mortgage-Backed Securities (MBS) which allows mortgage assets to be traded on recognized stock exchanges, do not presently exist in Nigeria.

Appalling state of facilities like roads, transportation, power and water supply had contributed to the high cost of building construction in Nigeria. Furthermore, the high foreign exchange content of imported building materials such as cement, tiles, ceramic wares etc have made housing non- affordable for the average and low income earners.

The lack of foreclosure laws governing the default mortgage loans, the entire cost associated with the task of title transfer, poor infrastructure to provide support for house constructions and highly complicated and lengthy legislative and legal frameworks for land acquisition.

Others are strict financing laws and weak banking structures that have led to volatile markets and made investors, reluctant to do business in such trying market conditions.


The way forward
The financing of national housing programmes should be viewed primarily as a national responsibility. The private sector should be encouraged to provide the bulk of actual investment funds for housing middle income and upper income groups.

For the low income group, however, continued public support, individual initiative and labour movement involvement, will be required for housing and community development. Empirical evidence shows that private sector participation in housing is the most assured way to induce stability in the market.

Indeed, the role of Government should emphasize creating an enabling environment to stimulate private sector participation in long-term housing finance. This includes provision of physical infrastructure, enhancing the soundness and competitiveness of mortgage finance institutions and developing property rights.

The housing fund contribution should be integrated into the personal income taxation system such that a defined proportion of taxes paid are allocated to the housing fund pool, as it is done in Singapore.

There is need for constant re- engineering of the capital and money markets in order to cope with the renewed challenges of provision of some mortgage financing. In this regard, the restructuring and strengthening of the FMBN becomes imperative for it to remain a viable financial institution with the capacity to enhance efficient housing finance development in Nigeria.

Cooperative and savings and credit institutions are complementary organizations in the housing sector. Savings and loan investment funds may be better able to serve low-income families if they are channelled through cooperatives. Infact, the cooperative societies may be necessary to encourage savings and loan associations to finance genuine low-income housing, since it enables small individual savings to be pooled into a collective mortgage.

In addition to funds through regular budgetary and fiscal programmes, there is need to put in place other measures to boost available investible funds in this sector.

New sources should be explored through the development of a variety of instruments for the mobilization of fund from the capital market. This include, the large-scale securitization of mortgage portfolios, a mechanism that has remained the primary engine of growth in the housing finance systems of the United States, Germany, France and Italy to name only a few.

For example, the National Housing Fund in South Korea thrives on, not only the deposit subscriptions, but also housing bonds issued by the Housing Bank to finance housing development programmes. Therefore, broadening the capital market to encourage sales and exchange of housing-related securities, i.e. housing bonds, mortgages, loan participations and certificates, can generate additional leverage. This is an important means to attract short or medium-term investment fund into the sector.

There is need to continue with sound economic and monetary policies to overcome the negative effect of inflation on housing and other construction finance, which require long-term credit in the country. This is because high and persistent inflation erodes the real value.

Housing is one of the basic necessities of life. However, basic to any development, housing inclusive, is finance.

The Housing Sector plays a more critical role in a country’s welfare than is always recognized because it directly affects not only the well-being of the citizenry but also the performance of other sectors of the economy.

With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in Nigeria can afford.

SOURCE: Affa Dickson Acho

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