Home buyers, especially first timers, are the focus of a new push and commitment by the Lagos State government, the Nigerian Mortgage Refinance Company (NMRC) and Mortgage Warehouse Funding Limited (MWFL) to build an end-to-end ecosystem for affordable housing.
Nigeria has a staggering housing demand-supply gap conservatively estimated at 17 million units which finds explanation in the affordability gap in the housing market. House prices are too high for the greater number of people which is also explained by the high cost of land, funds, building materials and even labour which is imported in some cases.
These challenges formed the nucleus of discussions at a one-day workshop in Lagos jointly organised by Lagos, NMRC and MWFL, primarily focused on providing access to affordable housing for residents of the Lagos State which has over three million housing deficit burden.
The creation of mortgages provided the compass for deliberations, as well as construction finance and interest rates. There were insights on pre-financing, financing and refinancing stages of the pathways to affordable housing just as the creation of a Fund 5 with the Pension Commission in the form of a ‘Pension Contributors’ Housing Fund’ was also highlighted.
A communiqué issued at the end of the workshop highlights some of the decisions, contributions, recommendations and approaches to building the ecosystem that will make affordable housing happen.
According to the communiqué, Gbolahan Lawal, Lagos commissioner for Housing, canvassed expanding the housing finance frontier and also advocated the need to think along the lines of addressing lender risks and costs to help market expansion as well as deal with constraints to accessing mortgages.
On his part, Sonnie Ayere, MWFL’s chairman, also assured that MWFL was positioned to bridge the funding gap through short term pre-financing of member mortgage banks for a period of six months prior to refinancing by NMRC.
Ayere described the ecosystem as one that will propel mutual benefit to stakeholders and, ultimately, the first-time home owner. He stated that a significant reduction in the high interest rate to bridge the affordability gap coupled with active contribution of both formal and informal sectors in pension funds will create an opportunity for more houses to be developed at affordable costs.
To galvanise all these contributions and bring them to fruition, the communiqué recommends that there should be concerted efforts in the housing sector to educate the populace on the numerous opportunities of becoming homeowners.
The proposal for a Fund 5 should be further explored to devise the best approach to overcoming potential hurdles while the Model Mortgage & Foreclosure Law (MMFL) should be adopted in Lagos State to strengthen investor and financier confidence in the recovery of invested funds in the event of default.
To ensure mass production of houses, the communiqué also recommends adopting a technology for producing housing units at record speed, reduced cost and time, noting that inclusion of the informal sector is critical and all avenues to shepherd in this huge demography should be devised and implemented.
Already, there are some reliefs which, the communiqué says, could be harnessed to boost the ecosystem and, ultimately, close affordability gap. “The National Pension Commission as a regulator does not object to creating an additional fund; however the commission needs to set a framework for the mechanics and the environment for this to take place”, the communiqué says, suggesting that, for a Fund 5, the regulators and operators need to discuss all the issues extensively to ensure that the proposition is workable.
The Lagos State Pension Commission explained the objectives in the state, which is to ensure that pensioners are able to own their own homes. The state’s pension law is being amended to reflect a position that allows the pension contribution to serve as equity contribution for mortgage. The state government has so far remitted over N80 billion for retirement scheme and has an arrangement to allow contributors to draw up to 25 percent of their pension contributions to part-finance their mortgages.
The Central Bank of Nigeria(CBN) disclosed that it has instituted a public awareness program titled ‘My Own Home’ (na me get am) where prospective home owners can approach their banks, declare their income and get advice as to the appropriate structure/home type they can subscribe to.
It was noted that several houses built are not affordable and developers are urged to conduct market feasibility to get necessary intelligence that would reflect the real needs of the people which in turn leads to the construction of affordable housing that match established needs.
The communiqué also harps on securitization as a veritable means of ensuring affordable public housing and bridging the housing deficit. The NMRC is looking to put modalities in place to ensure its funding programme can metamorphose into a full securitization model.
Important note was also taken of the Nigeria Housing Finance Program (NHFP) aimed to provide awareness. This is important to achieve a paradigm shift so that prospective homeowners focus on properties they can afford to buy. NHFP also promotes responsibility by encouraging mortgagors to be consistent in repayment of loans. The developers need to join NHFP in promoting the paradigm shift and educating the public on how to achieve a realistic target audience.