Land documentation process in Nigeria: A mixed bag of experiences

For Nigerians with enough money to throw around or those who have connection with persons in high offices, getting a title for their landed property can almost happen in a blink of an eye, while for others it can take almost forever.

Checks  revealed that Nigerian property owners, estate developers, legal practitioners and other stakeholders in Lagos state have had different experiences, at one time or another, in getting their land documents in a country where 90 percent of houses are built with own savings.

Issues around the rigorous processes,long duration and the high cost of obtaining land documentations are among key setbacks identified and highlighted by industry stakeholders.
Jide Ogunleye, CEO of Denaro Properties Limited, a business and investment strategies firm with emphasis on real estate, said bureaucracy combined with corruption in the titling process will not allow things to get done.

“Whatever has been done has still not solved the problem of titling, forget the e-certificate. The people that will provide the e-certificate can be bottlenecks in the process,” he said.
He explained that this is because “people won’t move your file, except they are paid or something, and as such it is likely that in some cases you can be on your land title for a very long period of time.”

Omobola Ayoola, business development manager at Joe Etoniru & Associates, a real estate company, affirms, saying that the process of getting land title “is not cut-and-dried; it is not like you submit the form and immediately your form goes through some people and you get your certificate, no.”

She notes that the cost of getting the document can be as high as N1 million to N2 million, adding that it has always been expensive.

But, according to the Lagos State Business Made Easy (BME) document driven by the Presidential Enabling Business Environment Council (PEBEC), there has been a reform in the method of operations by the Lagos State Land Bureau as it has introduced the use of technology in its day-to-day transactions.

The BME document, however, explains that prior to the implementation of the reforms, “applicants seeking to register property in Lagos were required to pay fees at different stages and carry out visits to the land registry before registration could be completed.”

It notes that “the reform initiatives put in place have simplified this process by making payments possible online, automating procedures and reducing charges.” As a result, the time required to register property has reduced from 105 days to 75 days, and also the number of procedures required to register property has reduced from 12 to 8.

Adeniyi Akinlusi, president of Mortgage Bankers Association of Nigeria (MBAN) and CEO, Trustbond Mortgage points out, however, that the cost of land titling has reduced compared to what it used to be before Bababunde Fashola’s administration.

“So in terms of cost, it has come down. They have also tried to reduce the administrative bottleneck but there is room for improvement. However, I am aware that the new law being reviewed by Lagos state is going to streamline titling in terms of the processing,” Akinlusi said.
Meanwhile, possession of land title documents is one of the most important ways of laying claim to ownership of a property.

Ayo Ibaru, COO/Director,  Real Estate Advisory at Northcourt Real Estate, explained that the process of land documentation in Lagos state has attained an almost legendary status in property development lore.

“There has been many a complaint about unnecessary hassles on the path to title perfection. The process takes too long. The requirements border on the onerous and the officials in charge could be more helpful,” Ibaru noted.

But he added that there have been some improvements, saying that transaction speed has gotten better as the government has made concerted efforts to introduce technology to the process, including the commissioning of an online system to facilitate the processing of land documentation.

Narrating his frustration with the process of getting land title for his clients, a legal adviser who asked not be quoted for the fear of losing his job said in his last  eight years of working on the field, nothing has changed about getting a land document.

“The time it takes to get the document has not improved; it only just depends on how fast you want to get it done. It is for the highest bidder, sometimes if you have someone at the top, it can be faster but with serious follow up which would have involved you paying heavily to the officers you will be able to get it faster than others”.

Over the past three years, Nigeria has implemented more than 140 reforms, increased its Distance-to-Frontier (DTF) score by over 11 basis points, and moved up 24 places in the World Bank Doing Business Index (DBI) rankings, as revealed by PEBEC Reforms Reference Handbook.

Some of the highlights of reforms by successive administrations in lands bureau to date, as compiled from the website of the Lagos State Government Land Bureau include  the 30-Day Governor’s Consent and Reduction of payments on Consent fees, Capital Gains Tax, Stamp Duty and Registration fees.

Ibaru applauded these efforts qand the resultant improvements, but pointed out however that, in all, it still leaves much to be desired for a state that prides itself as ‘Centre of Excellence’.
“The governor’s consent, by many accounts, can be obtained within 3 – 6 months of completing the application. The cost, however, could be improved as officials still charge approved and not-so-clear fees at different stages of the process,” he explained.

The administration of the land use act means that everything must be issued by the governor, which according some real estate experts takes a lot of time.  This means that when a mortgage is to be registered it must be with the consent of the governor, and this is cost-inclusive.

The transaction cost of title perfection sometimes gets between 7 to 8 percent of a mortgage loan amount. A loan applicant  sees a situation whereby he wants to borrow N10 million and he needs another N1 million or N700,000 as perfection cost, explained Abiodun Akanbi, head of strategy at Infinity Trust Mortgage Bank

Mary Ikechukwu disclosed that she had been processing her land title for over 2 years and still no sign of going through with it anytime soon. “At the first sight of presenting my file to the officers, they spotted some errors in the documents. Meanwhile, this is not my first time of registering, and so I had to start with the processing all over again,”  she lamented.

 

Continuing, she said,  “even with the amount I have paid, the process is still slow and I do not even know the exact issue” adding, “there is need for an efficient online system that will help remove all the human interface in the processing.”

Meanwhile, Nigeria with the highest population in Africa has one of the world’s lowest mortgages to Gross Domestic Product (GDP) rate at less than 1 percent, which obviously lags Ghana’s 2 percent, South Africa’s 30 percent, the U.S rate at 60 percent and that of the UK at 70 percent

According to Akinlusi, all hands are on deck, as the mortgage association was engaging with the government. “If the foreclosure law which is being reviewed now is enacted, like it has been passed by Kaduna state, it will help to streamline titling of property and documentation and when it becomes faster to get title, the cost of development will cost less and then you can start talking about property approval and, if they have building, then mortgage can come in,” Akinlusi assured.

Source: Endurance Okafor

Why PMBs can’t create mortgages or give housing loans

After the consolidation and recapitalisation of the primary mortgage institutions (PMIs), leading to their name change, reduction in their number from 83 to 40 at the time, and increase in capital base, expectation was that their impact would be felt considerably in the housing sector.

 But, even though the capital base of the PMIs which became primary mortgage banks (PMBs) was moved from the statutory N100 million to N2.5 billion for those licenced to operate at regional level and N5billion for those with national operating licence, Nigeria’s housing problem still persists.

 When the Nigerian Mortgage Refinance Company (NMRC) was set up by the federal government, part of its mandate was to increase liquidity in the mortgage market as a critical step towards increasing housing affordability.

 Twice, the company has raised funds from the capital market, totalling N18 billion as at December 2018, to refinance mortgages originated by the PMBs. But only a few of them had mortgages for refinancing.

 From the consolidation and recapitalisation time to this moment, many of the PMBs have been struggling, unable to originate mortgages or give housing loans. Not even the revised operational guidelines by the Central Bank of Nigeria (CBN) which stripped the PMBs of other business concerns and compelled them to focus on their core business of providing mortgages and housing finance for home ownership and other forms of property acquisition, has helped matters.

  “The problems of mortgage banks revolve around their small capital base and so there isn’t much they can do. For all the money I have, unless I raise additional capital, I don’t think I can do 1,000 mortgages,” Ayodele Olowookere, the CEO, Omoluabi Mortgage Bank, explained to us in an interview.

  “I think mortgage banks need to do self-enlightenment and education to grow the industry,” he added. He explained that over time there has been a wrong perception of the mortgage industry which, according to him, was understandable because a lot of mortgage banks had also done what was not right like collecting money from people and not giving back.

 A lot of people say they will never go near mortgage banks because of some unethical conducts like this. Though Rose Okwechime, CEO, Abbey Mortgage Bank Plc, attributes some people’s apathy to mortgage banks to the “newness” of the mortgage system, Olowookere insisted that it was as a result of lack of self-education by the operators.

 Besides these reasons, analysts observe that some of these PMBs are not doing well because the Nigerian business environment is both hostile and risky. So, if these banks are not originating mortgages or giving housing loans, it could be for either of two factors or both.

 One is that a lot of people who would have taken mortgages or subscribed to mortgage products are unemployed. Many of those who are employed are either not mortgageable or suffering from job insecurity. The second point is that the money that many of these PMBs have is short-term deposits and, therefore, cannot be given out to long-term borrowers.

 Paul Onwuanibe, CEO, Landmark Group, adds what he calls “the big issue,” which is the fact that there is a clear absence of mortgage-viable properties out there in the market on which mortgage could be created.

 “The basic principle of a mortgage is that you must have steady income and be in gainful employment. You must be able to provide income in multiples for the property that will be built for your use. If your income is N4 million per annum, for instance, and the cost of the property is N30 million, unless you want to steal, you cannot afford that property and there is no mortgage for you at that rate given your income,” he explained to us.

 In other economies, the mortgage sector is a huge contributor to economic growth, but in Nigeria, the sector’s contribution to GDP is less than one percent, which is why the industry operators are canvassing government’s intervention as has been done in the agric sector.

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 According to them, government must understand that if the mortgage industry is well-run and there is a good policy thrust to support its operations, it will diversify the economy with job creation. “The focus on other non-oil sectors, especially agriculture, is good because Nigerians need to feed themselves, but everybody also needs shelter and this can only be possible if the mortgage sector is made functional,” Olowookere said.

 Onwuanibe affirmed, adding that “the mortgage industry has to improve, and developers have to be encouraged to build mortgage-viable and ready properties; mortgage interest rates have to be reduced to single digit and made available; the whole process of securing mortgage has to be made clearer and more transparent, and the mortgage has to be available on the ‘retail high street’ such that every time you go out looking for it, you see it.”

Source: Chuka Uroko

Revised NHF: Fresh hope on more home affordability for workers

For Nigerian workers, thepassage of the revised National Housing Fund (NHF) bill by the National Assembly is not only a piece of good news, but also one that raises fresh hope for enhanced access to mortgage and more home affordability.

Liquidity issue in the mortgage system is expected to be a thing of the past. Nigeria workers, especially those in the public sector, are the least advantaged in terms of home ownership in Nigeria, considering that their take home pay at N18,000 per month can hardly give them three good meals a day and pay other bills including house rents and school fees, not to think of buying or building houses.

They need some support in the form of mortgage to enable them buy or build their own houses. It was in the realization of this need that the Federal Government, 27 years ago, came up with the National Housing Act 1992 that gave birth to the NHF.

NHF was aimed to mobilise funds for the provision of affordable housing for Nigerians. The outlined sources of funds for the fund included contributions by Nigerians in both the public and private sectors; investment in the fund by commercial and merchant banks; investment in the fund by insurance companies and financial contributions by the Federal Government.

But, over the 27 years of its existence, contributions from Nigerian workers have been the mainstay of the fund. Lack of compliance to the provisions of the Act by commercial and merchant banks and insurance companies has affected its liquidity and capacity to create the required impact.

Indeed, mortgage experts argue that the slow growth and minimal impact of the fund over the years are attributable to the failure of both the banks, insurance companies and other stakeholders to live up to expectations. This was the situation that gave rise to the review and passage of the new NHF bill by the National Assembly.

Some of the notable provisions in the new bill are the 2.5 percent contribution of monthly income to the fund by Nigerians in the public and private sector.

This comes with benefits and is refundable on retirement. As a contributor to the fund, a worker can apply for a housing loan of up to 15 million after only six months of continuous contribution. The loans attract low-interest rates of 9 percent per annum and are payable over 35 years.

Secondly, commercial banks or merchant banks and insurance companies are now required to invest 10 percent of their profit before tax into the fund.

In the existing law, commercial and merchant banks were required to invest a whopping 10 percent of loans and advances to the fund while insurance companies are required to invest a minimum of 20 percent of non-life funds and 40 per cent of it life funds in real estate.

The bill also stipulates fines to be applied to commercial and merchant banks as well as insurance companies to ensure compliance amongst others.

Though these provisions are still contentious as analysts say that asking every commercial or merchant bank, insurance company to invest 10 percent of its profit before tax (PBT) into the fund at an interest rate of 1percent above the interest rate payable on current accounts of banks could hurt them, close watchers of the mortgage and housing market in Nigeria commend the unfolding development.

These market watchers insist  that it is a positive development in the quest to tackle the perennial problem of sustainable housing finance that is required to develop  the country’s housing sector.

“The provisions of the new housing bill are relevant and will enhance the potential of the NHF scheme to increase access to decent, quality, affordable housing for Nigerian workers, especially those within the low- and medium-income brackets”, said John Ikyaave, a housing industry expert, in Abuja.

The fear of the analysts is that when such a financial strain is put on private companies, they will be forced to cut costs by sacking staff and freezing new investments, just as the new bill will probably see some of the companies pass on the cost to consumers, thereby triggering a surge in inflation.

But Ikyaave reasons that the new NHF bill, which is now awaiting the assent of President Muhammadu Buhari, will support the provision of housing loans at best and lowest market interest rates of between 6 and 9 percent that can be paid for periods of up to 35 years.

“Currently, if you go to commercial or mortgage banks for a housing loan, the interest rates you will be charged usually range from 19 to 25 percent. Now, how many Nigerian workers can afford that?

The  NHF is the only scheme that gives housing loans at single digits and for longer-terms of 35-years. A stronger NHF with  robust financial inflows will have the capacity to extend its range of affordable housing solutions to more Nigerian workers and create wider impact”, he posited.

Ikyaave commended all housing industry stakeholders who contributed to the passage of the bill and encouraged President Buhari to see its merit and sign it into law to kick-start a new phase in the provision of social housing in the country.

Source: Chuka Uroko

Is UK property still a good investment?

For those considering whether now is the moment to buy, these are disorienting times. When Kate Faulkner recently looked for a home in the city of Peterborough — a growing location for London commuters — she found comparable properties within one square mile whose prices were going up, down or were completely flat.

“There are as many different markets in one city as there are across the country,” said the founder of Property Checklists, a website and advice provider.

With price growth slowing in former hotspots, transaction levels stuttering and an uncertain period for Britain’s economy in prospect, the housing market has been drawing in its horns. Buy-to-let investors are hemmed in by new taxes and regulations, while owner-occupiers are reconsidering high-risk property moves as interest rates start to rise and mortgage affordability rules remain tight.

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This week, Bank of England governor Mark Carney delivered a stunning warning that house prices could be 35 per cent lower than would otherwise be the case three years after a disruptive “no-deal Brexit”.

Some, however, believe today’s uncertain market offers precisely the conditions in which canny purchasers can find opportunities to strike a property bargain. After experts tackled the issues on stage at the FT Weekend Festival last weekend, FT Money assesses the outlook for anyone thinking of pushing the boat out on a home purchase. Is property still a good investment?

A journey of price discovery

A housing cycle is under way across the UK, said Richard Donnell, director of housing market analyst Hometrack, told a packed marquee of FT Money readers at the festival. But depending on where you are in the UK, it could either be coming to an end or it is just getting going. While growth is powering ahead in cities such as Manchester and Liverpool, it is flagging or going into reverse in places like Aberdeen and parts of London, according to Hometrack’s latest prognostications.

 

There are other parts of the UK that are still to see the ripple effects of formerly stratospheric growth in London and the Southeast — a trend that stalled roughly three years ago. “Five cities are 50 per cent higher [in price terms] than they were 10 years ago,” said Mr Donnell, with Oxford, Cambridge and Bristol among them. “But there are four cities such as Glasgow and Newcastle that are still at 2008 levels or even lower.”

The decidedly mixed picture he set out is reflected by lacklustre levels of activity in the housing market. The number of housing transactions has been stuck at the same level for four years — around 1.2m per year — but in London, where the market slowdown has been particularly marked in central or “prime” areas, turnover is down by 20 per cent over four years. Sellers are coming to terms with the fact that there are fewer buyers on the ground, and today’s house hunters are making higher demands of vendors.

But some of those sellers are not yet willing to acknowledge that a material change in sentiment has taken place. One indicator of this is the gap between asking and selling prices, which stands at 10 per cent in central London, said Mr Donnell. In Manchester and Birmingham it has narrowed to about 2.5 per cent.

“In London we’re on a journey of price discovery. [Buying a home] is about finding the people who are serious about selling, who are happy to take that haircut on price to get on with their life. It takes a couple of years for sellers to take that on.”

 

The human factor

Among asset classes, housing often carries a strong emotional connection for its owner-occupiers — a connection that few would ascribe to the equity funds sitting in their Isa. Ed Mead, founder of property services company Viewber, expounded on the limitations of statistics in informing a decision about how to put a roof over one’s head — something that is essentially “a human endeavour”.

To ask the question whether property remains a good investment may have been uncontroversial in the FT Money tent, but Mr Mead, an industry veteran, said it marked a long-term and lamentable shift in public attitudes over the function of housing and the development of a national obsession with house prices.

“In my lifetime, it’s gone from being a home to being an investment,” he said. “The Brits have a macho problem with property prices. I do wish people would stop worrying about their inherent value being associated with their house.”

He was bullish, nonetheless, on the logic of pressing ahead with a purchase today. Pricing may be hard to pinpoint in a sluggish market with low turnover, he said, but the fact that everyone in an area was in the same position meant losses on one side of a transaction can easily become gains on the other.

“I think it’s the best time there’s ever been to buy in London,” he said. “Most people sell because they want to buy something bigger. Say you’ve got a £1m house that’s now worth £850,000. You’re trying to buy your dream house, which might have cost you £3m three years ago, and you can probably buy it now for £2.25m. Who’s winning there?”

His qualified optimism about the capital’s property market — in spite of falling prices in many boroughs — was shared by Henry Pryor, an independent buying agent speaking a stone’s throw away on the festival’s House & Home stage.

“Uncertainty is bringing with it opportunity because people don’t know how their sale is going to go, or how far their budget will stretch,” said Mr Pryor. “As a result, people are jumping the wrong way. Sometimes people are selling for less than they might have been able to get and in other cases other people are sitting tight.”

The difficulty of finding the right price in this climate of uncertainty, however, has brought interesting developments in the way people are marketing their homes. Terrified of putting their house on the market at the wrong level and either sparking no interest or leaving money on the table with a price pitched too low, vendors are increasingly turning to “ off-market sales”.

These allow them to put the word out among selected potential buyers, without publicly advertising the sale. Mr Mead said there had been “real growth” in the number of off-market websites such as Invisible Homes in Fulham — an area where sellers have had to accept lower prices than expected in the past two years. “They’re designed to try and show whether you’ve made a balls-up on the price before you take it to the market. They’ve become very popular,” he said.

 

Buy-to-let pressures

For owner-occupiers, investing in property can mean stretching oneself on a mortgage in the belief that a house is undervalued, or will rise in value following a revamp. But market purists might consider mainstream “property investment” to refer to the buy-to-let sector.

There, the experts agreed, the outlook is not rosy. Landlord investors have been in high dudgeon after a series of tax and regulatory changes that have hit profits and raised the costs of investment. Extra stamp duty in the form of a three percentage point surcharge on buy-to-let purchases introduced two years ago is one drag on the sector. Arguably, the more damaging move for highly leveraged landlords is the loss of higher rate tax relief on their mortgage interest, which is being eradicated in stages, disappearing for good in 2020. Mortgage affordability has also been curtailed by stringent “stress tests” demanded by regulators.

“All the benefits to owning a buy-to-let property are being taken away,” said Mr Mead.

The hit to higher-rate taxpayers has come together with the prospect of higher interest rates on buy-to-let mortgages after base rate rises, causing landlord owners to question their underlying rationale for investment and squeezing out those who pin their hopes on a short-term return via capital growth.

Mr Donnell offered a glimmer of hope in urging a different mindset on landlord investors. What buy-to-let still offers is a pension-style income stream that delivers a monthly cash flow from a property, he said. This can allow investors who are no longer working to benefit from earnings growth in the form of higher rents.

“Yields are low, but if you invest in the right markets this long-term link between rental and earnings growth is to me the underlying attraction of investing,” he said. “Learning to love the cash flow and taking what the housing market gives you on house price inflation is the way to approach investment.”

As London’s rental yields have paled against those achievable in the expanding cities of the north, investors based in the south are fishing further from their home territories in search of better returns. But the arms-length nature of such deals brought sharp warnings from Ms Faulkner about the need for fine-grained research into proposed areas for investment, with good and bad deals aplenty even on the same street.

“Your best friend if you’re investing outside an area you know is sold property price data. This is what you should focus on. You must find a good surveyor and agent and be very wary about property sourcing companies,” she said.

Does the loss of easy returns from price growth mean we will see a return of the classic “doer-upper” investor? Mr Pryor said the option of improving the value of a home through refurbishment or development had not gone away. “You can make money with property by re-purposing something that isn’t attractive today, turning it through 90 degrees, and adding a second bedroom or a mansard.”

In the FT Money tent, though, Ms Faulkner was skeptical, arguing that the “Sarah Beeny” effect, named after the TV presenter who sparked a surge in DIY property development, was fully played out in a crowded market, replete with people inclined to “go bonkers” over a derelict property.

“Far more people want to renovate properties than properties are available,” she said. “Some want to buy just to have the experience. The only way you can do it is to buy with cash, and buy something nobody would touch with a barge pole.”

The Brexit discount

One of the thorniest questions for those mulling a purchase or sale in the next few months is the extent to which the as yet unknown mechanics of Britain’s departure from the EU will affect any move they make in the market. Will a good Brexit deal cause prices to surge, or will they plummet should Britain crash out without agreements in place?

The “wait and see” approach already adopted by those not facing a forced sale or purchase will be followed more widely towards the end of this year, said Mr Pryor, as the political situation comes to a head before March 2019. In his view, this creeping reticence will tell on prices, leading to a drop of roughly 5 per cent in the second quarter of 2019.

“If you’re going out to buy what for most people will be their most expensive single asset, how brave have you got to be to commit to that purchase rather than do what I think most people will do and say — let’s just wait until June?”

Sharing the stage with Mr Pryor — as well as his view of the slowing effect of Brexit uncertainty — was Stephanie McMahon, head of research at estate agent Strutt & Parker. But asked when the clouds might lift in the capital, she predicted the beginnings of a recovery “towards the back end of next year”.

One effect that she pinpointed was a fall in the share of the capital’s homes being bought by overseas purchasers — a trend that is likely to accelerate until the uncertainty over Britain’s future status begins to dissipate.

“We’re seeing less activity from international buyers. UK domestic buyers are now 80 per cent of London transactions. If you’re staying in the UK you have to make decisions, you have to change home whether you’ve had children or changed jobs.”

Neal Hudson, director of market research company Residential Analysts and another speaker on the House & Home stage, said a hard Brexit was likely to result in further stagnation and, in terms of the likely price drop, “a lot more pain than 5 per cent”.

He also cast doubt on the idea that sharply falling prices in London would have a silver lining: that hard-pressed first-time buyers might thereby be brought within reach of a purchase.

“If we had something more severe — a hard Brexit — there would be rising mortgage interest rates and stressed affordability. Prices might come down more, but if you’re a first-time buyer trying to get into the market, the lenders are probably just going to shut up shop.”

Such sentiments were echoed in Mr Carney’s recent comments to ministers about a disorderly Brexit. A property price crash would be driven by rising unemployment, depressed economic growth, higher inflation and higher interest rates, the governor warned.

Mr Mead advised property buyers preparing to weather the turbulence associated with Brexit to take a long-term view.

“You can spend an awful lot of time getting very confused by this stuff. It doesn’t matter what you think is going to happen in the next year or so. People love Britain because it’s safe and economically stable. It’s not going to lose its lustre. So long as you take a long-term view, if you see something you like and it makes sense to you, buy it.”

Is it really harder to be a first-time buyer now?

Today’s conventional wisdom is that young buyers face unprecedented difficulties in getting a first home. For one audience member in the FT Money tent at last week’s FT Weekend Festival, it was an assumption worth questioning.

“I bought my first house in 1971 . . . I didn’t have a Bank of Mum and Dad. I lived with my mother-in-law for free for a few months. The interest rate was 7 per cent and in the 1990s I was paying double-digit interest. Is it genuinely more expensive to get on the property ladder now than it was 40 years ago?” he asked experts on a panel discussing property investment.

With 40 years in the industry, Ed Mead, founder of property services company Viewber, was sympathetic, pointing out that beyond London and the Southeast, nominal house prices had often remained unmoved over the decade. “If nominal house prices are looking the same as they were 10-12 years ago, that’s got to be cheap.”

But the panel agreed that the nature of the challenge facing first-time buyers had shifted over the decades from paying high interest on home loans to paying high deposits, and satisfying much more stringent mortgage requirements to qualify for the loan in the first place.

With current mortgage interest rates at about 2 per cent, it is cheaper for London renters to buy the property they live in than to rent it, said Richard Donnell, director of housing market analyst Hometrack.

But the problem lies in the affordability test required by lenders, for which borrowers must show they can afford much higher rates of interest.

You’ve got to prove to your bank that at a stress rate of 7 per cent you’ve got another £1,000 of disposable income to pay towards your mortgage so you can afford that property. That’s the real binding effect for first-time buyers particularly in London and it’s a huge affordability hurdle for people to get on the ladder.”

Source: Financial Tmes. James Pickford

10 things you need to know about the revised National Housing Fund that may reduce your salary by 2.5% monthly

The revised bill, National Housing Fund (Establishment) Act 2018, allows individuals earning from the minimum wage mark to contribute 2.5% of their monthly income while commercial or merchant banks contribute 10% annual profit before tax to a poll for affordable housing building.

The revised version also introduced a 2.5% tax on every bag of cement, meaning, you pay more to buy a bag of cement and contribute more – just because you want to build an affordable home.

Under the extant NHF law (NHF 1992), every Nigerian earning N3,000 or more per annum is required to contribute 2.5% of their monthly basic salary to the NHF. The funds mobilised will be made available to contributors at affordable interest rates to build homes.

Just like the pension and personal income tax contributions, the NHF is compulsory for a public worker, a private worker or self-employed individuals earning pay from the range of minimum wage and above.

What are the key highlights of the proposed fund?

  • Mandatory 2.5% contribution of monthly income by employees earning minimum wage and above in public and private sectors as well as self-employed individuals.
  • 2.5% on locally produced or imported cement.
  • Employers are to deduct and remit the contributions monthly
  • Penalty for non-compliance of up to N100 million for corporates and N10m for individuals while sanctions include cancellation of operating licence of banks, insurance companies and PFAs for violations.
  • Withdrawal by contributors who have attained the age of 60 years or 35 years of service to be an interest rate of 2% per annum. The Fund and any refund of contributions are exempted from payment of taxes.

Why are people making noise about it now?

  • Although the Fund is not new, many have faulted why the revised is coming without the input of various stakeholders. The NHF Act of 1992 failed before many organisation including government-owned failed to make a contribution to the poll.
  • There were also alleged poor record keeping by the Federal Mortgage Bank of Nigeria (FMBN), the authority charged for the sole responsibility and cumbersome bureaucratic bottlenecks of getting a loan from it.
  • Another shortcoming of the revised bill was its inadequacies to touch on the shortcomings of the 1992 Act on the issue of land ownership and titles as well as the current Land Use Act. The NHF loan is merely for the construction of the building without the acquisition of the landed properties.

What is the cost implication on earners?

  • The cost implication for income earners is that it will take 2.5% from your income every month which is the equivalent of 250% from the PAYE contribution.

Meaning: A N30,000 earner will pay 2.5% (N750) every month to a poll account on the provision of affordable housing for the population.

  • It will increase the price of cement as the revised bill introduced a 2.5% tax on a bag of cement.
  • It will also take 10% away from commercial or merchant bank profit before tax (PBT) in every accounting year.

Source: Aderemi Ojekunle

BPE says FG is not planning to sell Lagos Trade Fair Complex

Federal Government has no intention to sell the Lagos International Trade Fair Complex, the Bureau of Public Enterprises has said.

In a statement made available to our correspondent in Abuja on Tuesday by Head, Public Communications, Amina Othman, the BPE denied the purported sale of the complex.

However, the privatisation agency said that the Federal Government was in the process of concessioning the complex and had secured the services of transaction adviser in the person of Messrs Feedback Infrastructure Services.

Othman said in the statement, “The attention of BPE has been drawn to the alleged closure of the Lagos International Trade Fair Complex by the Traders’ Associations operating in the Complex and the protest by the said association over the purported sale of the complex.

“For the avoidance of doubt, the bureau states that the Federal Government of Nigeria through the BPE does not intend to sell the complex rather the facility would be concessioned through a competitive transaction process.

“It is for this reason that the government has procured the services of Messrs Feedback Infrastructure Services to advise on the way forward for the proposed concession.

It is apt to inform the public that the bureau on Friday, March 1, 2019, met with the entire Traders’ Associations to explain the essence of the planned concession.”

Othman added, “The bureau had on August 23, 2017, placed a caveat emptor in some national newspapers in the country wherein it stated that the lease agreement that was hitherto executed by the FGN in favour of Aulic Nigeria Limited had been validly terminated and possession reverted to the FGN with effect from 23rd day of August 2017.

“Members of the public were, therefore, warned that ‘any purported allotment, buying, selling, letting, leasing, charging, and subdivision, construction upon or dealings in connection with the said property and parcels of land in any other manner howsoever without the written permission of the FGN represented by the BPE is unlawful, illegal, fraudulent and amounts to trespass’.

“It further warned that any person(s) interfering with the said parcels of land ‘stand to lose their money as the FGN through the BPE will neither honour agreements, contracts nor arrangements entered into with person(s) purporting to have authority to transact the property and or parcels of land whether in the manner described or in any other manner whatsoever nor will it reimburse any monies paid in respect of such transaction’.”

According to Othman, the privatisation agency is willing to collaborate with all stakeholders to ensure smooth and successful completion of the transaction.

Source: Everest Amaefule

Commercial real estate is surging ahead

Australia’s residential markets may be suffering right now but the commercial sector is powering ahead.

What’s behind the surge and will it take the residential sector with it?

Mark Wizel, national director at real estate investment firm CBRE, analysed the commercial real estate market for us on Auction Day, revealing whether its performance is a precursor of things to come for residential real estate.

Despite concern over wages growth and some headwinds in the residential real estate sector, the national and state economies are performing well, Wizel said.

Population growth and infrastructure spending are likely to continue being key economic drivers this year.

This has meant commercial real estate performance over the last 12 months has been quite strong, Wizel said. Investment in retail last year was down on 2017 but still at a very healthy $9.4 billion in 2018.

What drives the commercial real estate market?

Wizel said a combination of factors continue to drive commercial real estate, including strong investor demand and tight supply.

Australia has a reputation as a safe haven for investors, which has attracted foreign investment particularly from Asia, Wizel said.

Overseas investors, unlike local investors, aren’t so driven by sentiment. They look at the fundamentals in the commercial real estate space, which are based on things like population growth, and believe the commercial market is a good place to invest.

“They are seeing an opportunity to get into that space and fill the void of what the big Australian banks have left post royal commission,” Wizel said.

Asian developers, who entered various parts of the Australian market from 2009 to 2014, are now shifting into investment or land banking opportunities as opposed to developments.

“Development sites are not trading anywhere near the ferocity we saw in 2015, 2016 and parts of 2017.

“Unfortunately that’s probably an indicator that we’ve probably got a way to go in that residential market picking up steam again,” Wizel said.

The availability of debt and the attractive pricing of that debt is another factor making Australian commercial real estate a smart investment.

“We are seeing a lot of non-traditional bank lenders enter the market and have a real willingness to work with investors and work with developers in the Australian markets.

“That’s ultimately what’s driving the confidence and the strong activity,” Wizel said.

Wizel rejected the thought that upcoming state and federal elections in Australia would make foreign investors feel jittery.

“Over the past 4 or 5 years, when it comes to Asian investment coming into the country, the election has nothing to do with the ferocity with which they look to attack the property market.

“A lot of the Asian groups, whether they are Malaysian, Singaporean, Hong Kong or Mainland Chinese, they see the Australian political landscape as quite steady,” Wizel said.

 

What does it mean for residential real estate?

Just like the commercial market is driven by general economic factors like population growth and infrastructure spending, so is the residential development and domestic residential markets.

But while the residential sector overall is driven by the same key drivers of the commercial markets, Wizel said there are some factors unique to the residential sector that determine the rate and depth of the current residential market decline and the timing and speed of its recovery.

Wizel said the residential market is “ahead of the game” in terms of market cycles, having peaked at some point across the different geographical markets over the last 12 to 24 months.

The good news?

Multi-billion dollar infrastructure investments by the Victorian and NSW governments into road and rail projects will underpin economic growth in those states for the next few years, Wizel said.

He predicted these developments will counteract, to some degree, the downturn in residential construction. A newly emerging mining revival will also give a boost to WA and Queensland housing markets.

Wizel’s forecast for the residential development market for the rest of the year is it will continue to face challenges, with more stock likely to be sold off and investors focusing on office developments.

Recent commercial real estate sales

There is a new evolving trend of Asian capital away shifting away from immediate development and more into established commercial sites as they sit and watch to see what happens in the market while having some skin in the game.

509 St Kilda Road

The sale of a St Kilda Rd office block in Melbourne smashed the leafy boulevard’s record by almost $20 million after an eye-watering $163 million sale.

It was sold to a mainland Chinese investor and illustrates the trend Wizel identified of Chinese developers shifting over into the investment landscape.

“Here it was effectively a Chinese developer who had done a number of projects in Melbourne and Sydney.

“They said they might just put the brakes on the developing for the time being but we still want to keep the money in the country. And they came out and bought that commercial office building for $160 plus million.”

A Chinese-backed land banker and developer swooped on an Abbotsford industrial site, buying an IKEA-leased warehouse for $17.3 million. It is an example of what Wizel called a “longer-term land-bank play”.

Source: Azal Khan

Five Trends That Will Impact Real Estate Investing This Year

Let’s be honest: Real estate valuations are very high today. But worries of an impending housing crash are premature. There are many trends that could continue to drive real estate values. A millennial middle class hungry for the independence of owning a home and a reasonable economy outweigh housing indicators that might signal a downturn is imminent. That doesn’t mean U.S. real estate markets are not in a pivotal phase. In fact, 2019 is poised to create significant opportunity for those who understand the five significant economic and demographic trends driving the market. Let’s consider the following five trends:

1. Rise in Interest Rates

Predicting Federal Reserve actions on rates is impossible. The Fed has wound down its unprecedented bond-buying program triggered by the 2008 financial crisis. Although mortgage rates have been in decline over the past several months with the 30 year mortgage around 4.5%, many analysts see mortgage rates rising on average to a high of around 5% on a 30-year fixed in 2019 and remaining at that level. As of this writing, the Fed’s next rate decision is a few weeks away and (at its mid-March meeting). It is widely expected that the fed funds rate will remain in the 2.25% to 2.5% and will delay any future rate hikes. However, mortgage rates geared off the 10-year Treasury rate may rise and increase the cost for real estate buyers and investors.

Some real estate price softening will be seen where cost of financing is critical. Given the amount of institutional capital chasing multifamily and industrial real estate investments, I expect investment activity to continue with lower IRR return expectations.

2. Millennial Homebuyers Enter The Market

There are 74 million millennials, a larger demographic than the huge number of baby boomers. So follow the millennial money. Many millennials are at prime home buying age, and they continue to push trends in the real estate industry. Millennial homeownership rates are below the national average of 64%. That represents a deep well of demand that could convert to 10 million home purchases. With the average millennial home buyer having a reasonably high household income at $88,200, millennials have the means, and they want to buy first homes.

The year 2020 marks the pinnacle of millennial home buying. For the next decade, this generation will represent the largest share of the market. The desire for their first home may continue to push single-family home prices higher in select markets. If prices are seen as too high in some markets, then millennials will focus on newer, expensive rental properties.

3. Growth Of Secondary Cities

High prices in first-tier cities are forcing many homebuyers and investors to consider second-tier cities in search of better value. This trend is likely to continue through 2020. The influx of capital to second-tier markets is driving double-digit growth in investment activity and price appreciation. Major employers such as Toyota have pulled out of Southern California and relocated to the Dallas metro area. Apple is opening a billion-dollar campus in Austin, and Amazon is opening HQ2 just outside Washington, D.C. These moves, and others like them, may be signs that economic growth could support continued rising real estate values in second-tier markets.

In a typical late cycle, capital leaves the overvalued first tier such as New York and San Francisco and flows to the less-expensive second tier. Eventually, capitalization rates in the two markets converge. Premium cap rates on secondary market investments range from 75 basis points to 100 basis points higher than major markets and a full 300 basis point higher than top tier cities. Expect to see rising property values in the secondary cities, which will reduce cap rates.

4. Housing Affordability

Currently, renting is more affordable in 59% of U.S. housing markets, and home prices have continued to increase more than wages in 80% of markets, according to an analysis by ATTOM Data Solutions. So, expect continued strong rental housing demand rather than continuing single family home price increases. Evidence of this shows up in strong markets such as Seattle, San Jose, Las Vegas and Portland, where the number of homes for sale rose last year, but the share of affordable homes fell, due to rising home values and increasing mortgage rates. Multifamily investors will be rewarded in markets where housing affordability is strained.

According to ATTOM, it has gotten increasingly difficult to afford a home purchase in virtually every market with a population over 1 million. Currently, it is more affordable to rent than to buy a home in Miami, New York City, Seattle, Las Vegas, San Jose, San Francisco and Boston. It’s my take that this will push rents higher, making multifamily investors happy.

5. Impact of Opportunity Zone Funds

Real estate investors should consider a new tax incentive included in the Tax Cuts and Jobs Act of 2017 for investments in real estate in qualified opportunity zones (QOZs). The provisions include deferment, reduction and complete elimination of capital gains taxes for certain investments. I believe local expertise in these markets is a requirement and fold it into my company’s own QOZ Fund offerings, because local operators will have the best understanding of these opportunities. It is projected that $6 trillion in unrealized capital gains are eligible for QOZ investment, which could result in very strong real estate values in these QOZs. With core property in first-tier markets flooded with capital, the right investment in a QOZ with the right local partner could be a diamond in the rough.

The Bottom Line

There are certain drivers that will push rents and home prices higher. For longer-term real estate gains, the trends of millennial renting and buying upscale homes, the increasing prices in secondary markets, and capital flowing to opportunity zones will provide great opportunities to make outsize returns. A disciplined approach to real estate investing can uncover opportunities that lead to outperformance with less risk.

Source: Forbes

Housing Ministry surpasses real estate developers in sales of new cities

The Ministry of Housing, through the New Urban Communities Authority (NUCA), has achieved significant sales in the cities of New Mansoura and New Alamein, in contrast to the expectations of real estate developers regarding the deceleration in sales of the real estate market during the current year.

The ministry announced in early March that 536 distinguished housing units were electronically booked in New Alamein in just 26 minutes. This is a great indicator of the popularity of the ministry of housing, which is almost the sole developer in the New Alamein city.

The substantial sales are not merely for the New Alamein city, but the ministry has also achieved sales which exceeded EGP 1.5bn in the Zahya project in New Mansoura in just three days, contrary to what was expected by City Edge Developments, the marketer and the project manager on behalf of the NUCA.

Additionally, in late February, Amr El-Kady, the CEO of City Edge Developments, elaborated that the company has achieved EGP 8.5bn in sales of New Alamein by the end of 2018, and has achieved EGP 500m in sales in the city in the first two months of the current year.

Moreover, the company achieved EGP 1.5bn in sales in New Mansoura in 2018, and EGP 600m in the first two months of 2019, according to El-Kady.

Some developers believe that this represents a significant competition for them, and not in favour of developers, but rather in favour of the ministry, which may affect their sales in the coming period.

Chief Projects Officer at Capital Group Properties, Amgad Hassanein, said that the government’s offers of luxury or distinguished housing projects are not its role, but rather the role of private sector companies.

Hassanein added that the continuation of the state in offering luxury housing may lead to problems in the real estate market, which may lead to the reluctance of some companies to exist in some areas where the ministry strongly competes.

For his part, Alaa Fekri, chairperson of Beta Egypt for Urban Development, said that this competition is unbalanced, especially after increasing the implementation cost by about 80%, in addition, developers incur the payment of the value of land purchased from the state.

Fekri explained that the companies’ advertising expenses are rather extensive and therefore companies are working under financial pressure, and at the same time are required to pay the instalments of the land’s value, so it is strongly seeking to accelerate marketing rates.

He elaborated that real estate companies currently face major challenges because they are competing for the same housing category, as well as facing intense competition from the ministry of housing.

Meanwhile, Ayman Sami, the JLL country head-Egypt, believes that the state had to first start by entering these new markets such as New Mansoura and New Alamein in order to reassure investors wishing to operate in these new cities–expecting that there will be a great presence by developers in those cities in the coming period.

Furthermore, Waleed Abbas, the assistant housing minister of the NUCA, said that there is no competition between the state and developers in new cities, especially New Alamein and New Mansoura, proving that the NUCA has offered four plots of land to investors in these two cities in November.

Abbas denied that the state is the only investor or the winning competitor in those cities.

He explained that competition exists if the ministry is offering the same features in projects provided by the investors, noting that develops must distinguish their products in order to be more attractive to the client than what the ministry offers.

He also pointed out that the ministry’s prices are not competitive but are rather market prices as the ministry calculated the cost and profit margins much like developers, in the case of units offering in any of the new urban communities.

Source: Dailynewsegypt

Building Collapse: Sanwo-Olu Promises Urban Renewal For Lagos

Babajide Sanwo-Olu, governor- elect of Lagos state has vowed to implement urban renewal programmes that would put a stop to collapse of buildings in the state.

While admitting that urban renewal policy has always posed a challenge for successive governments in the state, Sanwo-Olu said he would approach the programme with human face, by earning the trust of the people, rather than clamping down on their properties.

He gave the indication on Monday, after paying a courtesy visit to President Muhammadu Buhari at the State House, Abuja, in company of his deputy-elect, Dr. Femi Hamzat.

While reacting to the recent school building which collapsed in Lagos Island, the governor- elect acknowledged that many of the buildings in the state were now obsolete, especially as most of them were constructed when the state was a colony under the British government.

He hinted that his first approach to tackling the problem would be to do proper enumeration of the building in the state, while entering into agreement with the property owners.

His words, “The recent building collapse is an unfortunate incident, even when I was serving in government, I used to be the Vice – Chairman on issues that had to do with building collapse.

It was about ten years ago, which is what led to us to creating an agency called Lagos State Building Control Agency (LASBCA), it was meant to begin to identify structures well ahead before issues like this begin to happen.

“But it’s an unfortunate thing, extremely very unfortunate and it also means that we expect it would happen again. So imagine the current government had started very quickly the integrity testing of the properties in the state.

You know Lagos is a part of the old colony of Lagos, so you will expect to see houses that are over a century old and in those numbers, we need to be sincere to ourselves and we need to be real.

“Lagos truly really needs regeneration, especially Lagos Island and that was part of the things we promised on the campaign train. So, it’s to have a conversation right round all these with families and we’ll see the kind of redevelopment that is important as it’s built on in a lot of other big cities like Lagos.

“The issue of urban renewal has been a big challenge to Lagos, over the years, it’s been a challenge to successive governments. We are bringing things that will be different from what others have done that will make Lagos what it’s supposed to be.

“It’s really not that it’s been a challenge, but because we have not been able to see it through to the end. When you want to take people’s properties and you want to regenerate, they must first see a sincerity of purpose – what are the additional plans that you have for them? Before you could regenerate, there must be a stop gap – in the next two to three years what are the plans you have for them? And you need to do what we call proper enumeration.

“Once you can enumerate properly and determine who are the original owners? And you sit and have an agreement, then the regeneration will start. You can do it in two ways: It could be in form of which when you come back, you have part of it; or you turn it into equity. So it depends on whatever model you are working round to ensure that it works”. Sanwo-Olu narrated.

Source: Innocent Oweh

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