1 September 2008
A mortgage banker, Mr. Adeniyi Akinlusi, has painted a bleak picture of mortgage financing in Nigeria, going by the numerous challenges confronting the sector.
Speaking recently on ways of creating access to mortgage finance, Akinlusi who is the Managing Director of Intercontinental Homes Savings & Loans Plc, noted that mortgage financing faces a wide range of challenges in the country.
These according to him, include low earning capacities relative to mortgages required; inadequate housing stock; non-availability of credit database; high cost of funds due to high cost of doing business and market expectation; and liquidity risk - due to non-availability of structured long-term funding creating miss-matches, and no secondary market for refinancing.
Akinlusi listed other challenges as collateral risks - a scenario featuring complicated and expensive process of registering mortgages and socially irrelevant foreclosure laws; political/social risk - unwillingness to pay especially amongst high income groups, and policy failure; default risk - high default probability with non-fixed income groups; and, profit risk - loan margin on loan relative to increasing service cost during mortgage tenor.
AThe middle-income group is more likely to access mortgage financing because the numbers in the category are justified for business and represent the high growth sector in the economy. Those in the group have easy access to finance and are often highly geared and often purchase properties for trading/investment purposes.
AThe low-income, on the other hand, cannot even get affordable houses. Loss of jobs often becomes permanent rather than temporary as such skills are not easily tradable. Also inadequate capacity to fulfil required loan to value ratios (LTV) due to low savings,@ he said.
The mortgage banker while noting that all hope was not lost, however stated that a lot needs to be done to achieve improved access to mortgage. AThe authorities should review fiscal and monetary policies to reduce inflation and subsequently interest rates. Inflation rate is currently 8.9 per cent hence motivation to invest requires at least three per cent to five per cent premium.
AAnother three per cent to five per cent premium required by the mortgage provider to cover cost of business/servicing and profit, giving average of 17 per cent per annum is applicable on mortgages. There should also be an improvement of infrastructure to reduce the cost of doing business. Infrastructure should be provided to augment the cost of housing development.
AAlso to be provided are incentives, waivers and subsidies for low-income real estate development in suburbs. There should likewise be a review of pension funds to encourage direct investment in real estate and mortgages instead of through capital market instruments, which is presently underdeveloped.
AThere should be an enabling environment for foreclosure laws and review of title perfection processes and fees.
ABesides a review of the National Housing Fund (NHF) laws to improve processes in loan administration and review maximum amount that currently stands at N5 million, government should overhaul the authorised share capital of Primary Mortgage Institutions (PMIs) to attract significant debt-financing,@ he stated.
Minister wants Housing Ministry split from Environment
The Minister of State for Environment, Housing and Urban Development, Mr.
Chuka Odom, has called for the separation of the Housing and Urban Development Ministry from that of Environment.
Odom, who was speaking to the News Agency of Nigeria (NAN), said this has become necessary because the current arrangement was not conducive for articulating housing and urban issues. He stated that the Ministry has been lumping together issues that would have been addressed differently without the other interfering.
AThere are so many things that need to be unbundled so that the ministry can work independently. In a country such as Nigeria with a population of over 140 million, issues of housing, regional planning and urban settlement should constitute a major headache to a ministry,@ he said.
Odom said that the just concluded conference of African Ministers on Housing and Urban Development (AMCHUD) was set to address urban settlement in the region. He said as Nigeria would be chairing the event for the next two years and as the chairman, it would require a lot of funds to run its activities.
AAMCHUD is a new organisation without a funding structure. Prior to this development, South Africa had been the one chairing the activities since 2005,@ he said.
The Minister explained that prior to AMCHUD, urbanisation had been seen as a negative phenomenon, but "it is important to view it as an important process of improving human settlement. He argued that the problems of urbanisation and human settlement in Africa were so diverse and would need capacity building and the relevant information dissemination in the various countries.
"As the chairman of AMCHUD, it is my vision to strengthen the existing structure for operation instead of relying on donor agencies. All the funds used for the conference was sourced from the private sector that was why South Africa held the secretariat for so long,@ he said.
Odom said that Africa was the only continent that has issues with drastic urbanisation, as Europe, Asia and others have achieved some degree of stability in urban management. He stated that it was his vision for the next two years to create a veritable structure that would be sustained.
DN Meyer Partners FG on Housing
In response to the call on the organized private sector to participate in the Housing for All programme of the Federal Government as a solution to the acute housing crisis in Nigeria, DN Meyer Plc has collaborated with the Housing Ministry to develop housing estates in Abeokuta and Kuje in Abuja for low and middle income earners.
DN Meyer through its subsidiary, Meyer Décor, embarked on the construction of 50 three-bedroom bungalows at Obada-Oko in Abeokuta, Ogun State for the Federal Housing Authority. The project, which started in December 2006, was practically completed in 100 days.
Leveraging on this, the company under the public-private sector partnership has embarked on another 100 days landmark project in Kuje in FCT, Abuja christened: Kuje Housing Estate. The estate seeks to provide 93 housing units of varying standard to be offered for sale to prospective home buyers.
It consists of 35 units of two bedroom terrace bungalows with two2 toilets and one bathroom each on 83.22 square metres of built up area and 228 square metres plot size; and 23 units of three bedroom detached bungalows with two toilets and two bathrooms each on 89.79 square metres of built up area and 648 square metres plot size.
Managing Director/Chief Executive, DN Meyer, Mr. Bola Olayinka, said that the houses are developed to ensure that those who have national housing fund facility can access and benefit from them, adding that they are meant for low and middle income earners.
AThe government must provide necessary infrastructure to lift the private sector to the commanding height of the economy and it is our shared opinion to continue in this public/private partnership scheme which has benefited us like the Murtala Mohammed International Airport and the Kuje housing estate. We must continue to pursue it but more importantly, there should be a housing policy from those who have the responsibility to provide houses for the masses.
AWe understand that there is 17 million housing deficit and it might take us about 50 years to meet with the demand, we do believe, with our 48 years of experience in the construction and infrastructure development of the economy, we have the capacity and what it takes to make our contributions and as a result, we invested heavily in the industry,@ he said.
Olayinka said that the company has formulated a range of quality products in the construction industry and also for the upstream sector which definitely has confirmed their readiness to enter into local content initiative, stressing that the National Building Code is the perfect solution to tackle the incidence of building collapse.
AThis document addresses and proffers solutions to quality finishing of houses, deficiency in finishing and we believe that if we strictly adhere to the processes and procedures provided by the code, the problems will soon become a thing of the past,@ he said.
Be the first to Write a Comment!
Copyright © 2008 Vanguard. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
