analysisBy Bennet Oghifo
The nation's informal property market is where the largest chunk of the housing stock resides. Owner-occupier homebuilders, whose individual developments add up to more than 95 percent of homes in the country, drive this sector. Building a home during normal times is challenging enough let alone a time as this when the world is still reeling from the effects of a financial slump. BENNETT OGHIFO sought the opinion of financial experts and seasoned housing sector operators on how to navigate the chilly waters of home finance in an economic downturn
Nigerians always strive to own their own homes to afford them some dignity and peace of mind. There is also the business or commercial side of home-ownership for those interested in sales and rentals, which like the owner-occupier market, is in a bind.
But activities at most construction sites across the nation are grinding to a halt, while a few have dried up completely because of the serious cash crunch in the nation's financial system. These are hard times for the housing sector where even the number of owner-occupier buildings is shrinking for want of finance. On the corporate level, it is foregone conclusion that no real estate developer in the country has the capacity to build up to a hundred housing units annually, which leaves all categories of prospective homeowners who cannot cut a deal with these developers to buy their own plots of land to build a home wherever they choose or can afford.
Public housing deficit
Not a single block was laid in 2008 by the federal government or by any state government in support of shelter. Neither did they execute a government driven initiative to deliberately bridge the deepening housing deficit caused by the long-standing neglect in the provision of low income housing in the country. Access to inexpensive mortgage loans through the National Housing Fund (NHF) has also remained elusive if not cumbersome and tortuous, to state things mildly. According to sector operators, there is a massive deficit in the housing sector especially in the area of low income mass housing and owner-occupier homes for middle income families.
Access to inexpensive mortgage finance is a big hurdle to cross because in the last few months the average mortgage lending rates have been in the neighbourhood of 19% per annum (plus or minus a few percentage points). Housing sector operators say this is "killing" for someone building to let, talk less of for someone who genuinely needs the mortgage facility for the purpose of having a decent roof over his head.
Home owners stuck
Most prospective home owners are stuck and are not sure they can get bank facilities as is the case of Amos Oguoli, a staff of an oil servicing company in Port Harcourt, Rivers State, who says he needs a N5 million loan from the bank to complete his home in the old GRA. "My friends advised me against taking a loan since the house will not yield any income when it is completed. If it wasn't so big, I would have completed it by now."
People with ready cash, either saved over time or advanced to them by employers or family, tend to put a time frame on when to move into their homes. Muyiwa Ajani, a banker, who is developing his first home at Isheri north, Lagos, planned to move into his three-bed bungalow just before this Easter holiday weekend, but he is presently not sure when this will happen. Asked why his home-moving plan did not pan out, even as a banker, he says, "it's the global economic meltdown, which has resulted in all kinds of things. At the office, for instance, we are scaling down some loans and advances and we still have the old loans to repay."
A similar story was told by Adam Igbokwe who had to leave a multinational oil company at the end of March. His double plot of land is located off the Lagos-Ibadan express road, close to the Redeem Christian Church Camp. He says the initial plan was to build something huge for himself and for letting. "I'm bidding my time, because I don't want to rush into something I can't complete. I'm not sure any bank will want to advance me a loan as it is now and what I have is not inexhaustible. You know what money is like."
Other people like Mrs. Taye Akorodi are not exactly at ease because she is trying to buy a home in an estate off Lekki-Epe Road where she is already committed to the phased development of her property. The good thing is that she is not alone in this dilemma. "We are trying to convince the developer to give us more time to make payments. They know that things are not moving and there is no money." However, the owner of a plot next to hers, who asked to be identified simply as Mr Mike, suggests that the property company should go ahead with construction and to scale down the phased payment. "They can get bulk money from the banks, which can be used to deliver the homes. Things will change and we will surely take possession of our homes."
Marketers of building materials also complain about a drop in patronage, a situation that has presented good bargains to homebuilders with cash. "Most people have reduced the volume of materials they buy, but they still come. We try to give our customers some materials in addition to the ones they buy so that their work will not stop," explains Ignatius Okoro, a dealer in building materials at the popular Coker Market on Orile Road, Lagos.
Despite the global financial meltdown and its negative effects, which are already being felt in many spheres of life in the country, people can still finance their home ownership plans, say experts in the industry.
According to Afolabi Adedeji, a civil engineer and construction manager, construction will not stop, regardless of facts that banks are "recalling" loans in the face of tight economic times and that they are being very cautious about granting new facilities, especially for projects with long tenors like housing finance.
But for every challenge there is a solution, he assures and listed specific measures, approaches and channels that individual Nigerians could deploy or adopt in their route to accessing finance during an economic downturn. First, he acknowledges that under normal circumstances, funding could be sourced from financial outlets like Primary Mortgage Institutions (PMIs), banks and other financial institutions, from the National Housing Fund (NHF), employers home ownership schemes or from staff co-operative societies.
Those who have already taken housing loans from financial institutions and might be finding it difficult to meet mortgage payments could also consider refinancing options. This entails shopping around at other financial institutions to get the best possible deal to take over the existing mortgage under better terms. For instance if the existing mortgage had a tenor of 2 to 3 years, and was secured at an interest rate that is threatening to stifle the borrower, he/she should look for a financial institution that will take over the mortgage under a longer tenor and more reasonable repayment terms that provides some breathing space.
However, Adedeji says a sure bet in realising this homeownership dream at this time would be from individual savings and investments, which would be "funnelled" into direct labour construction of their desired homes. Another key strategy, he recommends, for high networth individuals, is repatriation of cash from abroad of savings and investments for outright home purchase in Nigeria.
In all respects, he advises that the only sane thing to do in the circumstance, where it is impossible to determine or control income inflow, is to make judicious use of the little money at hand and avoid wastage. He likens the situation to a game of chess, or cards. "A period of crisis, such as what is being experienced the world over is tantamount to a re-shuffling of the 'deck of cards' in the game of life. A few fortunate and perhaps hitherto unheard of players may be dealt with a 'joker' at this time and of course rise into stupendous affluence and prominence, whilst, sadly, many entrenched giants will fall."
Another means available to those wishing to own homes is resorting to stub housing which simply means building a home in sections. A home owner who desires a three or four bedroom house could design it as such but would begin with two bedrooms and leave stubs to indicate where the other room or rooms would be built when his finances improved. "It is done internationally," says Akani Tadafe, a home builder in Abuja, adding that the federal government used the system in its housing project in Bainawa Estate in Kaduna. "Some people leave vertical stubs when developing a storey building and it is alright to do it horizontally," he explains.
Nonetheless the need for government to take the lead in housing development to curb homelessness is still imperative, advises managing director of Centage Mortgage Bank, Gabriel Johnson Ndukwe, who called for more government support in the area of favourable policies for the country's real estate sector which he described as a fast-growing one.