2 January 2013

Nigeria: Housing Sector Hopes for 2013

Since 2007 when the United Nations' estimates put Nigeria's housing deficit at 16 million, stakeholders are worried that not much has been achieved to bridge the gap.

Housing being a critical component in the social and economic fabric of all nations, no country is yet satisfied that adequate housing has been delivered to the various economic groups that make up its populace; hence most nations continue to claim a housing problem in one form or another.

In fact, in 2012 there was oversupply of luxury accommodation in prime areas that softened rentals in the sector, but the year was characterised by virtual inactivity in the construction sector, low level of effective demand for houses and tumbling of property values and rental prices especially in the frontline cities of Lagos and Abuja.

Property developers could not access funds for development while would-be house owners also did not have access to mortgages.

The housing problem in the country had been further compounded by the difficulty in assessing land occasioned by the shortcomings in the provision and implementation of the Land Use Act of 1978.

Musa Ahmed, an Abuja-based real estate consultant, said, "the environment for mortgage and home ownership financing has not been conducive, primarily because of the absence of clear title and property rights. The requirements for obtaining the governor's consent for mortgage transactions, poor land management system and high cost of property transactions are serious hindering factors to housing development in the country."

Ahmed noted that out of the N4.2tn budget proposal of the Federal Government for 2012, N20.6bn or 0.49 per cent was allocated to the housing ministry.

He said of this amount, only N9.7bn, representing 42.4 per cent of the ministry's budget, was devoted to housing development and research, with N8.7bn going into ongoing and new housing projects. He added that N980m was for research and development.

Real estate industry players maintain that government must provide land for private developers to build and sell homes to Nigerians at affordable cost to significantly bridge the housing gap.

They noted that although providing decent homes for all Nigerians would be a difficult challenge, the task could still be achieved through a well-developed and functional mortgage finance system.

No matter the annual wage of the poor, the fact is that his earning capacity is abysmally low that he can least provide for his basic life needs and those of this family, let alone make any savings. It follows, therefore, that where the poor manages to feed and clothe himself and members of his immediate family, he may never be able to pay his rent or own a house of his own. It is therefore unimaginable that the private sector will consider this category of persons in its housing delivery system.

Rents for residential accommodation in our cities and urban centres are generally high. The oil boom, rural-urban migration, high housing demand relative to supply, spiralling inflation and high cost of buildings contribute in no small measure to the high rents regime.

Building materials and components are import dependent which makes them very expensive in the face of the value of the naira and global inflation. With the low earnings capacity of the poor, building materials especially burnt or/and vibrated bricks and roof/ceiling tiles are locally produced in the country, but their use has not been popularised while their production costs are not competitive enough because of the problem associated with technology and economies of scale.

The Land Use Act of 1978 enunciated to streamline land tenure systems in the country vests the ownership and title to all land in the federation on the governors of the respective states for purposes of easy management.

However, the contentious issue of governor's consent for any transaction in land and the intractable government bureaucracy have made the procurement of land problematic, unnecessarily expensive and undoubtedly out of the reach of the poor.

Nigeria did not have a National Housing Policy until 1991 when the document was put in place. The policy document sets out the institutional framework for housing delivery, land and settlement development policy, issue of housing finance, building materials and construction costs, strategies for mobilising private sector participation and ways and means of addressing housing for the low income persons.

Unfortunately, the document did not make any provisions for, nor did it address the matter of housing the poor.

The Deputy Governor, Operations, Central Bank of Nigeria, Mr. Tunde Lemo, disclosed in Abeokuta recently when he spoke on the theme, 'Towards the development of an efficient mortgage market in Nigeria: Challenges and opportunities,' that the N200bn lifeline from the federal government was part of the total N6tn needed to meet the housing needs of Nigerians.

According to him, the federal government's intervention will go a long way in reducing the 16 million housing deficit confronting the nation.

He said: "One of the opportunities in the housing industry, especially under this present administration, is the fact that over the next four years, the government intends to inject N200bn (more than $1bn) into the nation's housing sector through the FMBN. This is meant to provide decent accommodation for Nigerians out of the N6tn required to meet the housing deficit in the country.

"This intervention in the housing sector will increase the housing stock and substantially reduce the present deficit in decent homes, which is presently estimated at 16 to 17 million housing units nationwide. The beauty of this is that, hopefully, as the economy improves, the living standards of the workers will increase."

Survey also shows that estate surveyors expect greater opportunities for real estate in the middle to low income sectors where demand greatly outstrips supply during 2012 than for attached units, a category that includes townhouses and condominium apartments. "The cost of developing houses and property will escalate while at the same time the purchasing power of the populace may crash to the lowest ebb in recent history," says Mr. Bode Adediji, President, Nigerian Institution of Estate Surveyors and Valuers (NIESV).

He also sees the nation witnessing mass exodus of people from certain security-prone areas to more secure cities with its obvious attendant implications especially on residential houses. Adediji argued that house values and rentals will continue to crash in some regions while the same factor will push up the demand and prices in destination locations.

Arc. Bashir Salisu Haiba, Managing Director of Abuja Property Development Company (AIPDC), however says: "There is a gradual climb out of the depressed state of 2012 and this very gradual climb upwards will continue signalling a positive outlook for property and related transactions. The greatest opportunities for real estate lie in the middle to low income sector where demand greatly outstrips supply."

He adds that "housing is about location; location is a factor of where you stay and how you commune to places of work. Here in Abuja to me we should take up the upcoming railway corridors, because in the next 15-20 years railway transportation will be the most important means of mass movement. The ease of access to railway substation has to be factored in the choice of location for your house particularly for the poor, then your housing will succeed."

And unless radical efforts are made to provide a range of affordable housing options and legal and secure land at scale, cities will host some two billion slum dwellers by the year 2020, said UN Habitat Programme Manager, Nigeria Tpl. Kabir M. Yari, at a recent stakeholders' forum on 'Housing for the Poor: The Federation of Urban Poor (FEDUP) Perspective' held in Abuja.

He said the challenge has always been that of providing affordable housing for the teeming population of urban dwellers while at the same time ensuring that our towns and cities attain their full potentials as engines of national growth.

Yari cited some of the challenges to include the large proportion of urban residents who live in slum conditions, the huge housing deficit estimated at 16-18 million housing units, insecure land tenure, poor infrastructure, lack of basic amenities among others.

Government should, as a matter of urgency, address the housing need of the country's teeming population to ensure that many Nigerians live in decent and affordable homes.

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