The Federal Government recently launched the mortgage re-finance scheme aimed at ensuring easy access to loans for housing development. In this interview, a real estate expert, Mr. Robert Umoette, Managing Director/CEO, DURAN Intermediaries Limited (DIL), speaks on the challenges of the housing finance sector and other issues. Excerpts.
Major challenge impeding the growth of housing finance in Nigeria
The major challenge is lack of sufficient finance to boost the growth of this sector and make it work like what obtains in advanced economies. Now, with the launching of the refinance scheme, I believe government will turn attention to this important sector of our economy.
Are commercial banks not giving enough support to this sub-sector in terms of credit facility for capital projects?
What we have in Nigeria is deposit banking, where money is kept in the banks. Nigerian banks do not encourage entrepreneurship by giving credit facility for long term development. Also, the interest rate is very high and even close to 25 per cent now. With this high lending rate, how can the entrepreneurs improve their margin and still stay afloat in business?
What is the solution to high lending rate in the financial sector?
The Central Bank of Nigeria (CBN) needs to intervene and do something to reduce the lending rate to at least 10 per cent. Projects in the housing sub-sector are capital intensive and require long gestation period, but banks are not willing to give long term funding that can last for a minimum of 5 to 10 years. They can only give about two years, which is too short for any tangible output from the business.
What is the role of the mortgage system in this regard?
Our mortgage sub-sector is also facing numerous challenges. At present, there are a lot of people who do not even know that something like the mortgage institution is existing in Nigeria, because the sector is rapidly going under. For this problem to be tackled, there must be increased funding for the federal mortgage system to ensure funding of capital projects for long term growth and sustainability.
Whatfs your outlook for the economy in 2014?
I believe there is prospect for Nigeria's economy this year because the major issue, which is power is being addressed pragmatically. The moment government is able to fix this sector fully the entire economy will be repositioned for greater prosperity. Government should also put more emphasis on the housing sub-sector, which is capable of creating thousands of jobs for the people.