Mortgage Refinancing Coy will bring major impact – Expert
As an expert in real estate business, what does property market entail? The property business is a dynamic market comprising several areas, from sales & marketing, property management, mortgage finance, construction and other supporting services.The industry has the potential of transforming the Nigerian economy because of the multiplier effect it has in terms of job […]
As an expert in real estate business, what does property market entail?
The property business is a dynamic market comprising several areas, from sales & marketing, property management, mortgage finance, construction and other supporting services.
The industry has the potential of transforming the Nigerian economy because of the multiplier effect it has in terms of job creation and economic empowerment for millions of Nigerians. However for it to reach its true potential there needs to be major reforms in all the key areas of the industry to bring it to global best practice. For example we need to set minimum professional and ethical standards for all practitioners.
The issue of mortgage is a major issue affecting housing delivery in the country, how would you assess the mortgage system in the country as it stands now?
The major issue affecting the growth of this industry in Nigeria is the lack of long term affordable mortgage for the average Nigerian. At present only the National Housing Fund (NHF) can lend long term at affordable single rates but they have limited funds. The management of the Federal Mortgage Bank of Nigeria (FMBN) should be commended for their efforts in increasing the number of contributors and streaming the approval process for NHF beneficiaries.
The solution is the establishment of a secondary market for mortgages where mortgage bonds will be traded to raise affordable long term funds for mortgages. The good news is that the Jonathan administration through the Ministry of Finance just signed a $300million loan from the World Bank to jump start secondary mortgage market in Nigeria with the establishment of the Mortgage Refinance Company (MRC). The MRC will provide the long term liquidity the primary mortgage companies need at affordable single digit rates. Once this is done and the market develops we will see a major paradigm shift in the Nigerian mortgage finance sector that will be a major contributor to the GDP of this country.
Are you optimistic that this is going to work?
Absolutely, majority of the work has reached advanced stages and I hear they are pushing to kick start operation of the company by the 1st quarter of next year. The beauty of this company is that you have all the major stakeholders in the mortgage finance as equity partners – from the IFC, Federal Ministry of Finance, primary mortgage companies, and banks. Most importantly the MRC will have to follow strict guidelines and standardization set by the World Bank (IFC). Also with the single digit rates and terms of 30-40 years we will begin to see positive impact in the mortgage finance sector in Nigeria.
What is mass housing from a professional perspective?
Mass housing or social housing as it is also called, is housing built for the low to middle income household. Unfortunately, mass housing in Nigeria is not affordable and is poorly built, defeating the purpose which it was meant for. With a housing deficit of about 16million homes, the government will need to re-strategize and figure out a sustainable innovative solution to this problem.
First, I must commend the Minister of Housing and Urban Development and her team comprising the stakeholders in the housing sector for the tremendous job they are doing to change the status quo in this sector. Their efforts are beginning to yield results but they need the help of the legislators to pass laws repealing the Land Use Act and instituting the right legal and regulatory policies that will attract foreign investors with cheap long term funds.
Secondly, the government needs to engage the services of big developers both local and foreign that have the capacity and financial resources to build massive sustainable housing development projects.
Incentives like tax holidays, free accessible land and low interest development loans should be provided to developers but they must be strictly monitored to ensure they meet the minimal standards set by government. The current practice of allocating land to political cronies and friends who turn around to sell the land to developers at high profits needs to stop because these are some of the issues affecting the high cost of homes.
Finally we need to look at innovative solutions to get the average Nigerian family into an affordable decent home. In developed economies like the United States the government issues low interest loans and tax free bonds to developers as incentives, which they pass on to homeowners or renters in the form of lower mortgage payment or below market rental rate. This system has worked very well in the United States using the Public Private Partnership agreements and I believe with the right policies, monitoring and implementation the same can happen in Nigeria.
The cost of renting and buying houses in the FCT is on the high side, is there any way you think the prices could be reduced?
It is possible but what drives the market is supply and demand. In the case of the FCT there is a limited amount of affordable decent housing; it is only when we see supply outstripping demand that will we see home prices and rental rates coming down. Unfortunately I don’t see anything positive happening in this sector in the near future.
Building collapse is a major issue in the country. As an expert who has lived abroad what could you attribute to this?
As you know construction in Nigeria is unregulated, you have so many quacks parading themselves as contractors with little or no experience. The government agency tasked with the responsibility of regulating and monitoring these contractors should impose strict inspection of the contractors by making sure all stages of the construction process, e.g. foundation, structural, and mechanical to name a few pass inspections before the contractor is allowed to go to the next stage of the construction process.
Where do you expect Nigerian property market to be in the next few years?
I see a vibrant developed property and real estate finance market with the sector being a major driver of our economy, providing millions of jobs to the labor force and also a major contributor to our national GDP.
But most of the so-called affordable homes are not really decent for human beings to live in.
This is a major issue that the government should look at, most builders cut corners to save money or maximize profits which compromises quality. As mentioned earlier contractors should be given minimal standards which they have to meet when building and anyone not meeting that standard should have their license revoked.
I see a future where the average Nigerian will have a decent affordable home and the Nigerian real estate market being a major economic driver surpassing the oil & gas sector as the major contributor to this nation’s GDP.