Restrategising For Sustainable Housing Finance

August 3, 2019

In this report, CHIKA OKEKE, examines the impact of Abuja International Housing Show (AIHS) on the housing and construction especially in the provision of sustainable finance and affordable housing.

The absence of financing options and special intervention fund for the real estate sector is militating against the provision of affordable housing especially for low income earners.

To bridge the funding gap, the Federal Mortgage Bank of Nigeria (FMBN) signed a Memorandum of Understanding (MoU)  with Shelter Afrique on January 2017, which mandated the institution to invest $2 billion over the next decade at $200 million annually, as credit for construction finance to Nigeria’s real estate developers.

As Nigeria’s housing deficit rose from 17 million to 22 million, that of Africa increased from 52 to 56 million.

It will take federal government over 56 years to close the gap, by investing N56 trillion, based on average price of N3.5 million per unit, in order to complement Nigeria’s Vision 20:2020 which envisaged that the housing sector would contribute 15 percent to the Gross Domestic Product (GDP).

Regrettably, the commercial banks issue housing loans on a double digit interest rate of between 19 to 25 percent, which is almost impossible to bolster the provision of affordable shelter.

Given the shortfall in housing and construction finance, the 13th annual AIHS provided the platform for experts in the housing, construction and finance sector to proffer solutions on how to resolve the challenges.

The event which commenced from 23rd July and ended on 26th July 2019 pulled over 40, 000 participants, exhibitors and housing finance experts from Nigeria even as Debra Erb of Overseas Private Investment Corporation, USA led the international speakers from countries like China, USA, South Africa, Kenya and among others.

The theme of the event, ‘Driving Sustainable Housing Finance Models in the Midst of Uncertainty’, underscored the APC led administration’s efforts in providing workable strategies and financing models, towards reducing the high and rising housing deficit in Nigeria.

The former chairman of Federal Capital Territory (FCT), Arc Ibrahim Bunu described the show a a significant player in the promotion of affordable housing even as he commended the Convener for his commitment towards the reduction of Nigeria’s housing deficit.

He said that global housing market including Nigeria’s is in desperate need of new ideas, and alternatives to financing housing development.

Bunu informed that housing should be one of the key contributors to Nigeria’s Gross Domestic Product (GDP) even as he expressed optimism that stakeholders would suggest the most sustainable and practical approaches to a robust housing sector that not only provides shelter, but jobs and economic opportunities.

Contributing, the Chairman, innovative risk and investment solutions, Prof Charles Inyangete disclosed that the Central Bank of Nigeria (CBN) issued revised guideline for Primary Mortgage Banks (PMB’s) in 2012.

He maintained that the premise for the establishment of National Housing Commission (NHC) is the failure to match the annual increase in households and housing needs.

Inyangete who is the immediate past managing director of Nigeria Mortgage Refinance Company (NMRC) was hopeful that setting up NHC would create a focal point for housing as its imperative for achieving the ERGP’s vision of sustained and inclusive growth.

Lending his voice, the Convener of AIHS, Barr Festus Adebayo urged government to show more commitment in the provision of affordable housing, adding that stakeholders have been talking and doing a lot of advocacy that it’s time for action.

He charged the next minister of power, works & housing to explore the possibility of using housing to boost the economy, adding that the ministry should be more interested in formulating policies and in building houses.

Adebayo pointed out that the incoming minister should be interested in working with the private sector in providing affordable housing and liase with state governors in providing access to land for private developers, likewise in lobbying the National Assembly to pass bills on foreclosure law.

The Convener of AIHS assured that the  recommendations made by stakeholders during the show on housing development would be forwarded to relevant authorities.

According to him, “We will collaborate among ourselves like stakeholders in the building materials, real estate development and construction industry to move the sector forward without waiting for government’s next level”.

Adebayo who is also the president of Housing Development Advocacy Network (HDAN) suggested that one of the ways to end incessant attacks from Boko haram and bandits is for federal government to increase investment in the housing and construction industry, a situation he believed would improve housing provision and construction.

He asserted that federal government should invest more on housing sector instead of health, adding that such investment would improve the health conditions of Nigerians.

Adebayo harped on the need for all levels of government to seek alternative approaches to financing decent and affordable shelter for Nigerians.

He emphasised that the show provided an opportunity for stakeholders to proffer practical solutions to familiar problems in the sector, that extended across the continent.

The Federal Mortgage Bank of Nigeria (FMBN) is the only secondary mortgage institutions in Nigeria, providing mortgage loans at 6 percent interest rate for off-takers contributing to the National Housing Fund (NHF).

The managing director/ chief executive officer of Federal Mortgage Bank of Nigeria (FMBN), Arc Ahmed Dangiwa emphasised that bridging the affordability gap created by low disposable income and high housing delivery costs would deepen the mortgage market.

FMBN’s General manager of strategy and performance management group, Mr Fakeye Oladipo who spoke on behalf of Dangiwa pointed out that new housing construction remained limited in supply and expensive for middle and lower income households.

He stated that liquidity and funding gaps for construction and mortgage financing, sector de-risking to attract investments and improving funding capacities of mortgage institutions are crucial issues to be addressed in the mortgage industry.

On macro-economic challenges, he pointed out the need to address high interest rate regime, high inflation and foreign exchange challenges.

Oladipo stated that FMBN’s role is to link the mortgage finance market with the capital market and develop a viable secondary mortgage market, promote the growth of viable mortgage loan originators, mobilise domestic and foreign funds into housing finance sub-sector as well as collect, administer and manage the National Housing Fund (NHF).

The MD stated that the bank has a unique advantage in driving affordable mortgage financing in Nigeria through government sponsored entity, provision of low cost fund, of which two percent will be paid on NHF contributors.

He asserted that the bank’s target is to grow mortgages through the public service, informal sector and diaspora, which he said has huge appetite and resources for local and foreign investment.

Oladipo noted that despite the enormous challenges on affordable housing finance, that revamping the Nigerian mortgage sub-sector required collaborative approach from sector players like the regulators, national and state assemblies, Central Bank of Nigeria (CBN), as well as housing ministries at Federal and states.

The GM was optimistic that the bank is developing multi-dimensional housing solutions through home ownership, rental housing, home renovation and housing micro-loans.

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