NANFeatures/Vol.10/No.233/2016 (Oct. 6)
Accessing housing mortgage in Nigeria: Challenges and remedy
A News Analysis by Emmanuella Anokam, News Agency of Nigeria (NAN)
Unarguably, housing is central to the present administration’s policy and the country needs aggressive housing finance investments and opportunities to tackle challenges facing the housing sector.
Observers note that in spite of the effort by the Federal Government to provide affordable housing through the National Housing Fund (NHF) and Nigerian Mortgage Refinance Company (NMRC), the country still contends with housing deficit.
In view of this, many estate developers, mortgage companies and non-governmental organisations, among others, have been in the business of providing housing to many Nigerians.
Further to this, African Union for Housing Finance (AUHF) recently organised a conference, co-hosted by the NMRC, to discuss issues on housing mortgages, finances, challenges and solutions.
AUHF is an association of 56 mortgage banks, building societies, microfinance institutions, housing corporations and organisations involved in mobilising funds for shelter and housing in Africa.
Dr Femi Johnson, President, Mortgage Banking Association of Nigeria, observed during the conference that five per cent of the 13.7 million housing units in Nigeria was currently being financed with a mortgage due to some challenges.
He explained that low mortgage finance being experienced in the country was as a result of affordability gap and dearth of titled property, adding that a lot of property in the country lacked title, making it difficult for anybody to finance such property.
“Mortgage penetration is low because less than five per cent of houses in the country has formal title registration.
“When you want to refinance or go to the capital market it is that title they will also collect from you.
“Because the cost of registering that title can be as high as 15 per cent of the cost of the property, people now buy property but do not care to do the title registration,’’ he said.
He expressed concern that a lot of state governments were also hiking the price of title registration and transfer, charging as high as 15 per cent.
He also cited slow bureaucratic procedures involved in registration and transfer of title which could take from six months to two years as one of the challenges.
“It has too many processes which are slow, cumbersome, unreliable and inefficient, government needs to look into it,’’ he noted.
But Mrs Ethel Matenge-Sebesho, Head, New Markets Home Finance Guarantors African Reinsurance of South Africa, advised the Federal Government to introduce foreclosure law to boost mortgage lending.
She said that such a law would enable Nigerian mortgage banks to recover money from defaulting borrowers.
“Foreclosure law assists a lender to recover the balance of a loan from a defaulting borrower by forcing the sale of asset used as collateral for the loan,’’ she explained.
According to her, in South Africa, mortgage banks are not afraid of giving out loans because they have legal backing.
This, she said, made it easier to register a bond and for banks to collect title deeds at the point of providing mortgage services.
She also noted that the mortgage market in South Africa was well developed unlike in Nigeria where it was faced with lots of challenges.
She said that the absence of foreclosure law compounded the challenges by making it difficult for banks to foreclose property of defaulting borrowers.
“NMRC should wake up; I think they should draft mortgage and foreclosure laws and send to various states so that it can be enacted into law.
“If this law is in place, it would make it very easy for mortgage lenders to foreclose when someone is defaulting,’’ she noted.
In his opinion, Mr Simon Walley, Lead Financial Sector Specialist, Finance and Markets, World Bank Group, stated that Nigeria needed to boost housing development by facilitating an environment conducive for investors.
Wally also said that the underlying population growth rate and organisation rate were going to present real challenges for Africa between 10 years and 20 years.
Noting that Nigeria had an outdated housing data, Prof. Charles Inangete, Chief Executive Officer of NMRC, said: “We are still talking of 17 million housing deficit; we need more current data in order to make housing policy more relevant.’’
Similarly, Mr Thierno-Habib Hann, Senior Housing Finance Regional Lead, International Finance Corporation listed other factors that could boost housing investment to include appropriate support and targeted subsidy policies.
He said rationalising the formalisation process of customary rights to facilitate access to land could remove housing market constraints.
He, however, called for strengthening of developers in the industry, including land developers and synergy of real estate agents around the federation for improved housing development.
The Minister of Power, Works and Housing, Mr Babatunde Fashola, nonetheless, charged AUHF to put in place a mechanism to promote appropriate housing construction finance schemes.
According to him, the challenges do not support buying-off of houses to enable developers recoup their investments on time.
“Lack of housing finance in the public and corporate institutions and double-digit housing loans also remains major challenges in the industry,’’ he said.
Fashola identified other challenges of housing as land, population explosion, high cost of building materials, inflation and decreased purchasing power of the low and medium income earners.
He said that FMBN and NMRC were established to help in reducing the cost of mortgage loan by improving market efficiency.
He, however, noted that from inception of government initiative in organised housing finance system to date; only a meagre sum of money had been injected to the system.
The minister stressed that the FMBN as the secondary mortgage institution, should be strengthened by ensuring full compliance with NHF Act by the stakeholders.
In her remarks, Minister of Finance Kemi Adeosun said that the Federal Government was committed to reducing high rates of interest on mortgage loans to ensure affordability.
“Single-digit interest rates are critical to ensuring affordability of mortgages in the long tenures needed to repay mortgage loans over time.
“We expect monetary policy to support low interest rates that will see improved development of the mortgage markets,’’ she observed.
She added that legal reforms in foreclosure law and an expedited legal process for dispute resolution were also needed to support the development of mortgage market.
The minister said that with specific strategies which had already been designed to address the issues, government would encourage a culture where first time buyers develop an appetite for saving to own their homes through mortgages.
She also said that retail mortgages would provide long term source of revenue to pension funds and other investors and would, at the same time, increase land values.
All in all, participants at the conference agree with the minister this initiative will create a new generation of home owners to solve housing problems in the country.(NANFeatures)
**If used, please credit the writer as well as News Agency of Nigeria (NAN)