The United Nations Habitat defines housing as the process of providing safe, comfortable, attractive, functional, affordable and identifiable shelter in a proper setting within a neighborhood, supported by continuous maintenance of the built environment for the daily living activities of individuals/families within the community. Housing has been universally accepted as the second most important Human need. It is a basic need for the survival of man. United Nations Habitat therefore opined that the provision of adequate housing is a fundamental human right. It is estimated that 3 billion people, about 40 per cent of the world’s population, will need access to adequate housing by 2030. The housing deficit in Nigeria presently stands at 28 million units. Available data from CBN, indicates that Trillions of Naira will be needed to rectify the situation. The Bank further stated that only 10 per cent of Nigerians aspiring to own homes can afford to do so. The duty of any responsible government is the provision of enabling environment and policy for the development of an affordable housing programme. A good housing policy enhances, and advance the quality of life of the citizenry. This Universally accepted fact has been acknowledged by successive Nigerian Governments, as evident from the series of initiatives and programmes in mass housing development over the years. Among such initiatives is the Federal Housing Authority (FHA), established vide Decree 40 of 1973 now cited as Act CAP F-14 Laws of the Federation of Nigeria 2004,The National Housing Fund (NHF)Act 3 of 1992,Federal Mortgage Bank Act 82 of 1993 and so on.
The FMBN Act was established to provide long-term credit facilities to mortgage institutions to encourage and promote the development of mortgage institutions at various levels of government. One of the major functions of FMBN as stated in Section 5 (a) of the Act is to “provide long-term credit facilities to mortgage institutions in Nigeria at such rates and such terms as may be determined by the Board in accordance with the policy directed by the federal Government, being rates and terms designed to enable the mortgage institutions to grant comparable facilities to Nigerians desiring to acquire houses of their own.” The creation of FMBN was a major move by the Nigerian government to develop the mortgage industry and support housing development funding. In spite of this, and many other policies like licensing and encouraging establishment of Primary Mortgage Institutions (PMIs), etc. The impact of funding on housing delivery, particularly in the context of mortgage institutions in Nigeria, isstill a far cry. Funding is still a major challenge confronting the housing industry in Nigeria. Funding housing delivery in Nigeria through mortgage should significantly impact the industry but the reverse is the case.
The recently launched of the Renewed Hope Housing Cities and Estates Scheme is to deliver 100,000 homes, especially for families on low to middle income across Nigeria. The initiative is a key component of the Renewed Hope Agenda of the Federal Government under the leadership of President Bola Ahmed Tinubu. This initiative is good but cannot adequately address the housing shortage Nigeria is confronting. This, to me, is tokenism. There must be a deliberatesteps taken towards funding of housing. The FMBN has not really impacted the delivery of affordable houses, therefore must be regig.
Accessibility to mortgage
Mortgagors, or individuals seeking a mortgage loan,do face several challenges when trying to access a loan. Some common difficulties they encounter are as follows. Creditworthiness: Lenders typically consider a borrower’s credit score and credit history when determining eligibility for a mortgage loan. A low credit score makes it difficult to qualify for a loan or may result in higher interest rates. Income and employment status: Lenders require borrowers to have a stable income and employment history to ensure they can make their mortgage payments. Self-employed individuals or those with irregular income, due to high rate of unemployment, may find it harder to secure loan. Down payment: Lenders often require a down payment on a mortgage loan, typically ranging from 10 per cent to 30 per cent of the home’s purchase price. Saving up for a equity contribution can be a significant challenge for many potential borrowers. Documentation requirements: Lenders require borrowers to provide extensive documentation, including proof of income, assets, employment, and other financial information. Gathering all the necessary documents can be time-consuming and challenging for some borrowers. Overall, navigating the mortgage loan process can be complex, cumbersome and very challenging. The government must make sure that all these rules are relaxed and made simple to improve accessibility to mortgage.
Affordable interest rates
Interest rates offered by mortgage institutions play a crucial role in determining the affordability of housing loans. Lower interest rates can make mortgages more accessible to a larger population, Loans with high interest rate discourage potential homeowners. Mortgage interest rate in Nigeria at present ranges between 22-24 per cent.It is one of the highest interest rate in Africa. Whereas, in South Africa, it is 11.8 per cent.The government in U.K and USAwere able to keep theirs at a single digit. In UK it is between 3-6 per cent, USA is between 5-7 per cent. The cost of finance should be friendly and affordable.
Policy and regulatory environment
The Minister of Housing and Urban Development should convey a stakeholders’ meeting where some of the policies and regulatory framework governing mortgage institutions in Nigeria. There is urgent need to access the significantly impact of these policies on our housing delivery thrust. Our Mortgage policies need to be re-accessed, regig and restructured to encourage mortgage lending.
This will promote the growth of the housing sector. Property development is capital intensive, it is therefore essential to ensure a steady flow of fund before embarking on housing projects. It is time to think out of the box. It’s shouldn’t be only the government. There are alternative source of funding like Crowd Funding. It is the practice of funding a project or venture by raising money from a large number of people. For example, in 2015, over US$34 billion was raised worldwide through crowdfunding for various types of projects. The concept can be given legal backing. FMBN could creating the platform and bring the concept as a package that the PMI could buy into it. Our housing deficit, which currently stands at above 23m in the country can not be reduced without adequate finance.
With availability of adequate funding, activities will pick in many abandoned housing projects spread all over the country. The value-chain of such will lead to more job creations, thus contributing not only to overall housing supply in Nigeria but will drastically reduce poverty.
The inefficiencies in mortgage industry, which are due to Poor policy implementation, Instability of government policies, inconsistence Economic Policy, and corruption, must be fought headlong if the New-Hope Housing Agenda of Tinubu Administration would succeed. It is therefore imperative for the government and the stakeholders in the mortgage industry to take serious steps towards mitigating the above identified challenges. In conclusion, funding plays a critical role in facilitating housing delivery through mortgage institutions. The American and UK governments have been able to fight the problem of poverty using affordable housing delivery as a tool. It becomes achievable through formulations of policies that create access to affordable financing, effective and friendly cost of finance, and creation of a conducive and enabling environment for Property market to thrive.
- Akanbi, CEO of Samak Properties & Development Company, is an associate member of the Nigerian Institution of Estate Surveyors and Valuers (NIESV).
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