The Federal Mortgage Bank of Nigeria (FMBN) is advocating for private-sector funding in the supply of affordable housing.
The Managing Director/Chief Executive of the bank, Mr Shehu Usman Osidi, made this disclosure while analysing the giant strides of the bank in promoting affordable mortgage and housing in Nigeria
Justifying the need for the fund, the FMBN boss said the country would need to produce an average of 550,000 housing units per annum for the next ten years, while the financial outlay for this annual housing target is over N5.5 trillion per annum.
He said that Nigeria is faced with a huge population estimated at over 200 million growing at about 2.52 percent per annum; the high urban-rural ratio of about 50 percent, also growing at an astronomical rate of 4.3 percent per annum and perennial unfavourable regulatory and macroeconomic factors.
The combination of these unfortunate circumstances, he said had resulted in a significant housing gap estimated at millions in the double digits.
According to him, housing remained a basic human need that must be met by individuals and households, noting that the huge housing and housing finance gaps portrayed enormous opportunities to revamp and reverse the fortunes of the national economy.
He disclosed that FMBN had issued a N100 billion off-taker guarantee to real estate developers engaged under the Renewed Hope Housing programme to facilitate the delivery of the projects.
Stating this during the annual lecture organised by the Property and Environment Writers Association of Nigeria in Lagos, he said the granting of the off-taker guarantee, was meant to provide mortgages at single-digit rates of six percent and a tenor of up to 30 years to Nigerians interested in becoming homeowners.
This is where an institution like the FMBN, as the apex mortgage institution in Nigeria is playing a huge roll by driving housing affordability and accessibility,” he said.
The transaction arrangement, he said, clearly highlighted the significant role of the FMBN in housing delivery in Nigeria.
“FMBN is empowered to collect and manage the National Housing Fund (NHF) Scheme as a pool of long-term funds funded by contributions of 2.5 percent of workers monthly incomes. It remains one of the institutions that provides affordable financing to both the supply (construction) and demand (off-take) sides of the housing market.
“The banks loan products are granted on concessionary basis that are below-market interest rates and for relatively long tenors to ensure affordability, Osidi said.
He explained that FMBNs construction loans, were also granted to real estate developers, cooperative societies and individuals, asides from the NHF mortgage loan.
“FMBNs other loans on the demand side include a rent-to-own product and home renovation/improvement loans,” he said.
Osidi revealed that the bank is set to launch the Diaspora Mortgage loan to address the needs of Nigerians in Diaspora, non-interest loans and rent assistance.
He cited the rising cost of housing delivery in the country as a major reason the bank increased loan limits for individuals to N50 million from N15 million
It is of interest that to address the rising cost of housing delivery due to escalating cost of building materials, the bank increased loan limits for individuals from N15 million to N50 million while the equity requirement was reduced from as high as 30 percent to only 10 percent to ensure affordability.
We have also established partnerships with critical stakeholders including state governments, regulators, bilateral and multilateral financial institutions and the labour centres to increase access to affordable housing, he said.
He cited the 2019 PwC study, which noted that about 75 percent of the nations estimated 42 million housing stock falls below the United Nations criteria for permanent human occupation.
In addition, he said, the nations dismal record of untitled land implies that about $300 billion, roughly 60 per cent of national GDP is dead capital as the owners cannot realise tangible earnings or utilise the assets to improve their economic status.
“It is in this vein that at the recent meeting of the National Council on Lands, Housing & Urban Development that held in Gombe, Gombe State a couple of weeks ago, the Minister of Housing and Urban Development stated that to stem the national housing deficit, the country will need to produce an average of 550,000 housing units per annum for the next ten years, while the financial outlay for this annual housing target is over N5.5 trillion per annum.
He highlighted the significant economic opportunities for forward and backward integration that housing has the capacity to engender in terms of requirements of building materials, and household items, as well as huge capacity for job creation and employment.
During the construction period, our in-house estimates indicate that constructing a bedroom property can generate not less than 17 direct and indirect jobs, he said.
He maintained that the motivation for new home development would be driven by housing demand and by extension, “housing demand tends to be a factor of the available opportunities for mortgage financing as in most societies and less than five percent of the population lack the financial capacity for house for cash transactions.”
He stated further that even where individuals can afford to purchase a house outright, economic prudence dictates that a mortgage facility which offers regular repayment in instalments over a convenient length of time is preferable to tying down lump financial resources which can be more optimally deployed to alternative investment opportunities.
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