IT’s no longer news that the Federal Government, through its Ministry of Finance Incorporation, has announced a N1trillion real estate funds aimed at facilitating home ownership through the provision of low-interest loans at a 12 percent interest rate.
Designed to make housing more affordable by offering financing options below the prevailing market rates, the fund is expected to stimulate the housing market by enabling more individuals to purchase homes, thereby increasing demand in the real estate sector.
It is also aimed at boosting home ownership and addressing the housing deficit in the country.
Following the announcement, affordable housing experts have not stopped to talk about the issue, wishing that stakeholders could get the N1trillion real estate fund at single-digit interest rate.
Leading the pack, Executive Director, Housing Development Advocacy Network (HDAN), Mr Festus Adedayo, said the wish was to get the fund at single-digit interest rate, but that the current nation’s economic challenges prevailed.
Hr said: “We wish we can get it at single-digit, but we just have to start with this offer of 12 percent, having seen the challenges in the Nigeria economy.
“We are bothered about the seismic shift that’s happening in world trade which is affecting all economies and Nigeria is being affected, therefore starting with 12 percent is manageable.”
Adebayo, who doubles as the Lead Promoter of the Africa International Housing Show, said that time has come to call on all stakeholders to start looking for locally made building materials.
He appealed to the Central Bank of Nigeria (CBN) to show interest in the housing and mortgage sector.
He called on the federal government to support Family Homes Funds ( FHF) and the Federal Mortgage Bank of Nigeria (FMBN) to promote social housing so that people below the ladder that the 12 percent interest cannot take care of would be supported.
His words: “We are also appealing to CBN to show interest in the housing and mortgage sector.
“Federal Government must support Family Homes Funds to do more for social housing so that those below the ladder that the 12 percent interest cannot take care of will be handled by FHF and FMBN.”
“We need intervention that will make the housing affordable. We already have enough houses looking for those at the top echelon,” Adebayo said.
Managing Director, Ace Hi-Teck Construction Co., Adewunmi Okupe, pointed out that only the salary earner on N360,000 monthly could afford 12 per cent interest per annum on mortgage
“We advocate single-digit interest for housing. In fact, 4 to 6 percent, possibly. Affordable housing needs everything affordable including affordable interest rates.
‘They should not see this as a commercial loan at all. Even though they claim the 12 percent is less than prevailing market rate, if they cannot solve our problem they should not add to it,” he said.
Doing the calculations, Okupe said that taking a mortgage on a N12 million house would attract N1.44 million interest per annum (on simple interest).
“This is N120,000 per month interest alone. A salary earner on N360,000 per month will only be able to pay interest and can’t talk of capital.Our mortgage bankers need to help us out on this,” Okupe said.
An anonymous affordable housing advocate remarked that the N1trillion being released under 12 percent per annum would only result in unproductive mortgages.
Another expert,who identified himself simply as “ Evocati” wondered how government came about the 12 percent.
“If you mix this with the current prices of houses today, what you have is no longer a mortgage,” he said.
“Single-digit interest rates to aid demand, coupled with some arrangement to bring down house price through subsidy of some sort. This is the only mix that can make the houses within reach of the target population.
“Anything short of this will be repeating the problems we already have in the industry,” he said.
Another expert, Dr Niyi Ade, pointed out that the housing loan at 12 percent is still high but “the affordability bracket at least increased even though it won’t get to the bottom of the ladder.”
“For me, the intervention should go beyond just mortgage rates, building materials too need to be looked into and also innovative cost saving methods of building,” he said.
Some experts have a different view, suggesting that 12 percent interest on real estate fund wasn’t a bad idea.
An expert, who identified himself simply as “Banjo”, said:”Let’s start from somewhere first. 12 percent is still far better than over 30 percent in the market currently, courtesy of MPR of 27.5 percent.
Lagos-based estate surveyor and valuer Femi Oyedele, stated that single-digit interest rate for housing no longer possible in Nigeria.
“Not in the next ten years. The Nigeria economy and culture do not support single-digit interest rate,” he said.
Oyedele explained that MOFI is not a mortgage bank, reeling out that its core mandate was to engage in and carry out commercial transactions of any kind.
“In late December 2024, a N250 billion initiative designed to provide low-cost, long-term mortgage financing and stimulate economic growth through the housing and construction sector.
“The N250 billion is not designed for affordable mortgage loan as it said it will allow private sector participant to access the loan. Mortgage doesn’t work like that,” he said.
“At 12 per cent interest rate, it is no longer a mortgage loan but low-interest commercial loan. Mortgage works on contribution of the prospective home-owners and not aid or subvention from government to assist few Nigerians,” he said.
For Emmanuel, another housing expert, he said:”A single interest rate is possible in the medium term if the Naira devaluation is curtailed and the macroeconomic drivers and authorities are more disciplined and transparent.
“But, we are very far from getting there.”
He is of the opinion that if MOFI’s management and governance are sound and innovative, “that N250billion initiative can be used to catalyze over N1trillion funding for inclusive housing development and financing in addition to leveraging on affordable housing which may be supported by impact investment and significant crumbs from the table of other mortgage products which the demand side and supply side struggled painfully for over the years.”
READ ALSO: Real estate firm restates commitment to excellence, innovation
and then