Housing remains a major challenge in the country. But it is believed that with adequate funding, it can be tackled. This issue was revisited at the third Mortgage Banking Association of Nigeria (MBAN)-Housing Finance and Investment Conference and Exhibition in Lagos. The theme was “Mortgage banking: A catalyst for capital market growth in Nigeria.” SEYI ODEWALE was there.
They are bankers with passion, but not for the run-of-the-mill, day-to-day banking. Their passion is focused on providing humanity with shelter. They are mortgage bankers charged with helping the nation to bridge the housing gap.
Their gathering in Lagos last week was not to celebrate, but to assess the progress in their quest to proffer solution where needed. This year’s conference, the third in the series, focused on mortgage banking as a catalyst for capital market growth.
The association’s President, Mr Femi Johnson, said the mortgage sector has, in over two decades grown from its narrow product-base and capabilities to a level it is proud to present to Nigerian and international communities today.
He said: “The MBAN-HOFEX has been designed as an annual event to showcase the achievements and challenges of the housing finance sector in seeking innovative, pragmatic and contemporary solutions to these challenges in order to sustain the growth and evolution of the sector, and to highlight mortgage products and services, as well as home ownership opportunities available to Nigerians.”
He noted that the previous editions were successful because of the support of the Central Bank of Nigeria (CBN), the Federal Mortgage Bank of Nigeria (FMBN) and other stakeholders.
The annual MBAN-HOFEX, he said, has helped the sector achieved some milestones, such as the soon-to-be concluded consolidation/reform of the mortgage banking/housing finance sector, the incorporation and setting up of the Nigeria Mortgage Refinance Company and an increased public awareness of the housing/finance sector.
As the world begins to recover from the worst financial crisis since the great depression, Johnson said, housing finance markets are again looking into the future.
“Since the crisis was originally triggered by the sub-prime segment of the mortgage market, this has led to the questioning of some well established premises of housing finance and a revision of the way to approach it, both at the policy and at the market levels.
“However, the academia, policy makers and practitioners agree that on the impact of securitisation in the sub-prime crisis, it is not wise to throw the proverbial baby away with the bath water, in spite of the issues that triggered the sub-prime crisis. Securitisation and other secondary capital market means are still considered effective strategies to deepen housing finance systems, especially in an emerging economy like Nigeria,” he said.
In Nigeria, Johnson said, mobilising finance for housing delivery remains crucial and continues to encounter the same challenges as before. He noted that rapid urbanisation, growing population, limited land, access for lower income groups and dearth of long-term funds have continued to put pressure on housing finance and delivery systems.
He noted that a well-functioning housing finance system is imperative for a prosperous economy. According to him, it plays an important role in stimulating economic growth and creating the much-needed jobs in an economy.
The inadequacies in the housing financing system, he said, have resulted to the springing up of slums.
“A chronic shortage of affordable housing has intensified the plight of the poor in all our major cities,” he said.
He said there was an urgent need to increase housing finance to at least 10 per cent of the Gross Domestic Product (GDP) as against 0.5 per cent, adding that it would require the creation of more resilient housing systems to achieve this feat.
Johnson said there were numerous solutions and approaches to fostering housing finance, arguing that mortgages are not always the most appropriate financing instrument for every borrower. Home improvement loans or self-construction loans may be more appropriate in some cases, to meet housing needs, he added.
The take-off of the Nigeria Mortgage Refinance Corporation, he noted, would mark a wholesale shift in mortgage funding in Nigeria from the depository savings institutions and pooled funds, to mortgage securitisation.
He, however, noted that there is no solution to the nation’s housing finance needs, just as the generation of under supply of housing cannot be over turned within a year. The conference, he said, would lay a solid foundation upon which the association and other stakeholders can subsequently build, noting that the association and other stakeholders are committed to ensuring that housing finance in Nigeria is equipped to keep pace with the present demands and the imminent challenges of the fiture
He predicted that the future of the housing finance industry would be shaped to dramatically transform the industry
About six papers were presented at the two-day event. Presenting her paper on Creating the sustainable link between pension fund and the mortgage banking sector, the Acting Director-General of PENCOM, Mrs. Chinelo Anohu-Amazu, listed the roles of pension funds in the housing/mortgage finance sector.
One of these, she said, is that pension funds being long-term and more stable funds, are ideal and appropriate for housing/mortgage financing, adding that because of its primary and illiquid nature, pension funds help direct investment in real estate.
She spoke about initiatives that would increase investments in housing mortgage sector. These include: legislation which is about the ongoing amendment of PRA 2004 to allow the use of part of members’ RSA balances as equity stake to finance primary home ownership. She said the commission was working on modalities to ensure efficient implementation and safety of pension funds’ assets.
She listed the establishment of the Mortgage Refinancing Company (MRC) that will provide financing to primary mortgage institutions, as an upcoming initiative that could deepen the process
Enumerating preconditions for sustainable link between pension funds and mortgage finance sector, she listed approved legal and regulatory frameworks such as land reform (registration/titling, administration), securitisation laws and foreclosure laws.
Other preconditions, according to her, are favourable tax policies to incentivise private sector participation; stable micro-economic environment and indicators, especially inflation and interest rates; products development and innovation in order to link the housing/mortgage sector to the capital market; establishment of a strong and functional secondary mortgage market; professionalism and high corporate governence practises by operators and reducing building/construction costs and transaction charges.
She said a revolution in the housing/mortgage finance sector in Nigeria would have a significant socio-economic impact on the lives of Nigerians and the country, through job creation and enhanced living standards.
She listed critical steps taken recently by some relevant stakeholders (the establishment of MRC; PenCom, to include on-going ammendment of the pension legislation to support primary home ownership by registered RSA holders).
Stating the critical role of real estate developers in housing supply value, Brig.-Gen Tunde Reis, president, First World Communities Limited, defined real estate developer as those who orchestrate, control, imagine and create the development process from the beginning to the end.
He defined them as risk takers, converting ideas on paper into real property and work with numerous counterparts in the value chain comprising city planners, surveyors, engineers, architects, building inspectors and a host of others.
A real estate developer, Reis further said, is central to a development process that is interactive, long term and coperative.
Private sector property developers in Nigeria, he said, contribute about 80 per cent of the housing supply. The drawback, according to him, is that housing units provided are usually out of the reach of the low-income families.
To boost housing supply, Reis said, there must be a review of accessibility to land, accessibility to housing finance facilities, public sector infrastructure provision and cost of building materials.
Other factors to guide developers, according to him, are affordability; target market, which include low and middle earners; end user driven initiatives through the use of cooperatives, trade groups etc and house ownership rental option.
