- Title: NIGERIA: New affordable mortgage schemes to boost property market in Nigeria
- Date: 12th March 2014
- Summary: LAGOS, NIGERIA (RECENT) (REUTERS) VARIOUS OF PEOPLE WALKING STREET/VARIOUS OF ONGOING BUILDING CONSTRUCTION VARIOUS OF ANDY WABALI, EXECUTIVE DIRECTOR, MUTUAL ALLIANCE SAVINGS AND LOANS IN HIS GARDEN FLOWER (SOUNDBITE) (English) ANDY WABALI, EXECUTIVE DIRECTOR, MUTUAL ALLIANCE SAVINGS AND LOANS, SAYING: "It's a welcome development. The market has been waiting for it for a very long time. It is also a secondary market; the market has been waiting for it for a long time. In fact if we have more of these in the market, I think Nigerian mortgage industry will see itself competing with.., it will be the biggest mortgage industry in Africa." AERIAL SHOT OF BUILDINGS IN AN ESTATE SIGNAGE READING: "3" BUILDINGS IN AN ESTATE SIGNAGE READING: "2" VARIOUS OF A KITCHEN SHOWING TAPS AND CUPBOARDS VARIOUS OF A TOILET PEOPLE AT A RAFFLE DRAW VENUE SIGNAGE READING: LAGOS HOMS, LAGOS HOME OWNERSHIP MORTGAGE SCHEME VARIOUS OF PEOPLE AT A RAFFLE DRAW VENUE PROGRAMME CARD READING: WWW.LAGOSHOWS.GOV.NG VARIOUS OF PEOPLE AT A RAFFLE DRAW EVENT BANNER SHOWING PICTURE OF VARIOUS HOUSES (SOUNDBITE) (English) BABATUNDE FASHOLA, GOVERNOR, LAGOS STATE, SAYING: "We are moving our people from desperation for house to an orderly and predictable lifestyle. That is our dream and I have always believed that when people can dream things, their hands can do it." RAFFLE DRAW GOING ON MEN LOOKING ON NAME OF A WINNER BEING ANNOUNCED VARIOUS OF WINNERS WALKING UP THE PODIUM/STANDING TO TAKE PICTURES (SOUNDBITE) (English) ABAYOMI SYLVESTER, LAGOS RESIDENT, SAYING: "Because some people are looking at it that look, 12 million for a house or 11 million plus for a house is quite expensive, you know they are just looking at it that look, with 5 million, we could get a land in Ojokoro and do the structure on it for less than 2 or 3 million, but not considering so many other factors you know like tenement rate, C of O (Certificate of Occupancy) and all those kind of things. It's less stressful." (SOUNDBITE) (English) MOBOLA FASHOLA, EXECUTIVE SECRETARY, LAGOS HOME OWNERSHIP MORTGAGE SCHEME, SAYING: "Everyone that qualified will be coming for counselling at our office, so the process of the counselling is such that we will advise them of what the mortgage culture really is. They have to pay attention to paying their mortgage on a monthly basis; they have to make sure that they don't default because if they don't pay one month, second month, by the third month, we are going to re-possess your house." VARIOUS OF BANKS SIGNAGE READING: "Z ZENITH" (SOUNDBITE) (English) ANDY WABALI, EXECUTIVE DIRECTOR, MUTUAL ALLIANCE SAVINGS AND LOANS, SAYING: "Land is in the hands of government, we need to do a land reform, change the land use act, repeal it, so that it will be easy and accessible for all to own land in Nigeria. Land reform is a bottleneck, we need to untie it." VARIOUS OF LAND REFORMS IN AN ESTATE LAGOS, NIGERIA (FILE) (REUTERS) VARIOUS OF MAKOKO SLUM/ PEOPLE ON THEIR BOATS
- Embargoed: 27th March 2014 12:00
- Keywords:
- Location: Nigeria
- Country: Nigeria
- Topics: Industry
- Reuters ID: LVA3NQT2L4FF38QG0R785FF9CQJ0
- Story Text: Nigerians will now be able to access a variety of loans for housing, after the country's government recently launched a company that will deliver effective mortgage financing.
The company, which is called Nigeria Mortgage Refinance is funded by the World Bank, and has created an avenue for the loans to be paid back over a 20-year period, at an interest rate of between 1 to 9 percent.
In the last few years, Nigeria has become an increasingly popular investment destination due to a huge potential consumer market of more than 160 million people and Gross Domestic Product (GDP) growth over 6 percent, far outstripping the stagnant economies in developed countries.
The construction and real estate sectors are growing at more than 10 and 12 percent respectively, a boom for foreign and Nigerian construction firms.
But for a long time, Nigeria's mortgage sector was bogged down by various challenges, including crippling interest rates and a lack of adequate housing.
New quality housing has been slow to materialise because of a lack of building expertise and financing. Some housing estates have been left unfinished after projects ran out of capital, while many are poorly constructed, leading many Nigerians to shy away from buying property.
Property in Nigeria's commercial capital of Lagos, a heaving metropolis of around 20 million people, can be among the most expensive in the world with two-bedroom flats costing more than 1 million US dollars in upmarket areas. The most popular units are those selling for 25 to 35 million naira (152,900 to 214,100 US dollars).
But with the recent introduction of mortgage companies which allows for subsidised interest rates, hopes are high that affordable housing will soon become a reality.
In order to address the funding constraints, a 300 million US dollar soft loan from the World Bank under its International Development Association (IDA) concessionary lending window, has been secured by the government.
One of the companies involved in giving out loans is Mutual Alliance Savings and Loans.
The 14-year-old company which is self funded, gives out loans at a 23 percent interest rate, but can now get funding from the government through the National Housing Fund and give out loans for as low as 6 percent.
Andy Wabali is the executive director at Mutual Alliance Savings.
"It's a welcome development. The market has been waiting for it for a very long time. It is also a secondary market; the market has been waiting for it for a long time. In fact if we have more of these in the market, I think Nigerian mortgage industry will see itself competing with.., it will be the biggest mortgage industry in Africa, "he said.
The city of Lagos has also jumped on the opportunity and set out to establish a mortgage scheme to encourage those who want to purchase houses, with an interest rate of 9.5 annually.
Like in many parts of Lagos, several well-financed new developments are rising, with many apartments and houses springing up.
Apartments ranging from one bedroom to three bedrooms are up for sale for a minimum price of 4.3 million naira (27,125 US dollars) and maximum price of 32.63 million naira (203,938 US dollars).
As the country's property market continues to boom, the government aims to build 200 houses every month for residents in the state.
At a recent raffle draw held by the Lagos state governor to present the first batch of beneficiaries, over 100 people were selected to receive the new mortgage scheme.
One of the criteria for selection includes payment of taxes consistently for five years.
"We are moving our people from desperation for house to an orderly and predictable lifestyle. That is our dream and I have always believed that when people can dream things, their hands can do it," said Babatunde Fashola, the Lagos state governor.
Abayomi Sylvester, recipient of the new mortgage scheme says the lower interest rates are a welcome relief for people who could not afford to buy or build their own houses.
"Because some people are looking at it that look, 12 million for a house or 11 million plus for a house is quite expensive, you know they are just looking at it that look, with 5 million, we could get a land in Ojokoro and do the structure on it for less than 2 or 3 million, but not considering so many other factors you know like tenement rate, C of O (Certificate of Occupancy) and all those kind of things. It's less stressful," Abayomi said.
Mobola Fashola, Executive Secretary of the Lagos Home Ownership Mortgage scheme says frequent consultation is required for residents who take part in the mortgage scheme in order for them to be constantly reminded of their requirements.
"Everyone that qualified will be coming for counselling at our office, so the process of the counselling is such that we will advise them of what the mortgage culture really is. They have to pay attention to paying their mortgage on a monthly basis, they have to make sure that they don't default because if they don't pay one month, second month, by the third month, we are going to re-possess your house," she said.
In Nigeria, land is owned by both the federal and state governments giving them the opportunity to reclaim any property whenever they desire to use it for other projects.
Despite huge demand for housing, both developers and buyers struggle to get financing inside Nigeria where lending rates are typically around 25 percent.
The only way to unlock all the latent demand is to make borrowing affordable but the mortgage market is almost non-existent.
Nigerian banks do not like giving out mortgages because reliable information about buyers and land is scarce, while there is no secondary market to offset the risk.
Wabali hopes that access to affordable mortgages payments will make room for residents to possess land titles.
"Land is in the hands of government, we need to do a land reform, change the land use act, repeal it, so that it will be easy and accessible for all to own land in Nigeria. Land reform is a bottleneck, we need to untie it," he said.
The government launched a Federal Mortgage Bank last year, which it hopes will help build 500,000 new homes.
The bank plans to float a 200 billion naira mortgage bond, the proceeds from which can be handed over to home buyers with the state guaranteeing against default for five years.
The government is also discussing passing legislation to create a secondary mortgage market and to improve land laws. - Copyright Holder: REUTERS
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