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Low Mortgage Interest Rates for Affordable Housing

The quest for affordable housing especially by low income earners is outrageous and mind boggling in a country that rakes in billions of dollars from oil proceeds until the recent clash of oil price in the international market.

Stakeholders are sceptic on why Nigeria with an estimated population of over 170 million cannot build at least 50, 000 houses annually for the target group despite its popularity as the giant of Africa.

This is however not unconnected with difficulties in land acquisition, land approval and especially high interest rate from Primary Mortgage Banks (PMB) and other Commercial banks.

No wonder, a good number of sophisticated buildings in the Federal Capital City of Asokoro, Maitama, Wuse, Wuye, Garki and among others had remained unoccupied for over four years.

Apart from challenges associated with high interest rates , others are optimistic that a greater number of unoccupied houses were owned by landlords who allegedly pumped stolen money into real estate to avoid being nabbed for money laundering.

Cross section of experts that spoke to LEADERSHIP argued that high interest may soon force private investors out of real estate business even as they requested for long term repayment period.

In an interview with LEADERSHIP, the Chairman, Fellows Forum of Nigeria Institute of Quantity Surveyors, Mr Ifeanyi Anago maintained that no country developed it’s housing sector with the normal commercial bank interest rates of 25 % to 30 %.

He suggested the enactment of deliberate policy aimed at making funds available through mortgage intermediaries at single digit interest rate to crash the cost of housing.

Anago noted that single digit interest rate should be accompanied with long tenured payback period adding that the measure is widely practised in developed countries that have used housing to boost their economy.

According to him, “At times, when the economy is weak and the government wants to pump money into circulation, it’s usually done through housing.

“To make it happen, the interest rate must be single digit, otherwise; the cost of borrowing will drive the developers out of the market and housing deficiency will still be a song of the moment.

He regretted that despite the versatility of the construction and building industry that it contributed between 3 to 5 per cent to the GDP.

“In developed economies, building and construction industry is the ground wealth that contributes higher to their GDP but because Nigeria is not developed, most of the construction market is in the informal sector.

He said the only way to capture their contributions was to push the sector into the formal market even as he kicked against the poor rating of the industry’s performance by staticians.

“When our economy was rebased, we took over from South Africa not because we did anything extra ordinary but because we captured markets that were not captured before.

“It is the only industry where wealth grows and you don’t experience depreciation all the time.

Reacting, the Managing Director / Chief Executive Officer of Federal Mortgage Bank of Nigeria (FMBN), Mr Gimba Yau Kumo disclosed that FMBN was the only institution in Nigeria that offered single digit facility for construction stressing that there is insufficient funds to address the requirement of the developers.

“There is also no bank in Nigeria that loans beyond the NPR which is 13%, all of them are 15% plus but since most estates are being funded by commercial banks, the developers have to service the banks which also increases the cost of houses.

Explaining further he said, “If they are to take mortgage from commercial banks, some PMB’s affiliated to commercial banks will give them at 20 to 25% which is not affordable.

Kumo argued that problems associated high interest rates was one of the major reasons he was suggesting for a policy that would capture construction and mortgage finance as single digit to address the housing deficit.

“If the developers are to borrow at a market rate, Nigerians cannot afford to buy the houses.

“We need an interest regime that Nigerians can afford for both construction and mortgage finance which is the responsibility of the CBN.

Also speaking, the Vice President of Real Estate Development Association (REDAN), Dr Aliyu Oroji Wamako said it was impossible for developers to obtain a loan from the bank with an interest rate of 28%, build and sell the house for N5 million.

He argued that the federal government plans of providing affordable houses to low income earners would be thwarted given the high interest rates stressing that any developer that collect loans from the banks would end up working for the banks.

For this reason, he sought the release of counter -part funding that would further facilitate home ownership, reposition the building industry and reduce the current housing deficit.

On the way forward, he said “The federal government should relax some of the land acquisition procedures and make it accessible to developers. If they want to give counterpart funding, they should give it to the existing institutions that provided the funds earlier at 10% which is the FMBN.

“For instance, if 1000 people are contributing N5000 in one year, they will only contribute N60 million. There is no 3 bedroom house that is sold below N8m to N10m. How do you expect FMBN to provide mortgage for 4 million people when contributions from the NHF contributors are like peanuts?

To this end, he called on the federal government to provide adequate funds for FMBN, streamline the idea of housing provision, cut down bureaucracies involved in accessing mortgages and re-organise the mortgage procedures in Nigeria.

On her part, the President of Nigeria Institute of Quantity Surveyors (NIQS), Mrs Mercy Iyortyer expressed displeasure that since the 17 million housing deficit was pronounced that the federal government have not taken cogent steps to provide at least, 10, 000 housing units.

“I know that Mortgage Finance Company was put up to help the Primary Mortgage Banks but I dont know how vibrant they are?

Iyortyer emphasized that housing deficit cannot be addressed given the high interest rates from commercial banks stressing that developed countries operate on single digit interest rate to facilitate home ownership.

Source: Leadership

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