*As CBN launches new mortgage standards for informal sector
There are systemic barriers to homeownership in Nigeria that should be removed to make housing affordable, says Professor Charles Inyangete, the Chief Executive Officer of the Nigeria Mortgage Refinancing Company, (NMRC). He says with existing barriers, prospective homeowners must pay up to 50 per cent of the price of their desired homes to get the keys. Bennett Oghifo reports
The reason it is so challenging to own a home in Nigeria is “because of the barriers that exist all the way through, said Professor Charles Inyangete, the Chief Executive Officer of the Nigeria Mortgage Refinance Company (NMRC), during a chat with journalists, recently; with him was Dr. Femi Johnson, a Non-Executive Director of NMRC.
“The barriers are such that before you get your own home, you will have to pay in the region of 34.5 per cent, we estimate, in legal cost, governor’s consent, in bank charges, on top of the 20 per cent that you need to deposit as equity contribution; that, in itself, makes it unaffordable,” said Prof. Inyangete.
He explained that “even if you were looking to buy a N10 million house, you have to find half the price to receive your keys. So, we need to systematically address those problems.
He said, “Homeownership will not take off until we have addressed the issue of affordability,” adding that the nation needed a figurative escalator to get prospective homeowners over these barriers and that “one key escalator component that will allow you to jump those barriers is a housing policy for first time home owners. In most parts of the world, the first-time homeowner is supported to own such a home. We are hoping that the Family Home Fund of the federal government (for housing supply) will focus on home ownership for the first-time home owner, because what they are bringing to the market are two things- the construction of affordable homes and, secondly, we hope they’re bringing also the funding that will allow the realisation of cheaper mortgages to be created.
Inyangete said, “If we solve those two things and we on our side give money over a long period/repay over a long period as a young person, the repayment for each period, whether it is monthly, quarterly will be small, will be more affordable. So, the essence of homeownership in Nigeria is affordability.
NMRC is the final component that deals directly with the provision of funding for homeownership, said Professor Inyangete. “We’re set up and supported by the World Bank and we benefit up to $250 million which we have drawn down based on milestones, and are still drawing down. Our key role is to make homeownership a reality. So, you can see how we plug into the Myownhome scheme,” an aspect of the Nigeria Housing Finance Programme (NHFP).
“Our mandate is to provide funds to the mortgage providers/lenders to be able to make mortgages a reality. But that is a big challenge in itself. That means we are standing at the back end of the transaction and we cannot take the portfolio of mortgages to refinance, which we are allowed to do, until such mortgages are created. So, we recognise the importance of not just sitting and waiting, so we adopted a business approach to looking at the value chain.”
They then tried to identify where the challenges are “all the way from land and land assemblage, through to construction and construction finance, through to mortgage origination and, of course NMRC, which is to refinance,” the CEO said.
He explained that NMRC “does not refinance on the day that the mortgage banks create the mortgages”, saying there is a “seasoning period, under the underwriting standards, which is a six-month period. So, mortgage providers have to find the fund to create the mortgages and then wait for six months for the mortgages to season for us to refinance.”
He said this was a big burden and that in recognition of this, the NMRC is reinterpreting some of its roles, “We are looking to see how we can play a part in the creation of mortgages itself and we are coming up with a product which we hope will be approved through our Board. It is called Mortgage-driven Placement, and it will allow us to be able to support the creation of mortgages and, of course, we will be standing to refinance through our member banks.”
The whole idea of creating an enabling environment is to ensure that these houses are available at the right prices, that mortgages are available at the right interest rates and right tenures and that over time issues of title transfer, foreclosure mortgage rights and even rights of citizens are protected, said Dr. Femi Johnson, a Non-Executive Director of NMRC.
The major component, he said was provision of mortgage, “which is where you find NMRC playing a very active role,” adding that the mortgage guarantee scheme, which is about to be launched by the CBN. “They have consulted wide on this, I was part of a team that visited Canada Mortgage and Housing Corporation in August last year to understudy how the run mortgage guarantee which is also called mortgage insurance.”
Johnson explained that the mortgage insurance allows people who do not have up to the 20 per cent minimum equity contribution to their desired property to reduce their contribution to 5 per cent and get a loan of 95 per cent.
“It is an innovative tool that is being used in other climes that CBN is trying to launch in our market. The fourth component of the Nigeria Housing Finance Scheme has to do with incremental building, particularly for people at the really low end.”
He said the way it works is for people who want to build a house but do not have the money to take the first mortgage loan to buy the land, another to build a room and when income improves or loan is repaid, s/he takes another to add a new room.
The MyOwnHome scheme, he said is the enlightenment initiative to let Nigerians of all ages to know that a revolution is taking place in the housing industry that they should take advantage of.
According to him, the scheme is to make people aware that the product is available in the market, what their responsibilities are to mortgages, what their rights are to mortgages, and to enlighten people, among others.
The supply side of housing is also being addressed with the Family Home Fund that is supposed to take care of the supply side for housing construction so that demand will not outstrip supply.
Also as part of the Nigeria Housing Finance Programme (NHFP), the Central Bank of Nigeria, will today, launch the underwriting standards to enable people in the informal sector of the economy obtain mortgage loans for homeownership.
This is in realisation of the fact that over 80% of Nigerians in the informal sector of the economy do not benefit from these housing/financial policies. Not anymore because today, the Central Bank of Nigeria will launch a mortgage finance arrangement for people who are not civil servants.
The processes of instituting a seamless financing system for housing will be discussed today, during a two-day meeting to be hosted by the Nigeria Housing Finance Programme (NHFP), an initiative of the federal government that is supported by a World Bank (International Development Association) loan of $300 million and implementation by the Central Bank of Nigeria. The meeting will be attended by all managing directors of mortgage banks in Nigeria and executives of CBN.
At this meeting, the industry mortgage underwriting standards will be launched. The standards have been developed as a collaborative effort between the Mortgage Bankers Association of Nigeria (MBAN), in conjunction with Nigeria Mortgage Refinance Company (NMRC) and the NHFP.
“The unveiling of the standards is expected to open a new vista to the housing market, which is predominantly composed of clients from the informal sector,” officials of NHFP. The workshop will also validate a draft mortgage underwriting standards for the non-interest sector.
This whole housing finance revolutionary initiative is to ensure that Nigeria’s housing market becomes a key driver of the nation’s GDP, as it should be; that Nigerians have fluid access to affordable homes with multiplier effect of direct and indirect employment.