Worried about the high cost of owning homes in Nigeria which has seen about 85 percent of the country’s 170 million population living in rented accommodation and spending over 50 percent of their monthly income on house rent, NatanelFlorens, a real estate firm, has come out with a new homeownership model which, it hopes, will enable many Nigerians to own homes.
Known as Rent-to-Own, the new homeownership model is aimed to complement the mortgage market which, apart from being inaccessible, is also unaffordable with its high interest rate, cumbersome application processes and near-impossible requirements.
Described as a child of necessity by its authorities, NatanelFlorens is the premier composite real estate advisory and development firm whose mission is to transform the Africa property landscape with innovative, ingenuous but affordable solutions.
The company believes that apart from easing homeownership process, the entrenchment of Rent-to-Own concept in Nigeria will allow typical real estate investors to enjoy 100 percent occupancy ratio on residential properties because of the huge rental market, growing middle class and the promise of ownership to potential home owners, adding that the investors will also be able to improve their returns from the typical 3-4 percent rental yield to 17 percent yield per annum.
“The core of this model is that prospective tenants/homeowners pay the rent that they are used to paying and own it over time. The beauty of this model is that it comes with zero percent interest and it begins to give hope to many Nigerians who never thought they could own a home”, Oguche Agudah, the company’s Chief Investment Officer and Executive Director, explained to BusinessDay.
Agudah, who was former Special Adviser to Minister of Industry, Trade and Investment, explained further that “this model essentially seeks to integrate the informal rental market with the formal financial system”, adding , “there are millions of Nigerians who have been paying their rent consistently over the years. What we are saying is that you can own a home based on your integrity and consistency in payment of rent. This system is complementary to the mortgage market as it instills the need to pay consistently and data can be shared among financial institutions to create a larger database and discourage recalcitrant debtors”.
Nigeria has major homeownership problems and Agudah said the first of those problems was that the financial system was awash with short term capital which was used to finance long term assets in the form of property, noting that such a situation creates a mismatch that many banks and developers are currently struggling with.
“The second issue is the cost of funding. This is usually in the high double digit space. The effect of this is an increased cost of residential houses for individuals. It is therefore, not a surprise that approximately 85 percent of the Nigerian population is renting the places they live in. People have worked for years and they cannot get their own houses because of the financing model for real estate”, he said.
On the retail end, he noted that there was a dearth of affordable mortgages in the market, quoting statistics which showed that mortgage loans represented less than 1 percent of Nigeria’s GDP and that there were less than 100,000 mortgages written in the market. “Furthermore, in a depressed economy, like we’re in, it’s difficult for individuals to drop lump sums for the purchase of their houses”, he hinted.
