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In order to ensure that working class Nigerians in the middle and low income brackets leverage on current government initiatives to buy and own houses, the Federal Mortgage Bank of Nigeria (FMBN) has said it will henceforth concentrate on facilitating mortgages that will cost around N5 million and be more affordable for lower end buyers.
This is because the country suffers a housing deficit of 17 million houses, with the housing market contributing just 1 percent to GDP, but unlocking the sector’s business potentials can trigger economic growth and create widespread employment.
FMBN is the manager of the National Housing Fund, which is a contribution by Nigerian workers who are required to contribute 2.5 percent of their basic salaries to the fund each month, to qualify for accessing housing mortgages of N5 million, N10 million and N15 million, which is the maximum amount to be accessed.
Equity contribution based on the current loan amounts is 30 percent for N15 million, which is N4.5 million; 20 percent for N10 million, which is N2 million; and 10 percent for N5 million, which is N500 thousand.
However, due to their high cost, houses in previous estates developed with the bank’s support have not benefitted middle and low income Nigerians, who form the bulk of the homeless , but have rather been hijacked to be re-sold by the wealthy who already have pre-existing houses elsewhere, hence the current position of the new FMBN management to focus on serving the lower end of the market.
“For mortgage requests that are N5 million and below, there is a complete waiver of equity contribution, not waiver per say, but there is capitalisation of equity contribution over a 24 month period, so that clearly removes the barrier for such mortgage applications to begin their journey towards home ownership,” Richard Esin, the managing director/CEO of FMBN told BusinessDay.
This, he said, only applies to over 95 of the bank’s partner companies throughout the country for the purpose of driving home ownership among eligible members of the Nigerian public, including those in the Nigeria Police, which is the largest single contributor to the National Housing Fund.
“We are a bank and not a construction company, so as much as possible, the new focus of the bank is to play extensively on the demand side, like driving mortgages and then allow property developers to come in and deliver on the supply side,” Esin reiterated.
He further said there are a number of products that are being used to drive mass housing and the flag ship of these products is the National Housing Fund mortgage or loan, available to Nigerians at six percent interest rate per annum with a tenure of up to 30 years, depending on one’s age while accessing the loan.
Esin further assured that the current process of capitalising the equity contribution and processing fees for mortgages of N5 million and below would enable a lot of Nigerians come into the process of owning their own homes, which he insisted is almost like the collapse of an entry barrier.
Esin explained that the homes to be built would be based on a national housing model that is now in place, comprising of six designs that range from complete detached bungalows to blocks of flats.
Charles Inyangete, who is the CEO of Nigeria Mortgage Refinance Company (NMRC) says, “our role is to go into the market and raise long term money from the capital market and to use that long term money for re-financing mortgages and in doing so, we are able to provide longer term mortgages up to 20 years, maybe even beyond, instead of say five years or even ten years that is what is common now.
“If I borrow N5 million and I am paying it back in five years, I will be paying back a lot more than if I am paying it back in 20 years. I may pay back more in interest but in terms of the proportions that I will be paying every month, it’s much lower because it is extended, and that is what drives affordability in the housing market.”
YANGE IKYAA
