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Damilola Adegoke, a
writer, says he was discouraged by the procedure he was told to go
through before he could obtain a mortgage.

“I was asked to
first open accounts and save with the bank. They said after that, I
would be entitled to a mortgage of N5 million. I was told it was a 60
year repayment plan, and that you deduct your present age from the 60
years, within which you must finish the payment, so for instance, if I
am 30 years, I must repay the N5 million within 30 years. The
percentage they told me to pay annually, I think 20 per cent of the
borrowed sum, when I added it up, I saw that it amounted to about N12
million or more.

“That apart, I was
told categorically by the managing director of the bank that there was
no guarantee I would get the loan, I would just submit the form and
hope that it would be granted. I was told everything is based on
probability” Mr. Adegoke said.

Such is the tale of
about 80 per cent of mortgage applicants in Nigeria, a nation with a
weakening mortgage sub-sector which can barely create 10, 000 housing
units per annum. The nation is short of about 15 million housing units
to meet the demands of its citizens and would have to create about 700,
000 housing units in 20 years, if it would address her housing
challenges, according to Kola Ashiru-Balogun, an investment officer at
ARM, an asset and investment firm in Lagos.

Mr. Ashiru-Balogun at a recent conference added that banks have no appetite to lend to the mortgage sector.

However, in
recognition of the importance of the housing sector, and considering
that banks have ready access to cheap sources of funds through retail
deposits as well as the infrastructure to process real estate loans
efficiently and the skills to manage the risks involved, the Central
Bank has encouraged banks to support the development of the housing
sector in Nigeria.

Inadequate Funding

The Central Bank
has through its credit policies, required the erstwhile commercial and
merchant banks to allocate a stipulated minimum proportion of their
credit to the housing and construction sector.

According to the
Central Bank, available information reveals that the supply of credit
by the Federal Mortgage Bank of Nigeria is grossly inadequate to meet
the growing demand.

“With regard to
cooperative societies and state/municipal governments, evidence seems
to suggest some increase in the level of funding although, there
appears to be a lull in recent times owing to inadequate funds.

The lingering
challenges of mortgage financing in Nigeria includes low interest rate
on National Housing Fund, the hitherto high inflation rate negatively
affecting the macroeconomic environment, non-vibrancy of some primary
mortgage institutions, cumbersome legal regulatory framework for land
acquisition, The structure of bank deposit liabilities, among others.

“We need long term bond in this mortgage sector, I strongly believe Lagos State can champion this,” Mr. Ogunniran advocated.

Kelechukwu Mbagwu,
an executive member, Real Estate Developers Association of Nigeria,
(REDAN) said if builders can build with cheaper funds, it would be more
suitable for them to approach lenders.

Borrowers have
issues too Some experts say all the blame should not be put on the door
of the banks or lenders as some borrowers do not meet the requirements
to access such loans.

“The reality of the
matter is that for access to mortgage finance, usually, you would be
required to have a part funding. Most people who want to access
mortgage in this country do not have the capacity to provide the bank
part funding, so that is a major constraint. The second is collateral.
It poses very serious challenge to lenders” Abimbola Olayinka,
President, Primary Mortgage Institutions, (PMI) Association said.

Mr. Olayinka added
that unless the right environment is created to have the level of best
practice as seen across the world, the sector cannot really attract
investors.

“As it is now, the
system that we run is people driven, we have to get to a level where
mortgaging will be process driven. It should get to a stage where it
would no longer be, I know a friend who can help get this done within
the shortest time. All those long procedures must be cut down” he said
adding that there are so many bottlenecks in this present procedure,
“We have to create a smooth, formal transparent system”.

Another issue is
acquisition of land which takes a longer period in Nigeria. Processing
title and getting the required papers, especially certificate of
occupancy is not a simple matter. Hakeem Ogunniran, managing director,
UACN Property Development would be happier if it does not take more
than three days to acquire land and finish the processing of papers.

Striving forward

Some experts say
the financing of national housing programmes should be viewed primarily
as a national responsibility while the private sector should be
encouraged to provide actual investment funds for housing middle income
and upper income groups.

A Central Bank
report says empirical evidence shows that private sector participation
in housing is the most assured way to induce stability in the market.

“The housing fund
contribution should be integrated into the personal income taxation
system such that a defined proportion of taxes paid are allocated to
the housing fund pool, as it is done in Singapore. There is need for
constant re- engineering of the capital and money markets in order to
cope with the renewed challenges of provision of some mortgage
financing. In this regard, the restructuring and strengthening of the
FMBN becomes imperative for it to remain a viable financial institution
with the capacity to enhance efficient housing finance development in
Nigeria” Joseph Sanusi, a former Central Bank governor, said in a
report titled Mortgage Financing in Nigeria, Issues and Challenges of
2003.