How cooperative housing finance system can solve deficit


Lack of affordable shelter has remained a perennial problem in Nigeria. The problem has reached crisis height such that paying of lip services mouthed by successive administrations in the country do no longer make news. At various points, government propaganda seems as the magic wand needed to bring the necessary changes in the way things are done in the sector. 

Experience has shown that as a country scales higher on the rungs of the ladder of economic development, demand for housing, especially for owner-occupied units increases. The demand for housing credit often outstrips the supply, as available loanable funds cannot adequately be utilized to meet the mortgage needs of the teeming prospective borrowers who deserve assistance. The fact that it is financially very tasking for a prospective homeowner to fund his aspirations wholly from his own resources has always been recognized and in some traditional African societies, it predates the advent of the European colonialists. For instance, in many communities of South-Eastern Nigeria, when it was time for a young man to start his own homestead, what he needed to do was to invite members of his age grade to a sumptuous menu in the course of which he tabled his intention.

Thereafter, his age mates were duty bound to assist him in gathering the traditional building materials and constructing his new abode provided such aspirant was not indolent. Of course, he had the responsibility of ensuring that his helpmates were treated to a sumptuous menu on any day they had to forgo their individual responsibilities to his sole benefit. Today, there are various financial institutions involved in home finance. There are those who mobilise savings form households and enterprises and make loans to mortgagors. Because they take deposits from individuals, they are called financial intermediaries. Such institutions include commercial banks, savings and loans association (Primary Mortgage Institutions in Nigeria or Building Societies in the United Kingdom), Mutual Trust Banks, etc. These are retail or primary mortgage lenders, as they operate at primary level of the housing finance market. The major characteristic of primary market operators is that they originate service and fund mortgage loans. Although, this system, primitive as it was, provided the people with a method of being homeowners whether the traditional or the conventional houses. There is also limited number of mortgage institutions in Nigeria. The ones that do exist compared to their overseas counterparts are still lagging behind. This, results in the movement of people from rural areas to urban centres causing population explosion in such areas. Over the years, there has been rapid urbanization in Nigeria. This has led to people settling in very unsanitary environments. There are also other categories of financial institutions that tap capital funding to buy mortgages already created by operators in the primary mortgage market. These institutions are said to be operating in the secondary level of the housing finance market. Secondary mortgage market as already defined is that sector of the housing finance where existing (perfected) mortgages, which means mortgages created in the primary mortgage market are bought and sold. In the drive to find workable system, industry leaders have argued that to significantly reduce estimated millions of housing deficit, there is an urgent need to start a cooperative housing financing system to deliver affordable houses in the country. They also said that housing finance is critical in the construction of houses for high, medium and low-income earners, adding that investors have what it takes to develop the real estate sector for affordability. This, they believe could be easy with the provision of social amenities.

Basic facilities such as good road networks, water supply, electricity, drainage systems, rail tracks and tunnels are still lacking in many areas in Nigeria. These are infrastructure that if improved upon and installed where they are lacking will greatly ameliorate the living conditions of the people and bring about better housing situations. This, though has not come without challenges. In the words of Odunayo Ojo, Chief Executive Officer, Alaro City, a development by Rendeavour and Africa’s urban future, at the Project Finance, Asset Management and Effective debt structuring: Creating value in both development and operational cycles, the major challenge of real estate is poor infrastructure in the satellite towns in the outskirts of the cities. He said even though his firm partners government in the provision of infrastructure, not many other firms do the same. According to him, ordinarily, government should provide the infrastructure. “In our development project that spans across Kenya, Zambia, Ghana Nigeria and one other country in Africa, we have all that you need to have in a city like schools, worship centers, playgrounds, markets and any other services you may want. We have been pressing on the ease of doing business in Nigeria”. He stated that cooperative way of tackling this problem would have a better strategy.

Roland Igbinoba of Pison Housing firm, explained that the Federal Housing Authority, FHA has not built houses less than N10 million, and most citizens cannot afford such amount for houses. Even at that, such housing are no longer being built because government agencies prefer making money out of the services they ought to render to the public. At the third Nigeria Affordable Housing Finance and Innovation Summit and Expo (NAHFIS) organised by NISH Affordable Housing Limited, Igbinoba stated that financial institutions created to help citizens in this direction have failed to achieve their mandates, so they have not addressed the issue of financing so the gap kept increasing instead of being bridged.

The inability to get loan by private individuals to finance their projects has denied a lot of investors the opportunity to invest in the real estate. Though, a lot of people use their personal funds to invest in real estate, the problems come when it is finished and the time for maintaining the property. According to the Managing Director FilmoRealty, Luqman Edu, 60 percent of the amount spent in real estate come during maintenance.

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