RE-ENGINEERING MORTGAGE ECONOMY OF SUB-SAHARA AFRICA by kennyfutmin

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									In developed countries and emerging economies across the world , home ownership is mostly
achieved through well structured mortgage schemes.


Again in jurisdictions where mortgage system is effective, the procedure for accessing the funds
are so simple that the prospective home owners only use the services of professionals as a formal
requirement.


Thus, many Nigerians who had lived in such countries and benefitted from the mortgage
schemes can attest to this fact.


Alex Akusi, a Nigerian who had lived in the United Kingdom for a long time told
LEADERSHIP that he moved into his own house in London many years ago without depositing
a dime for the property in Sydenham, South East London in 1988.


According to him, “When I wanted to buy my house after working for a period of time in the
country , I was offered a payment option of between 30 per cent to zero per cent deposit. It
depends on what you want . It is flexible . Under this arrangement the interest you have to pay on
zero per cent deposit is higher when you are paying back which is a period of 25 years”.


In Nigeria, the mortgage institutions whose primary responsibility is to facilitate easy home
ownership through long –term loans to interested individuals desirous of owning their homes
have not been able to render this service effectively.


With all the claims by the mortgage institutions, LEADERSHIP findings showed that less than
10 per cent of those who apply for housing loans to the Federal Mortgage Bank of Nigeria
(FMBN) get favorable response. They have not been able to expand mortgage lending on a
national scale perhaps due largely to insufficient funding.


This lingering lapse in the system is a negation of the provisions of Decree 53 of 1989 which
provided the regulatory framework for the establishment and operation of Primary Mortgage
Institution (PMI) by private entrepreneurs.


Under this arrangement the PMIs are to mobilise savings from the public and grant housing loans
to individuals, while FMBN mobilises funds for the PMIs to enhance private sector participation
in housing finance.
There are allegations that PMIs in the country are owned by bankers who are not interested in the
development of the sector, but prefer to engage in money laundering and financial activities that
would bring quick return on their investments.


Thus, the number of people who have accessed mortgage facilities for home ownership is a far
cry from what it should be .


Since their target are those people who have regular paid employment, one of the impediments
has been that the ratio of people with regular paid employment is very low compared with the
population of the country.


Another factor that tends to render the mortgage facility unattractive is the fact that the PMIs
target only those workers working in blue chip firms whose income can service a N6 million
mortgage facility, shutting the low and middle income earners out of the scheme.


According to Chief Biodun Olapade , the Chief Executive Officer of Biodun Olapade and Co, a
frontline firm of real estate practitioners, “There is virtually nothing that qualifies as mortgage in
Nigeria, no effective mortgage.There should be a single digit mortgage loan where the younger
generation of Nigerians who are 25 years and above can take a mortgage for 25 years.


“ The kind of money people pay as rent to landlords can be used to amortise the mortgage loan.
You know that at the end of the day the house belongs to you. So until there is an effective
mortgage system on a single digit, home ownership will not be achieved by majority of the
people”.


His views are not different from those of Mr. Debo Adejana, the Managing Director of Realty
Point Limited, who affirmed that what makes for good mortgage is the duration within which
one is asked to pay back the loan.


“Housing if properly maintained can last for sixty , seventy years , even hundred years,
depending on the maintenance and therefore the period for which the person is applying for the
finance should be such that he would be able to pay conveniently .


“Any mortgage loan you take today, they will tell you to pay it back within three years or five
years. Of course, that stops being mortgage. So what we are now sayings that our mortgage
needs to be properly restructured. Of course, the question that comes to mind is okay, we are
talking of loan that is paid over a long period of time and with low interest rate.
“Then we must talk of how we can get the sourcing for such funds and to that end, we can get
loans at single digit interest rate. The way it is right now there is virtually nothing that qualifies
as mortgage in Nigeria, no effective mortgage around,” he stressed.


The housing developer opined that one of the ways to raise the funds required in the sector is
through the pension funds where the government is said to have locked up a lot of money.


“There is a lot of money locked up there. Government can give a directive that a substantial
percentage of the pension funds should be diverted to the mortgage sector where people can get
loan at single digit interest rate,” he counseled.


In Lagos State, for instance the State government has been looking for ways of ensuring that
houses being built by the government are acquired through mortgage financing.


The state Commissioner for Housing, Mr. Bosun Jeje, said the present units of housing in the
State are meant for the teeming Lagos masses who are in dire need of housing accommodation in
the State, adding that the houses would be possessed through mortgage financing.


He said the houses were carefully designed to meet frequent demand for the three bedroom units
housing in the area, explaining that the new housing estate would be used as a model to
determine the viability of providing three bedroom flats within the axis without losing the focus
on the end takers who are basically low, middle income earners.


Jeje said the government had finalised plans to commence construction works on another 80
units of 1, 2, and 3 bedroom flats beside the existing Oba Adeboruwa Housing units.


He said the construction of another scheme in Ikorodu “would create more jobs to feed children
and keep our youths actively engaged and perhaps enhance the economic viability of the area.”


The estate being designed he said, has infrastructure that includes primary health care centre,
police post, water treatment plants, roads and drainages among others.


According to him, “ As a government we have remained focused on providing quality and
affordable houses for our people, this is why we have put in place several policies and programs
that would not only stimulate a mortgage culture, but would ensure that the potentials inherent in
the housing sectors are unlocked.”
He said the new mortgage scheme would allow subscribers become proud owners of their own
homes upon payment of an equity contribution not exceeding 30 per cent of the price of the
housing units, saying the schemes would be launched very soon with 700 housing units.

								
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