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‘FMBN, REDAN, Shelter Afrique to create $2b affordable housing fund’

“Some stakeholders have agreed to pool resources to tackle the housing problem headlong. This is by ensuring  improved access to credit facility and reducing development costs for low-income housing.”- The Nation

The Federal Mortgage Bank of Nigeria (FMBN), Real Estate Developers Association of Nigeria (REDAN) and a pan-African finance institution, Shelter Afrique have joined forces to create a $2 billion affordable housing fund.

The money, will be disbursed at $200 million yearly to developers, to help in financing the construction of a targeted 10,000 homes over the next decade.

Activities to be generated from the construction works are expected to  create more than 150,000 jobs.

“We agreed that we needed to bring in Shelter Afrique to work in partnership with REDAN to make available some funds over the next 10 years by providing REDAN members with the necessary construction finance that is required to drive the national housing model,” the Acting Managing Director of FMBN, Richard Esri, explained.

Recently, the Federal Government announced it would waive an initial 10 per cent payment on mortgages below N5 million or $15,700, being administered by the FMBN. This is targeted at future homeowners planning to take out mortgages in the low-to-mid price range. According to the Centre for Affordable Housing in Africa, the average cost of a mortgage is $18,000, with interest rates at around 19 per cent as of last September. This move comes on the heels of the establishment of the Family Homes Fund by the government, last September.

Aside from helping to develop more houses, the injection of the $2 billion fund is to keep mortgage rates in affordable housing schemes at well under the average 23 per cent, with a target of 9.99 per cent and payable over 20 years. Under this arrangement, prospective buyers are required to make an initial deposit of 10 per cent of the house value to qualify for these home loans; 70 per cent of the mortgages are expected to go to houses priced between N2.5m ($7, 900) and N4.5m ($20,000).

Financed through the Sovereign Wealth Fund, Federal Government bonds and Bank of New York, the scheme will work as a public-private partnership (PPP). It is also expected to promote the development of primary mortgage institutions, which tend to have a narrow banking licence and are generally reliant on wholesale funding, making them more vulnerable in times of financial or economic crisis.

These changes will come as welcome news to many Nigerians, with half of the population living on less than $1 a day. Furthermore, the minimum wage is currently around $60 per month, meaning home ownership is often out of reach for those in the low- to middle-income wage bracket.

The Centre for Affordable Home Financing in Africa reports that a standard mid-level apartment in an urban area in the country can cost as much as $100,000, with rent averaging around $5, 000 a year; the situation has kept home-ownership rate at 25 per cent.

Meanwhile, the mortgage penetration rate stands at about 0.6 per cent of gross domestic product (GDP).  The World Bank data which although is low by standards in more developed economies, puts Nigeria roughly in line with many other large African markets. The report also attributed low mortgage uptake to lack of awareness and cost, as high interest rates can make mortgages too expensive for middle-and low-income earners.

According to the Oxford Business Group, a global research and consultancy company with a presence in over 35 countries, including the Middle East, Africa and Asia to the Americas, in order to begin filling Nigeria’s existing deficit of 17 million housing units as projected by the World Bank and to meet the increase in demand, the government will need to support the construction of 170,000 units per year over the next decade. With almost half of the country’s 170 million population residing in cities and urbanisation growing at an annual rate of 3.75 per cent, demand for affordable houses is also set to remain strong.

 

 

 

Culled from The Nation

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