Challenges, prospects of housing in Nigeria

The government should focus intensely on the provision of housing for the low and middle-income groups, says CHUDI UBOSI, President – Africa, International Real Estate Federation (FIABCI) and principal partner at Ubosi Eleh and Company. He argued that the impact of government should be felt at this level

Housing is one of the fundamental human needs in addition to food and clothing. It is equally a significant indicator of a person standard of living, and sometimes also an indication of place or status in the society.

The performance of the housing sector is a significant measure of the economic health of a nation. In advanced countries, for example the United States of America, the housing sector is a major driver of the economic engine.

However, from a few years after independence, access to land and affordable / habitable housing has for the most part been an unfulfilled dream to a displeasing large proportion of the middle and lower class population.

According to a World Bank report bridging this 17 million national housing deficit will gulp at least N59.50 trillion.

To start with and most critical of all in remedying the situation is the need for the government to fund a proper census that would address the various types of accommodation currently available nationwide. The results should then be harmonized with the current population census with a proper stratification of the various age groups and their
numbers.

The various State governments (that are interested) can initiate housing development projects in certain key areas within their States. This option is most advisable for states where housing accommodation is most acute such as Lagos and Rivers.

These estates will be provided with all the basic infrastructural facilities to make them habitable including security. The roads should be upgraded or rehabilitated to ensure that access and exit is not hindered by excessive traffic hold-ups, which in itself could serve as a disincentive to the effective occupation of the estates.

To ensure that the housing developments are within the reach of the masses, pricing is very important. Housing being one of the basic needs of man, government should not see investments in this sector from the profit motive only. Governments should view the returns more from the positive social impact of the developments.

Assuming that indeed housing estates comprising 1000 units of mixed developments are undertaken in a certain local government area, the impact of on the life of the precinct would be tremendous. Apart from the fact that a new catchment area would have opened up, subsidiary and support activities will be introduced. Plumbers, welders, mechanics, artisans of all trades will spring up to provide support services to the residents of the estate. In doing this, employment is generated, income taxes will be paid, and tenement and ground rents will be collected resulting in increased revenue to the various authorities.

It must be pointed out that what helps and drives real estate development and marketing in any country is a dynamic mortgage financing industry. In Nigeria today, there is really not a mortgage finance industry. Where they exist, their effect has been minimally felt with the few mortgage institutions undertaking almost purely commercial banking activities. This unfortunate situation has been aggravated by the fact that financial institutions operating in Nigeria do not have access to long-term funds.

According to the National Bureau of Statistics, the real estate contribution to the Gross Domestic Product (GDP) has fluctuated around the 7 per cent region over the years. 7.56per cent in 2010 and 7.73per cent in 2012. Of this figure, the mortgage loans and advances contributed 0.5per cent.

Recently, statistics from one of the biggest financial institutions in the country indicated that of its loan able funds less than 10 per cent of it was available beyond 12 months. Most of the funds were liabilities that had 30, 60 and 90 day maturity periods. Property investments have a payback period of sometimes up to 15/20 years and so matching these funds against real estate developments will be impossible.

The Land Use Decree should be reviewed to make it in consonance with the times. Unless this Decree and its provisions are reviewed access to land by both government and private developers would continue to be problematic and hampered.

The lopsided nature of many real estate and land related legislations in favour of the tenants and mortgagors has become a serious disincentive to investment in housing. A large number of Nigerians own properties outside the country and are very aware that it is unlikely that a tenant can live in any property without meeting his/her rental obligations and not be evicted from such a property.

In Nigeria it is indeed possible for periods upwards of five years, and unfortunately, this will be done with the full cover of the law. Landlords are not properly protected by this legislation.

In the case of mortgages, we are all familiar with the endless litigation which mortgagors engage mortgagees in when the latter forecloses on a real estate that has been used to secure a facility which goes bad or becomes non-performing. This is despite the fact that the mortgagee will have a registered and legal interest (mortgage) over the asset. With the connivance of the law, injunctions, endless motions are brought to the courts of law all in a bid to frustrate the financial institutions from realizing the asset.

The result of all this is that the financial institutions are not willing to fund real estate transactions or use them to collaterize facilities. They would rather settle for more easily realizable securities i.e. stocks, fixed deposits etc. All these invariably end up acting as a disincentive to property developers, who pay a laudable role in increasing our housing stock.

Encouragement to property developers by governments could also come by way of tax breaks or concessions. For example, the State could come up with legislation that if a developer can show that he has spent N200 million within a certain period then certain tax concessions are available to him as an incentive.

Again, the government should ease the access to land for private developers. Theoretically, the process to acquire land for development is by way of an application to the Governor who will then process same and allocate a plot of land where it is desired or where available. On paper it is a straightforward easy process but in reality, it is a nightmare that could last ad infinitum.

High cost of land registration and titling hinder housing delivery. To register and process land titling in Nigeria requires 21 procedures and the entire process of transfer could last 274 days.

Also to be eased are the huge cost fees and levies, which the government charges developers on real estate transactions. For example in Lagos State where a transaction is concluded, to obtain the governors consent to the sale an individual has to undergo a long process of inspections etc where all kinds of levies and fees are paid; consent fees, capital gains tax development levies, and stamp duties. These governments have indeed discovered that this is a money yielding venture and have hung on tenaciously to this process especially in states where land values are quite high, despite the disservice this plays to property development.

What then obtains in most developments is that the focus is on luxury developments to be completed and sold at high prices far out of the reach of the greater proportion of the masses. Subsequently, these same properties are let out by the owners at exorbitant rents to enable them recover the purchase prices.

It is an opinion that government should focus intensely on the provision of housing for the low and middle-income groups. The impact of government would be felt greater at this level, whilst the luxury developments could be left to the private developers, or government acting jointly with them.