Not yet Uhuru for housing sector in 2017

Based on housing market reports published throughout the year, The Guardian has analyzed the most important trends of 2017.

The sector was left to the vagaries of free market forces, the built environment could be said to have posted a dismal performance in 2017 despite positive projections from stakeholders.

A review of the activities in the sector depicted a lackluster performance.

With a budgetary allocation of about N141 billion in 2017 made up of N100billion for social housing fund and N41 billion for federal government National Housing Programme, the federal government was to deliver affordable housing to Nigerians through integrated national housing plan, which impact is yet to be felt among the populace.

The drive to construct thousands of houses nationwide by the federal government and private developers was aimed at narrowing the housing deficit in the country and was in consonance with the focus of the budget on providing infrastructure.
However, that seemed not to be the case, as many Nigerians still battle without a roof over their heads.

High cost of building materials
The outgone year witnessed a rising cost of building materials , which heavily impacted the provision of affordable housing in the country.

Between October 2016 and April 2017, several building materials have become more expensive than they used to be. In October 2016, it cost N2,500 to buy the ¼ white plywood board whereas, in April 2017, the same plywood was sold for N4,200 per unit.

The cost of cement increased by 200 per cent, iron rods by 120 per cent and timber is up by 20 per cent. Prices of imported finishing products such as tiles, roofing sheets, sanitary wares and doors have also hit the roof.

For instance, cement price, which increased from N1500 to N2,350, has now gone up to N2,600 in Lagos area; the cost of rod has skyrocketed from N170, 000 per ton to N300, 000 .

As expected, this holds grave consequences for developers, the government, Nigerians planning to rent or buy property as well as other stakeholders.

When former President Olusegun Obasanjo assumed office in 1999, a bag of cement was sold at N500 per bag. Despite various policies and interventions, if any, the price of cement has continued to rise. It is the same story all over the country. Since 2015, the price of cement has climbed from N1,400 to between N2,500 and N3,000, depending on the location and quality. A bag of cement costs between N2,550 and N2,600 in Calabar, Cross River State, while it costs N2,800 in Aba, Abia State. In Port Harcourt, it is sold at between N2,700 and N3,000, depending on the quality. One can buy a bag for between N2,700 and N2,800 in Jalingo, Taraba State, while it is sold at between N2,800 and N2,850 in Abuja.

The increase in the prices of building materials has multiplier effects on housing development, many projects are not completed on time due to the cost of materials which have been on the increase. Besides timely completion, high prices of building materials form a crucial constraint to improving housing conditions in Nigeria.”

The implication of this is that housing schemes initiated by the government are not affordable to the average Nigerian.

As expected, this impacts negatively on the projection of the government to cut down the visible housing deficit that the country has endured for years.

With the rising cost of building materials, government ‘s initiatives to provide affordable housing to the teeming population and encouraging homeownership through site and services schemes have continued to prove elusive.

Building collapse
Despite efforts by governments and relevant stakeholders in the built environment to curtail incidences of building collapse in 2017 , it has continued to become a recurring decimal in various part of the country.

For in instance , Lagos has continued to record chunk of building collapse incidence even with the Lagos State Government engagement of the services of additional 115 certified engineers and other relevant professionals in the built sector in its quest to address the incidences of building collapse and ensure compliance with relevant building laws. Some of the incidences were recorded in in Alaba market, Ebute- Metta, Lagos Island, Agege, Isolo and Abesan , while there were also incidences at FCT Abuja, Kano, Rivers, Imo, Anambra, Abia, Enugu and Delta states to mention a few.

This was even as the Federal Ministry of Power, Works and Housing has disclosed that about 54 buildings collapsed across the country between 2012-2016.

Mortgage financing
While the Minister of Finance also launched a N13 billion mortgage refinancing fund to support the financing of house ownership for civil servants in the country, the scheme is yet to bear the expected fruits.

Available data shows that there are currently about 35 Primary Mortgage Banks (PMBs), and 19 registered banks offering mortgage to customers at an interest rate of between 11 and 27 per cent. Many of the commercial banks demand a down payment of 25 per cent of the value of the mortgage with a repayment plan of between 10-20 years. When this is compared with China where interest rates are below five per cent it is understandable why Nigeria has a housing deficit while China has a housing surplus. As a result of the high interest rate many Nigerians are compelled to own homes through personal savings or loans provided by employers. This scenario means that individuals that lack good employment cannot save for a house nor access loans to acquire a house. The weak social security system in the country also means there is currently no plan to provide homes for the poor in the society. Interestingly, housing units built for the poor in Nigeria cost between N5million and N20million. How many poor people can truly afford N500, 000 talk more of N5million to own a house in Nigeria?

The Nigerian Mortgage Refinance Company (NMRC) established in 2013 was conceived to raise funds for housing in the country. The NMRC has been able to disburse funds to some mortgage institutions to finance the construction of housing units.

However, the process of distribution and ownership of the relatively cheap housing units is still entrenched in some form of corruption. Apart from the high cost of owning the supposed low-cost homes, the distribution process does not completely ensure equity and fairness. In a country like Nigeria, whilst a powerful and well connected individual can obtain allocation of five units, the poor man on the street may not even be aware of the process needless to mention owning a unit.

Some challenges associated with housing provision for the low and medium income earners include credit risk, liquidity risk, and cash flow risk.

The mortgage banks at present face the challenges of low-interest rates on National Housing Fund, Macroeconomic environment,
Non-vibrancy of some Primary Mortgage Institutions (PMIs) and cumbersome legal regulatory framework for land acquisition.

The primary impediment to the development of a virile mortgage banking sector has remained the Land Use Act (LUA) 1978 because it affects every aspect that relates to the acquisition of affordable housing ranging from basic human rights to mortgage lending.
With the failure of Nigeria law maker to amend the act and the expected benefits missed, there is need for appropriate housing finance, to meet the huge capital expenditure involved in mass housing development in the country.

As noted recently by the former Chief Executive Officer and Managing Director of Asset Management Corporation of Nigeria (AMCON), Mustafa Chike-Obi, there need for more government roles in the sector by guaranteeing certain type of mortgages.

According to him, at present, government is only guaranteeing the lender, which is not doing much and as such should guarantee the mortgage itself.