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‘Banks must reserve earnings for property development’

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Prince Oluseyi Lufadeju is a former Managing Director of the pan-African finance institution – Shelter Afrique and currently, Chairman, Board of Trustees, Real Estate Developers Association of Nigeria (REDAN). In this interview, he spoke with the Property & Environment Editor, CHINEDUM UWAEGBULAM on how property developers are weathering the storm in the housing industry and reducing the deficit in the country.

There has been rising apathy by financial institutions on the provision of long- term funds for private real estate developers to increase the nation’s housing stock, what policy changes or incentives should be put in place to encourage investors into real estate development projects?
I think we’re in a new kind of dispensation in Nigeria where things are changing on a daily basis. Before now, no institution will look at you, when you talk about long- term funding.

The situation is that institutions are coming up, created by government and some existing ones are changing their polices and ways of doing business. 

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For instance, the Family Homes Fund (FHF) is providing long-term financing. I believe what government should do is to really liberalize the situation to free money into long-term development by getting hold of the Pension funds. There is a lot of money that is locked up there, which belongs to the people. Let people start enjoying the benefits of their sweat while they are still alive, not when they have grown so old. It will go a long way.
  
In doing that, there is bound to be a good synergy between development housing institutions and all the pension funds, both private and public. There is lots of funding to be released through that process that can assist in the development of properties. The Nigerian Stock Exchange will have a role to play in this in terms of listings on the Exchange.
 
In the activities of institution like the Federal Mortgage Bank of Nigeria (FMBN), not much can happen in terms of long-term financing in that area.  What government can do with the FMBN, and other banks, because banks are also making a lot of profits, is to issue a new regulation, which will make banks reserve a percentage of their profits for property development. That has been done in other sectors, such as agriculture. Banks should be put in a position by the Central Bank of Nigeria to move some of their assets and resources into funding properties. It will be a deliberate effort, and there should be incentives that can be given to them such as tax break, which will make them to provide the funding at a reduced competitive and friendly rate.
 
I can assure you that at the level of Real Estate Developers Association of Nigeria (REDAN), we are having a lot of discussions with institutions, ministries and ready to engage CBN on the new regulation for the banks. I think in the second term of President Muhammad Buhari, this will be a lasting legacy for him, so that at the end of it, there is no need for government to be building houses again for its citizens, and people can access 25 years mortgage funding.

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In the bid to create sustainable growth in the housing sector and also generate employment for Nigerians, the Real Estate Developers Association of Nigeria (REDAN) signed a Memorandum of Understanding (MoU) with Shelter Afrique. What has happened to that agreement?
I was majorly involved in drawing up the agreement. You know my relationship with Shelter Afrique being a former Managing Director.

At that time, there was agreement with Shelter Afrique for a $200million funds to be released to the housing sector in Nigeria through REDAN, to build 155,000 low and medium housing units across the country. Developers were expected to receive about $50million each per annum. 

The reality is that Shelter Afrique has gone through few changes in the last couple of years, which has necessitated a review of their project and loan profile. This will now make it necessary for them to review the existing relationship, so that we can take advantage of it.

Of course, it will also be a source of long-term funding with the participation of banks in Nigeria as intermediaries, in terms of receiving and disbursing the loans.

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We learnt that FMBN is having a big task to recover money collected by developers, after they failed to deliver on agreed projects. What’s the position of REDAN on this?
The position of REDAN is very clear and it has been a consistent position over the years.

First, there is need for FMBN to put its house in order, through a very professional approach to providing and recovering loans; to ensure that the loans given are used for the purpose, which it was meant for.
  
FMBN has an array of loan profiles. There are those loans that were given, and the people who got the loans performed, built the houses, sold them and paid back. There are those who collected the money, started the project, and because of cost over run, the project was abandoned. There are also those who were given loans and didn’t have the intention of moving to site and ran away with the money.
 
There has been a joint meeting between REDAN members with FMBN, Primary Mortgage Banks, and Special Presidential Investigation Panel for the Recovery of Public Property, where all the matters were analyzed. FMBN is supposed to give to REDAN, the profiles of the loans and debtors, as the Association promised to reach out to its members. It must be said, that not everyone that was given loan belongs to REDAN.
   
Investigation of private developers that applied for the loans were not properly carried out by FMBN officials, who created loopholes and billions of naira could not be accounted for. 

The mortgage banks are making efforts to trace them and some are not even Nigerian companies. They collected money and left.

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On our part, REDAN is assisting the Presidential panel to make contact with members of the association who may one way of the other have outstanding loan, so that they can settle them.

The panel is very pleased with the way, we’re going about it and FMBN is also very grateful on what we are doing to assist in the recovery of the loans from members.

There have been several complaints by the National Housing Fund subscribers, who are ill treated under the scheme. Do you think the NHF should be scrapped?
The National Housing fund is a very laudable programme, which was put in place by government to ensure that workers can a little contribution from their salary and take advantage of possible access to funding for property. The management of the fund in the past has not been done in a way that can be beneficial to the contributors. The fund was seen as largesse for development not knowing that this is individual money.
  
I’m pleased to say that the present management is streamlining this to ensure that contributors to the fund can take advantage of it anytime they want. It is not the place of mortgage bank to go and tell people to come and take loans. The contributors must know their rights. The procedure may need to be restructured to make it easy for people to know that out of the contributions they make, these are the options and opportunities. The mortgage bank has woken up from slumber and they are working very hard to ensure the success of the scheme.

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How do Nigerian government achieve affordable housing and reduce the deficit in housing in the country?
There are vacant houses in Lagos, Abuja and everywhere. We’re looking at affordable housing. We start from the basics, what do we call affordable, affordable to whom? What is the income level? We check that and translate it back to the inputs into the property such as land, materials and sources of funding as well as interest rate charged.

How is the land provided for, is it a site and services with infrastructure? All of these questions need to be answered. We have a lot of very brilliant professionals in this country who are working on a day-to-day basis to ensure we get to what we call affordable housing.

For instance, in my estate in Abuja, when we started in 2005, we were able to provide a descent two bedroom for N700, 000, three-bedroom N2.9 million and four bedroom N4.5 million. 

A lot of people thought it were a joke. I said it was not a joke. But I tell you what; we were not able to carry on because of bottleneck in the system. 

FMBN was the financier, and after completing the project; they couldn’t exit us from the loan. They started charging us interest for eight more years. That will not make it possible for Nigerians to have affordable housing. It will retrogress the system, make life unbearable and destroy your dream. If we’re not resilient, we would not still be in the business.

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What should be done?
The agencies that provide the loan must be prompt and sharp to know that the income, livelihood of people are involved in this venture, therefore don’t toy with it.

With the emergence of the FHF, Nigeria Mortgage refinancing Company (NMRC), which is there to refinance, if there is the need for more money and with the determination of developers, who want low-cost housing and cheaper materials and ensuring that infrastructure is made available. Ensuring that designs are functional and not extravagant, not wasting space, just to show aesthetics beauty. That is what we want now in this country and that’s what REDAN is doing, which is interesting to FMF, mortgage institutions and FMBN.

Similarly, the government must come to our side, and embrace what is being done by the private sector in areas of cost of building, materials being used, cost of funding and use them its own programmes successful. 

The role of government is to assist with the regulations, facilitate homeownership, and not expected to build houses. If people want to produce tiles and bricks, or other building materials, the Bank of Industry should assist them, so that we don’t import tiles from Italy and China anymore.

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At our level in REDAN, we have set up an institution, which is concentrating on training and retraining of artisans. We don’t need to go to Togo or Benin Republic to bring in masons now. We are training masons; artisans and all developers have access to these artisans. This is a project, we are committed to and the Presidency is also interested and assisting us. These are what will make affordable housing possible.

Lastly, are you satisfied with current developments in the property market?
No. In this country now, what 80 per cent of Nigeria population require is decent, affordable, and environment-friendly properties. We do not need mansions that will cost between N350 to N500 million. The property market is over exposed to a lot of human inefficiencies and wrong costing procedures. In big cities like Abuja, Enugu, Kano, Lagos and Port Harcourt, we build houses, which are not occupied, and unaffordable. The people who need those properties are not been assisted because of wrong polices of the past administrations. 
 
The government should free some land, which can be use for development purposes. Let developers go there and provide infrastructure as well as build houses that people can afford.

Today, if you build cheaper houses in Abuja between N3million and N5million, people to will buy them, and if there is mortgage, people can subscribe to them. We need to build more houses so that people won’t be homeless. There is also need to emphasize upgrading of infrastructure and services and eliminate the slum settlements surrounding our major cities. This is very important.


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