‘Removing drivers of high construction cost will reduce house prices’
In Nigeria, there are between 17-23 million housing deficit, what factors precipitate the gap? How can it be addressed?
I will say the structure of our financial system is one major reason why housing gap continue to widen.
By the finance structure, I mean both the supply and demand side. In recent times, we are beginning to see improvement. Even at that, the cost and interest rate is still prohibitive.
The one that is manageable, the National Housing Fund (NHF) cannot go round. It can hardly scratch the surface. But on the supply side, we have not really done so much. Finance has been a major hindrance.
To address the problem, we need to look at both the demand and supply side. So for demand, we need to look at how to drive interest below double digit and increase the tenure. It is very important.
The kind of funding that will allow for that is what we need to start creating. I know that everyone that needs funds is looking at the Pension Fund.
Unfortunately that has not created much impact. I also think that if the insurance industry has better legislation probably through enforcement of rules, insurance companies can mobilise good funds because they are cheap funds and the country can channel towards housing, either in funding mortgage or housing construction through a well-arranged system.
If we can increase this through legislation, we will have funds, which can crash rates. Mortgage banks can also go to the market to raise funding once the rates are okay.
Right now, the rate is prohibitive, that is the challenge. If they go out now, the kind of interest they will be giving out will be high.
So, once we can bring our rates down as a nation, increase the coverage in the depth of insurance, and also look at the pension fund, that will increase funding for both demand and supply side.
How would you access the various initiatives of government to boost housing financing such as the National Housing Fund? Can you such interventions encourage homeownership?
Yes, these are very laudable interventions. Fortunately for us as a country, we don’t lack initiatives. It is the execution that we usually have problems with.
So in terms of these ideas, NHF, the Federal Integrated Staff Housing (FISH) for the civil servants homes, Nigeria Mortgage Refinance Company (NMRC), Mortgage Warehouse, all these are very good. I must say, they will give desired result provided they are executed appropriately.
What has happened to the housing fund? There was a time some developers were given that money but they could not pay back.
Why are they not able to pay back? Have we investigated that? So, if we cannot resolve all those issues, they will continue to raise their ugly head again. We have some novel ideas that come up but execution is the problem. I think, we really need to look at it very seriously.
Access to mortgage by workers is becoming a mirage. What could be done to mitigate the challenge?
Access to loans is really a big problem because of the high interest rates. Tenure is short and income is low which means many won’t even be able to qualify for the mortgage.
Unfortunately for us, we are also not being able to build because land cost is so prohibitive, especially in Lagos, Abuja, and Port Harcourt.
Also, the price of cement, which is a major input to construction is out of this world. We have one of the most expensive cement products in Africa and the world. Cement constitutes about 40 per cent of our input, which is major, iron is another one.
So the cost of producing these houses, in terms of land, cost of perfecting titles and other inputs make the price prohibitive. When the mortgage tenure is low, interest is high and affordability will become an issue.
People cannot have access to mortgage, only a little per cent of our workforce in the country can afford mortgage. Even in the hinterland, where we can build, infrastructure is not good.
So people have to build in places where they can access work and all that and those places are crazily expensive.
In other parts of the world where infrastructure is available, somebody can, for example live in Abeokuta and work in Lagos, maybe commute an hour through rail and all that in an hour and get to work.
Many commute within Lagos more than that. So that is the challenge. If we can improve our infrastructure and also bring down cost of construction by way of looking at access to land, if corruption can be reduced because it is one of the drivers and lots of that, it can help to reduce house prices within a particular area.
Let us look at the quality and come up with some ideas that can help bring down the cost.
Let us also look at local materials inputs in areas that we can and other building methods that can help bring down the cost of construction, then, people can begin to access mortgage, for example, if somebody wants to buy a property, may be N2-3 million, many people will be able to access. And if with 7 million, you can get mortgage for 20-30 years, then more people will be able to access. That is really, where the problem is in terms of access.
Why it is becoming a challenge is that we don’t earn enough to be able to qualify for the types of mortgages that exists in the country.
What type of partnership exists between your firm and mortgage institutions to encourage subscribers to the National Housing Fund? How many people are you targeting under the scheme and what are the benefits?
We are not into any direct partnership with the mortgage banks. We only have projects that can qualify for the fund and subscribers can take loans to secure their houses.
To that extent, we partner with mortgage institutions that can process this. The number of those projects, we have now is less than 200 units.
It depends on people that are qualified to take it up. We are still discussing with a few of them so that they can help us source for people that are qualified and interested in our products.
Access to data for prospective investors in the housing sector poses great problem amid inconsistencies in existing figures. How can stakeholders build a reliable data?
I want to believe that with the advent of digitalization and Internet technology, data aggregation is becoming better. What we need as a country is cooperation and collaboration across the value chain in real estate.
So that people can collate and compare data. I want to also note that some research companies doing consulting and research in real estate space are also trying to work on this and help to come up with credible data. That effort I must say is yielding results.
Take for instance, we now have property search engines, from the engines, interaction and transactions are taking place along in these portals and can help in generating credible data for investors and other decision makers in the sector. We can use the data as basis for some decisions or innovations that are coming into the industry.
What is your current land bank across the country and how affordable are your products for the low-income earners as well as Nigeria youth?
For us as a company, we have lands all across the country, we have in Lagos, Ibeju-Lekki axis, we have in Isolo, Isheri-Osun, Jakande Estate area, and we also have in Eti-Osa, Lekki, Abraham Adesanya, and Sangotedo.
In Ogun State, we have land banks in Agbara area, Mowe- Ofada, Ijere-Pakuro, in Nassarawa state border of Abuja, and in Abuja.
By land banks, I mean places you can buy and keep for a long time to come and get value in 11-20 years, when development comes. They are usually places where development will come; there is always something that will let you know that development will get to these places.
There is the direction development will go to. Low-income earners, who can afford N25 to N30, 000 monthly can get.
Nigeria youth can also get from us once you can afford that. If they are looking at half of a plot, then it means that they can do N15, 000 per month. These are things we currently have in the market.
Do you think that Government is doing enough to encourage private sector participation in housing delivery?
No, I think they can do more. I think much of what has happened is private sector led. In the last five years and there about, much of what has happened, I mean positive development in the housing sector is private sector driven.
Yes, a lot of them are private public partnership. So that is why I think government is not doing enough. They can do a whole lots more.
Your basic role is to secure suitable and affordable housing for everyone irrespective of his or her incomes and social class. How much of the objective has been achieved in terms of your subscribers’ base?
We are in the neighbourhood of 5,000 people, who have benefited from our company.
Many of Nigerian houses are considered as substandard in terms of design, layout and facility management components. How can we improve on this quality?
The major way we can improve is by ensuring that we keep to standards but first we have to know what the standards are.
First, I will say, we have to look at the standards we currently have and align them with the current economic situation and environment, the age and time we are now.
So we need to review some of these standards as it were and align them in a way that it can accommodate, especially, affordable offerings and social housing as well as making sure that the size of rooms are not less than a particular size. We need to look at all these, so that we can have a better reach.
Once, we review our standards, ensure that properties have approvals, improve on the process so that it is not discouraging someone that really wants to get approval and because of time it takes and the cost.
If you look at all of these, it will help in ensuring that we can improve quality because people would no longer have reasons for not going for approvals..
What innovations are you adopting to encourage more Nigerians to own their homes?
Currently, we started a co-operative geared towards real estate investment and helping people access home ownership.
So, if a member joins, we provide housing and funding opportunity for him. We also embark on rent-to-own, works with other partners in the housing finance industry to make this happen.
That creates opportunity for someone to be able to go through housing ladder in terms of realising what he needs as a bachelor and when to go for bigger sizes as the family increases.
He also knows how to reduce sizes and quality as a family reduces, once the children are out of home.
This is one of the approaches we are using. You realise that in other parts of the world, like South Africa and Kenya, co-operatives do a lot in terms of housing or real estate industry generally, that is what we are doing to encourage people in the housing sector.
We also provide some form of development in our structures, so that people can build over 3-5 years to allow for affordability.