Foresythe: How Lagos sets pace in bridging Nigeria’s housing deficit
Mr. Bayowa Foresythe is the General Manager/Chief Executive Officer (CEO) of Lagos State Mortgage Board. In this interview with ONYEDIKA AGBEDO, he admits that Nigeria has huge housing deficit and x-rays the efforts of the state government towards bridging the gap. He notes that Lagos has been setting the pace in mass housing through its Home Ownership Mortgage Scheme (Lagos H.O.M.S) and recommends the model to sister states and the Federal Government.
The burden of the huge housing deficit in the country seems to be weighing heavily on Nigerians now and there have been discussions about the problem lately. As a major stakeholder in the sector, what has your organisation been doing to bridge the housing gap in Lagos State?
Lagos State Mortgage Board, otherwise known as Lagos Homs, was inaugurated in 2014 with the mandate to reduce the housing deficit in the state. At that point, there was a housing deficit of about four million in the state and the only way to reduce that was to find a means through which residents can come up in the property ladder. It was thought that this could only be achieved by looking at a way by which affordability and supply as well as demand and supply can work hand in hand. And how do you do that? You look at a mortgage system or a programme like the ‘Rent To Own’ that we are currently doing. Under the programme, you pay five per cent of the asking price of the property and make repayment over a 10-year period of 120 months. That has actually helped because, initially, we started with the mortgage where you pay a 30 per cent equity contribution and pay the remaining 70 per cent over a period of 10 years. After the 120 months, the unit becomes yours.
Now, in the supply side of things, the Lagos State government has actually commissioned about 20 schemes for the mortgage and the Rent To Own programmes. The difference between the Rent To Own programme and the mortgage scheme is that on the mortgage, you pay a 30 per cent equity contribution while on the Rent To Own you pay five per cent. On the mortgage, you have a 9.5 per cent interest rate while with the Rent To Own programme, you have a six per cent premium that you pay. This has actually helped people to get on the property ladder.
For example, we have Sir Michael Otedola Estate, Odoragunshin Epe; we have the Enahoro Scheme in Ogba. The Enahoro scheme has phase one and phase two. The phase one has 144 units fully occupied. In fact, the risk is now crossing over to them. We did that in 2014 and it is a 10-year programme; they are now in their eighth year so they have about 36 months to go. That is an economy itself. The same thing applies to the Enahoro phase two where people paid the 30 per cent and the remainder 70 per cent is to be paid over a period of time. The risk has actually crossed over to them. They are in about eighth year, about the eighth month now. So, in the next 36 months they will also be proud homeowners with equity on the property. The same goes to the one in Ilupeju.
There is a Lagos Homs Scheme in Ilupeju where we have 120 units of one, two and three bedroom flats. That too has crossed into the eighth year. We also have the Mushin scheme, which has 60 units of one, two and three bedroom flats payable over 120 months. They are into their eighth month and we have also created an economy there.
So, Governor Babajide Sanwo-Olu is pro-reducing the housing deficit. He has been doing so much within the housing sector. And within the short span of his administration, he has commissioned about 11 schemes of the Rent To Own, which is the programme that the government is doing now. He has commissioned the Prince Abiodun Ogunleye scheme in Igbogbo, Ikorodu, where we have 360 units; we are currently at about 95 per cent of allocation. The keys have been collected.
The governor has also commissioned the Lateef Kayode Jakande Garden in Igando, where we have 492 units of one, two and three bedroom flats fully occupied. We had a stakeholders meeting there about three weeks ago; people have started making their payments. We took the stakeholders meeting to the place to sensitise the beneficiaries on the importance of making payment and also the importance of insurance payment. We have a package as well where you pay insurance and facilities management fee. The reason we are stressing repayment is because we have a dedicated account where all these monies go into so the government can do onward construction of other schemes. And obviously we want to cover the five divisions of Lagos.
We are expecting Governor Sanwo-Olu to commission the Ibeshe scheme in Ikorodu, which has 480 units, anytime soon. We have Sangotedo Scheme Phase one and two in Eti-Osa. Phase one will be commissioned within the next one month or so. The governor inspected the scheme about two weeks ago and he is expected to commission it before the end of the year. It has 744 units. Residents have been applying. What we do is that we look at their debt to income ratio to make sure they pass the affordability test. You can’t use more than one third of your salary to make payment. So, if, for example, the repayment amount is N50,000 per month, you must be able to show the board that your monthly income is in excess of N150,000.
That takes us to the issue of affordability of these houses. The impression out there is that the government has been developing these housing schemes for the rich as the asking price and even the repayment plan is usually out of the reach of the common man…
I beg to differ from that. I will give you some examples. The Sir Michael Otedola Estate in Epe are bungalows. There is room and palour, one bedroom and two bedroom. The room and palour is only N1.5 million where you pay N15,000 per month on that property; the one bedroom is N2,000,000, where you pay N20,000 per month; the three bedroom goes for N3,000,000 where you pay N36,000 per month. We have 336 units there fully subscribed to on the Rent To Own programme. How cheap can you get it? And I explained to you earlier that the interest rate is single digit. You can’t find it anywhere in Nigeria, even with the National Housing Fund (NHF).
In Igbogbo, it’s N8.5 million for the three bedroom with N475,000 and some other small charges like administrative fees and facilities management fee. Once you make the payments, you are on the property ladder. So, with less than N600,000 you are in a three bedroom apartment with all amenities. And how much are you going to pay over 10 years? Just N84,000 per month.
The same thing goes for our Odo Onosa, Agbowa schemes. With as little as N7.5 million, you have a three-bedroom there. You pay over a period of 120 months. You can’t get anything better.
So, Lagos State is setting a pace. We are not looking at the revenue; we are looking at social housing. What we get back is even more than the revenue in terms of cash. We are giving our people shelter; the idea of corruption is eroded because you don’t have to have N50 million to be able to own any of the property.
At the Lagos Mortgage Board, we have many applications. They have tried and tested the agency. Some people thought that because it is a government thing, it would not happen. But the moment somebody in their family gets one and they visit, the next thing they do is to get in touch with us via phone calls, emails and visits to our office. Sometimes our reception is jam-packed.
So, this is something real and it’s affordable. It is just that obviously for economic reasons, we have to understand that the price of cement four years ago is not the price now. So, basically we have to look at it and sort of balance it. But in a nutshell, this is the best that can happen to anyone. We, therefore, advise that people should get in touch with us; demand is more than supply and that is why we have the deficit.
You have spoken about other charges like insurance and facility management fees. Can you shed more light on these?
After spending huge amount of money on construction of homes, the need to protect the investment of the government arises, and that led to the inclusion of LASACO Assurance Plc.
Moreover, there are two insurance policies on all our estates, these policies are mortgage protection insurance and fire and special peril. Mortgage protection insurance is to protect the mortgage process against untimely death. The insurance covers the outstanding mortgage in the event of death of the assured life. This is to make sure that the demise of a mortgagor or allottee does not affect the mortgage. LASACO Assurance Plc will pay the outstanding mortgage and the property will be free to the family of the demised.
Fire protection and special peril insurance is the merging of two insurance policies into one. This is because the government’s stakes in those estates are huge (70% and 95% respectively). The fire protection covers the property against fire, lightning, explosion of boilers or gas use for domestic purposes only, while the special perils aspect covers the property against riot, malicious damage, earthquake or volcanic eruption, storm tempest and flood, bush fire, and impact by road vehicle or animal.
To further facilitate speedy process of claim, the Lagos State Mortgage Board appointed insurance brokers for our various estates. The insurance brokers serve as an intermediary between the allottees and LASACO Assurance. The brokers ensure timely payment of premium, facilitate claims, and guard the allotees.
How transparent is the allocation process of these schemes because there are allegations of favouritism against the board in some quarters?
I would like to tell you that you don’t need to know anybody to be allocated a house by the board. You called me today and I picked your call. Other people call me directly to enquire about these schemes. That is the transparency there. You don’t need to know anybody; just go to the reception. You can even visit our website www.lagoshoms.gov.ng. If you go there, you can download information regarding these schemes. Those that are sold out, you will see them on the website. If you come here to make enquiries about those that we are still allocating, you can download the application form here, fill it here and submit immediately. If you have any issues whatsoever, we have an effective customer service, the operations department and the facilities department. You can even walk straight to my office; it is open.
But in terms of the allocation, what we do really, which I mentioned earlier, is that we check the debt to income ratio of applicants. Normally, we allocate on first come first serve basis. The moment you submit your application form, we record it. Once we go through the application form, it might not be 100 per cent okay but we don’t push it away. What we do is to request for more documents to see that we help you as much as possible to get to the stage of approval. If you don’t meet up with the criteria, we advise you on other options.
For instance, if you applied for three bedroom and your salary is less than what it requires, we can just possibly drop you to one bedroom if that is okay for you. Some people reject because of the size of their family. But what we look at really is the debt to income ratio and the process is excellently transparent; you don’t have to know anybody. Many people have benefitted.
There are some of your estates that have been sold out yet majority of the apartments are unoccupied. Isn’t that an indication that the rich people buy up these apartments with the aim of profiteering?
Well, our schemes are for first time buyers. The first thing we do is to make you to swear to an affidavit that you are a first time buyer. I could remember when the government enacted a law that you cannot pay more than one year rent to a landlord. You know the government won’t be there when you do an agreement with the landlord. The landlord might just say pay two years and you will go ahead and pay the two years. It is when the problem starts that you will now call the attention of the government.
For us, within that form, there is an affidavit that you swear to that it is your one and only property as at the time you are buying. You know that affidavit is a legal document. As such, many people run away once they see that. For want of time, we can’t be chasing everybody around; but we have put in checks and balances there to get you to sign an affidavit that you are a first time buyer. We do carry out spot checks on applicants and we know where to go because this is a government agency. We have the Lands Bureau and the Survey Department and we can pull it at anytime.
So, with those checks and balances, we seldom have people who come with such tendencies. May be they might have tried before, but it’s far from what is happening.
Do you allow beneficiaries to pay up when their income improves or the repayment must run its full cycle?
There is no approval for that yet and I will tell you why. You asked a question about moneybags. The idea was that we wanted to build a mortgage culture, a culture of payment in instalments. That was why the Rent To Own programme was introduced.
We didn’t want people to come in at that time and think they could pay in two or three tranches. The moneybag is good to do that. But we know that once we stress it that you are going to pay over 120 months, moneybags don’t have that patience. It would ordinarily go to someone who really wants to live there, who really needs it and wants to pay over that period of time. So, we left it at that as a policy.
But now the risk is crossing over to some that started in 2014. We then sold as cheap as N1.5 million on the Rent To Own programme, where they are paying N15,000 per month. Those ones are three to four years into the repayment. So, looking at those ones, circumstances might have changed and it’s possible that N700,000 might just be a small fee for them now to pay off.
We are working on it now, looking at the modalities. Once we conclude, we will send it to Governor Sanwo-Olu, who will give us the approval to allow people who have paid over a period of time without defaulting, who might have five, six, seven years left, to redeem to exit at that point and pay whatever it is probably with an exit administrative fee and move on. It will even be a bit of revenue for the government to build more schemes. It is something we have looked at and I think within the next few months, we will see something in the affirmative on that.
Given your experiences at Lagos Homs, what do you think the Federal Government and other states should be doing to narrow the huge housing deficit in the country?
There is a very big challenge and I understand that in terms of the deficit. It is wide. For me, I would always say supply, supply and supply. Government has to start making judicious use of lands. We have to start going vertical to be able to push people into the property ladder. There is no point having bungalows instead of storey buildings on an expanse of land. I personally look at some schools and when I see the expanse of land these schools are sitting on, I wonder why. If you go to Britain or America, you will see schools that sit on about four plots of land and all the amenities there. But here, you see schools sitting on an expanse of land part of which could be used for social housing schemes. Most of such school land is basically unused. So, the moment we start going vertical and the more units we build the more we will reduce the housing deficit. Apart from that, it creates an economy because the more you build the more you empower artisans. So, it’s a revolving thing.
Also, they should increase the budget for housing. There should be more money for social housing. It’s not about generating revenue alone; you generate more mileage by taking people off the streets, giving people shelter and making sure it is affordable. Obviously we have to look at our economic cycle as well. We should do away with importation and embrace made-in-Nigeria materials. Raw materials like cement and iron rods should be sourced locally. Doing so will bring the price down.
You know about the NHF. How can it be better managed so contributors could easily access it?
The NHF is something that, if well managed and is accessible, will be one of the best things that will happen to us. The interest rate too is cheap. The problem is accessibility and that is a federal issue really. The Lagos State government had an issue with the Federal Government on the NHF sometime ago but that has been resolved. I think they have their office in Lagos now but it’s not the Lagos Mortgage Board that is dealing directly with them. We have a sister agency, the Lagos Building Investment Corporation, that has been assigned by the state government to work with NHF to see how they can make it easy for people to access the fund. I think that in the long run, it will happen but it is a little bit slow. It’s work in progress.
On our side here at Lagos Homs, as the supply comes, we push it out. We don’t wait at all. However, the good thing about the NHF is that you will look for your own property, put in your application and follow up on the processing. The only challenge is that the property may not wait for you till the approval comes.