The challenges of the housing deficit in Nigeria are no longer news for everyone who has ever rented a house or bought one. Nigeria is estimated as of 2015 to have a housing deficit of approximately 1 million and projected that about 59.5 trillion naira will be required to remedy the gap in the sector.

Of all the challenges in the housing sector, limited access to finance stands as a major setback that requires immediate attention. According to experts, this challenge can be traceable to the underdevelopment of our mortgage industry which according to the report has generated 200,000 transactions between 1960-2014. According to a report from the world bank (2015), the contribution of mortgage financing to Nigerians GDP is close to negligible, with real estate contributing less than 5% of GDP.

Key players in the housing sector in Nigeria are, i.e., the central bank of Nigeria, the securities and exchange commission, the federal ministry of lands, housing and urban development, financial institutions, and property developers. It’s also important that I bring to your notice the legislations that provides for the administration of mortgages in Nigeria. They include the central bank of Nigeria (CBN) ACT, the banks and other financial institution ACT, the federal mortgage bank ACT, the land use ACT, the national housing fund ACT, the mortgage institution ACT, the trustee investment ACT, the Nigeria social insurance ACT, the investment and securities ACT, and the federal housing authorities ACT.

The purpose of this post is not to bore you with the statistics and the names of the institutions, but to proffer solutions to the deficit challenges as we at PERFECTION REAL ESTATE believes that the same deficit can turn to opportunities for growth economically if properly managed. Having carried out extensive research as to how to solve these problems, we came up with five things that should be reviewed if the housing deficit in Nigeria must be reduced.

1 Reducing the insecurities In the land tenure system

To get this right, it has to start with the land use ACT which states that all lands in the state belong to the state.  By state, I mean that the law vest title to the governor who holds the same in trust. This mandate means that the governor reserves the right to revoke title to any land in the state for public purposes. This ACT has led to the tussle between holders of rights of occupancy whether statutory or customary over land has always gone down the judicial way.

This is why it’s easy to see massive portions of land under acquisition in Nigeria whether or not they have already been marked for public projects.  This factor has been identified as a primary cause of concern for both cooperate and private investors in the real estate investment sector who live in constant panic as to whether the government is working in their interest.

This is where the lawmakers and the court of law in. They have to define the powers that are of the governor and the enforceable rights of persons holding various interests inland.

2 Great bureaucracies in land registration in Nigeria.

This is another challenge that is limiting the success of reducing the housing deficit in Nigeria.  The high level of bureaucracy involved in land acquisition and perfection of the title poses a great challenge and a considerable difficulty to effective housing delivery, especially in most urban areas. Some of these challenges experienced are land accessibility, affordability, availability, and ease in the acquisition. The process of obtaining a certificate of occupancy may take up to 2-5 years while the cost of registering a mortgage is estimated at the top at 19% of the property value.

To solve this, there should be a digital registration process that will erode the manual process. An accurate and comprehensive land registration process is necessary for effective property rights. States like Lagos state has taken the initiative to set up a regulatory body that is responsible for the smooth registration of lands and titling. It’s also important that the central government do the following two things to make it easier for people to own their lands.

  • Create an electronic system that makes it easier for people to purchase, register, and title with ease
  • Review the power and responsibility of the governor towards land transactions in the different states.

3 Increase awareness of mortgage financing arrangements

There is an extremely low level of awareness of mortgage facilities, their benefits, and the services provided. Research has shown that mainly servants and individuals in formal employments make use of mortgages as a result of the monthly contributions made to the national housing trust fund.

Collated data across the 36 states including the FCT indicates that people based in the rural areas are less likely to consider the use of mortgage facilities compared to those based in the urban areas. This is so because of a lack of awareness of the existence of those facilities and the earning capacity of the people.

This certainly calls for the development of models to enable the spread of mortgage engagements to these areas and the transmission of information, bearing in mind that we have an estimated 68% of Nigerians living in such areas.

4 High interest’s rates and inflation

Compared to some other jurisdictions where mortgage interest rates range between 3-5 percent, Nigeria’s mortgage interest rates range between 16-24 percent save for the federal mortgage bank which lends under 10% high rates of interests charges by financial institutions presents a major challenge for middle and low-income earners to patronize mortgage financing.

It’s also common practice for commercial banks to misrepresent commercial loans as mortgages which tend to have higher interest rates and for which the duration is usually a maximum period of two years. These have led to Nigerians preferring to use personal savings, monthly contributions groups, return of sales of the previous house, government subsidy of the private sector to fund housing projects

Its, therefore, recommended that mortgage institutions are regulated by a central mortgage guideline on mortgage transactions. This doesn’t have to come from the legislative arm of the government but the interest groups from the investing and consuming communities as the case may be.

5 creates opportunities for growth

Irrespective of the above challenges, with targeted and specific reforms, mortgages can become a viable option to resolve the housing deficiency and ultimately improve the state of the overall economy. If properly handled, the above situation could create lots of jobs and opportunities for investment.

It is estimated, following labor impact assessment in countries such as Columbia, Malaysia, and South Africa, that at least 5.2 direct jobs with every new home and 2.48 indirect jobs associated with housing-related expenditure. A starting point for this source of development will include as of necessity, amending the land use ACT to adequately address the mentioned challenges, facilitate ease of approval process, and act as a pivot for development.

This is courtesy of PERFECFEECTION REAL ESTATE GROUP. For more information,  kindly visit www.perfectionrealestategroup.com or call us on 08091111384, 08090229899 or 0817789876.

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