Mitigating recession through sustainable housing investments

Just recently, the Governor of the Central Bank of Nigeria, CBN, Mr. Godwin Emefiele advocated for sustainable investments in housing sector, noting that such investments would no doubt, mitigate economic challenges being faced by Nigerians.

Emefiele, who disclosed this, in the just-concluded Africa’s Housing Agenda, jointly organized by the African Union for Housing Finance, AUHF, and the Nigerian Mortgage Refinance Company, NMRC, in Abuja however suggested that sustainable investments in housing sector would grow it above a dismal one percent contribution to the Gross Domestic Product, GDP.

He said: “If the housing sector can contribute over 80 percent to GDP in the United States of America, USA, it can also improve the nation’s economy significantly. If you look at the housing market in Nigeria and in Africa, compared to the more developed economies, you will find that the housing markets in Africa are indeed largely underdeveloped.

“The contribution of the housing market to the GDP in Nigeria is less than 1 percent, compared to that of the U.S, which accounts for over 80 percent”, he added.

Explaining further, the CBN Governor said the housing sector in the U.S. represented the highest financial assets in the world, as it is the highest contributor to its combined capital market, adding that it represents a higher subsection of the country’s economy.

As a result of this, he advised African governments to use housing sector as stimulant to grow the economy, thereby increasing its contribution to GDP.

Already, the Federal Government had noted that Chinese companies had sealed a $250 million deal with Nigerian government to develop an ultra modern 27-storey high rise complex as well as $2.5 billion agreement for the development of Lagos Metro Rail Transit Red Line project.

This is in addition to a call for foreign investors to invest in low-income housing, as statistics have shown that one million houses are needed annually to reduce 17 million housing deficit in the country while averting housing crisis by the year 2020.

Federal government said it earmarked N40 billion in 2016 capital budgets to implement a comprehensive housing programme.

According to President Mohammadu Buhari, government intends to supply housing stocks directly to urban areas across the geo-political zones under its Comprehensive Housing Programme.

He said: “The federal government would also continue to prosecute overall housing policy, which recognizes government as active facilitator of private sector-driven housing sector.

The President noted that government is also considering vibrant reforms in land administration, urban planning/renewal as well as mortgage housing finance under its new comprehensive housing programme, aimed at improving housing delivery in the country.

The current realties of housing shortfall, according to him, imposes serious challenges to housing developers in Nigeria as well as African continent, saying there is need for re-assessing strategies while evolving fresh methodologies to meet the exigencies of the time.
Citing successes recorded by Shelter Afrique, a pan-African Finance Institution, through its ‘Exemplar Housing Initiative’, the President also noted that such benefits could be better harnessed through a wider housing market, to achieve housing for low-income earners in different parts of the continent.

Lauding Shelter Afrique’s commitment to further popularizing current best practices for housing delivery in the continent, Buhari urged the board and management of the continental finance institution to open new frontiers by investing in low-income houses in the country.

While also appealing to other development partners to invest more in Nigeria’s housing sub-sector to deepen the vibrancy of the country’s housing market, he averred, “I expect a consolidated strategy to assist national governments across Africa to develop robust systems to deliver affordable housing to low income earners on sustainable basis”.

Already, Institute of Mortgage Brokers and Lenders, IMBL, has urged the federal government to invest recovered loots in low-cost housing as well as mortgage.
The Institute’s Director-General, Elisha Jasper, said lack of housing is the major plight facing many Nigerians.

“There is lack of mortgage professionals in the country due to lack of mortgage studies; thereby creating a lack of knowledge and skills on mortgage brokerage, financing and lending. IMBL cannot do it alone. Individuals (workers and or students), governments, Federal Mortgage Bank of Nigeria, FMBN, and Primary Mortgage Institutions, PMIs must play their parts or roles in this fight’’, it stated

He canvassed that looted funds recovered should be reinvested in low-cost housing as well as mortgage.

Jasper, however, explained that while the Institute with help from government continues to raise mortgage professionals, the Federal Mortgage Bank of Nigeria, FMBN should build mass houses that could be acquired by Nigerians on mortgage basis, adding that the Institute and Lenders believe that every Nigerian should own a house, no matter the situation of the economy.

He further noted that the problem with housing in the country has become unbearable and unimaginable for not just the low-income earners, but also for the rich and elite, adding that the problem ranges from lack of funds, insurgency, economic crisis, unavailability of structured houses and, most importantly, lack of skills and knowledge on mortgage, leading to ineffectiveness of the housing sector as well as inefficient processing of the National Housing Fund application.

“Lack of awareness, skills and or knowledge on mortgage studies have brought about low capacity of mortgage professionals. Lots of Nigerians serve their country and don’t even have houses owned by them to show for it.

“People waste money on paying rent for the rest of their lives without knowing that the money paid for rent can be factored into mortgage financing and owning these houses after the payment period’’, he added.

Regrettably, the housing problem in the country is unfathomable, when taking a cursory look into massive land and infrastructural organisations at the disposal, which begs a whole lot of questions.

According to the Institute, there is an acute shortage of housing infrastructure in urban centres due to rapid urbanisation, which found expression in the number of homeless people roaming the streets and sleeping under the bridge as well as those living in slums and squatter settlements.

This phenomenon, IMBL, said has become a great challenge to the teeming urban population and government, as there is an urgent need for government and corporate bodies to find lasting and enduring solutions to the nation’s housing deficits.

Chairman of Housing Developers Cooperative Society, HDCS, and past President, Real Estate Developers Association of Nigeria, REDAN, Chief Olabode Afolayan told Financial Mirror that the nation’s housing sector has the potential to lift the country out of its present economic doldrums if fully tapped

Noting that housing sector development could mitigate Nigeria’s current fiscal crisis, he said the current economic situation in Nigeria is not entirely a bad one. According to his statement, “’for the very first time in our nation’s history, it affords us the opportunity to genuinely look inward with a view to reviewing all our strategies and begin to address critical issues based on what is tenable and acceptable in the market.

“For instance, it is obvious that the economic capability of the people is nose-diving and the earnings of the people are dropping based on reduction in business activities. All we need to do as private investors is to begin to marry people’s need with their means; we must allow the market to drive transactions in the housing sector’’.

He said Nigeria had great potential in the housing sector because of her population need to address some of these challenges with a view to translating them into opportunities.
Giving the scenario in the banking industry, he said the challenges they had faced gave rise to deployment of technology, especially Automated Teller Machine, ATM, he said the present challenges could as well applies to the housing sector.

‘’Now that we have come to realise that our sector can create a lot of employments for the people, we need to imbue it with a lot of creativity to increase its viability.

“With a huge deficit put at 17 million units, operators in the industry need to begin to look at housing structure that meets the need of the people without compromising standard. Governments at various levels can begin to invest in housing and increase the GDP because it is obvious that even if you are building houses for rent or own, you will definitely have returns on your investment over time. It is a sector, we believe, will help jump start the economy’’, he stated.

According to him, if government is desirous to do anything about the economy, it must start with the housing sector’’.

“Look at Ogun state for instance, the government started with an encouragement for everyone to obtain land title for a flat rate of N10, 000 and in the process raised a lot of money. The good reasoning in this is that, with several million people having titles, they pay ground rate every year.

Riding on the Ogun state success story, je said a good number of state governors are now opening up more cities, having realized that they can get more money in housing related transactions and that is why the process of issuance of titles has been computerized in most states.

Citing examples, he said Lagos state started with e-title and started with about nine people signing Certificate of Occupancy, which it could not meet up, so they went ahead with the e-title.

Also, Kwara state government started giving people options to fast-track the process of insurance of titles with an extra payment.

With title, it makes the product transferable, liquid or makes it comfortable to have assets that caould pass on to the next generation.

It is however clear that the sector with the highest investment destination at this period of time is housing, as whenever construction is taking place, a lot of housing related materials are usually in demand, thus having sprawling effects on manufacturing, agriculture, mining and financial sectors.

Already a lot is being done through the private sector to develops the private sector as government has come to realize that the best that can happen to the economy, like what is being done in other economies of the world, is to continue to encourage investment in the sector.
The fastest growing economy of the world is private sector driven, so government is trying to collaborate under the Public Private Partnership, PPP, arrangement to ensure that it takes housing to the next level.

To be fair to these housing agencies, they have done very well within the spectrum of the enabling Act establishing them.

Some of the Acts, he noted were enacted over a decade ago and for them to meet the emerging demands in the housing sector, some of the sections needed to be reviewed. For instance, when we were being governed by the military decree, FHA got lands in all the states of the federation easily, but now state governments see land as their own.

It is going to be extremely  difficult for FHA that operates as an agency of the federal government to go round the states to start grabbing lands for housing development.
What the federal government is doing is to change the composition and the operation of the FHA to enable it operates as a commercial entity.

“If it operates as a commercial venture, it would be easier for the agency to enter into partnership with the state governments with a view to doing business with them. Until it gets such status, the agency will be unable to deliver on its mandate of provision of housing to the masses’’, he said.

There are two options that can be considered to enable the bank perform effectively. First, we can raise the capital base in line with the present economic realities and second, the bank can be encouraged to raise money from the capital market to fund mortgages.
Except that is done, the bank may not be able to raise mortgages that would make the desired positive impact on the lives of the people.

This is not something anyone can sit down and work out like mathematics because individual contribution is a function of personal income. In this regards, you cannot overnight increase the percentage because what they earn is not even enough to take care of their needs.

He said, there is a mismatch between what people earn and what they can buy in the market and it is going to be difficult to try to change that without first addressing the issue of take home pay.

“We can say it achieved its purpose in the past when the contribution was commensurate to the value. For instance, when somebody contributes N1000 a month, in one year, he is contributing N`12,000 and he will need to work for 30 years to contribute N360, 000.

‘’The whole thing needs to be worked out in line with the cost of the product, the cost of an average house. In my view what I feel government can do is to fill the affordability gap by defraying certain percentage of the total cost. In the past it might work when you can get a house for N500, 00, N1 million, but in today’s economic realities, it is not possible. We need to also look at how to improve the money accrued to FMBN for the creation of mortgages’’.

These are the challenges. We need to begin a literacy campaign to educate the people on why they must change their consumption pattern and on housing mobility. Why must a person live in the same house all his life? My take is that it is good to start with what you can afford and when you’re income increases, then you move to a more luxurious building.

On habitat, it is no longer debatable that African nations are besieged common settlement challenges. From Nigeria to Uganda, Kenya to Sierra Leone, the story is the same. And until we begin to address the issue of informal settler, we will not get the issue of urban settlement right.

“If we don’t do that, we will continue to have position papers that will not work. Let us study our own peculiarity in Nigeria. Government will come today and relocate Informal settlers on the pretence that they live in the ghetto. How do you refer to people who have lived in one area for the last 50 to 100 years as informal settlers? What do they need to do to give them ownership of the area? For me, until the federal government of Nigeria review the issue of indigenes and state of origin, we will continue to live in a circle, while we breed slums’’, he added.