Osidi advocates for private sector funding in the supply of affordable housing

Managing Director/Chief Executive of the Federal Mortgage Bank of Nigeria (FMBN), Mr. Shehu Usman Osidi has advocated for private sector funding in the supply of affordable housing.

Osidi made this remark in his paper titled “The Place of Affordable Mortgages and Private Sector Operations in Catalysing Housing Demand and Supply” delivered by his representative, Mr Oladapo Fakeye, Group Head Strategy FMBN at the 2024 Annual Conference of the Property & Environmental Writers Association of Nigeria (PEWAN) held on 28th November 2024 at the LCCI Building, Lagos.

The FCMB boss said “In Nigeria we are faced with a huge population estimated at over 200 billion growing at about 2.52% per annum, the high urban-rural ratio of about 50% also growing at an astronomical rate of 4.3% per annum, and perennial unfavourable regulatory and macroeconomic factors. The combination of these unfortunate circumstances has resulted in a significant housing gap estimated at millions in the double digits.”

He cited the 2019 PwC study, which noted that about 75% of the nation’s estimated 42 million housing stock falls below the United Nation’s criteria for permanent human occupation.

 In addition, he said, the nation’s dismal record of untitled land implies that about $300 billion, roughly 60% of national GDP is ‘dead capital’ as the owners cannot realise tangible earnings or utilise the assets to improve their economic status.

He revealed that it is in this vein that at the recent Meeting of the National Council on Lands, Housing & Urban Development that held in Gombe, Gombe State a couple of weeks ago, the Honourable Minister of Housing & Urban Development stated that to stem the national housing deficit, the country will need to produce an average of 550,000 housing units per annum for the next ten years, while the financial outlay for this annual housing target is over N5.5 trillion per annum.

“By contrast, our average annual housing production is about only 100,000 units mostly through prevalently informal, incremental self-construction dictated by the availability of excess household income, scarce savings or loans from friends and relatives. Again, the national appropriation for housing last year was around a paltry N50 million, a far cry to the N5.5 trillion required per annum,” he said.

According to him, like food, shelter and housing remain as a basic human need that must be met by individuals and households, noting that the huge housing and housing finance gaps portray enormous opportunities to revamp and reverse the fortunes of our national economy.

He highlighted the significant economic opportunities for forward and backward integration that housing has the capacity to engender in terms of requirements of building materials, household items, as well as huge capacity for job creation and employment.

“During the construction period, our in-house estimates indicate that constructing a 3-bedroom property can generate not less than 17 direct and indirect jobs,” he said.

He maintained that the motivation for new home development would be driven by housing demand and by extension, housing demand tends to be a factor of the available opportunities for mortgage financing as in most societies and less than 5% of the population lack the financial capacity for house for cash transactions.

He stated further that even where individuals can afford to purchase a house outright, economic prudence dictates that a mortgage facility which offers regular repayment in instalments over a convenient length of time is preferable to tying down lump financial resources which can be more optimally deployed to alternative investment opportunities.

In this context, he said, the role of affordable mortgage in addressing the housing deficit cannot be overstated, adding that under President Tinubu Administration’s Renewed Hope Agenda, the Federal Ministry of Housing & Urban Development is rolling out the Renewed Hope Cities and Renewed Hope Estate housing projects to deliver 100,000 new homes across the country.

“This is where an institution like the Federal Mortgage Bank of Nigeria (FMBN), as the apex mortgage institution in Nigeria is playing a huge roll by driving housing affordability and accessibility. FMBN has issued a N100 billion off-taker guarantee to real estate developers engaged under the Renewed Hope Housing projects to facilitate project delivery. By this, we will provide mortgages at single-digit rates of 6% and a tenor of up to 30 years to Nigerians interested in becoming homeowners.

“This transaction arrangement clearly highlights the significant role of the FMBN in housing delivery in Nigeria. FMBN is empowered to collect and manage the National Housing Fund (NHF) Scheme as a pool of long-term funds funded by contributions of 2.5% of workers’ monthly incomes. It remains one of the institutions that provides affordable financing to both the supply (construction) and demand (off-take) sides of the housing market. The Bank’s loan products are granted on concessionary basis that are below market interest rates and for relatively long tenors to ensure affordability,” the FCMB boss said.

FMBN’s construction loans, he said, are granted to real estate developers, cooperative societies and individuals, asides from the NHF mortgage loan, FMBN’s other loans on the demand side include a rent-to-own product and home renovation/improvement loans.

Osidi also revealed that the Bank is set to launch the Diaspora Mortgage loan to address the needs of Nigerians in Diaspora, non-interest loans and rent assistance.

“It is of interest that to address the rising cost of housing delivery due to escalating cost of building materials, the Bank increased loan limits for individuals from N15 million to N50 million while the equity requirement was reduced from as high as 30% to only 10% to ensure affordability. We have also established partnerships with critical stakeholders including State Governments, regulators, bilateral and multilateral financial institutions and the labour centres to increase access to affordable housing,” he stressed.

In furtherance of its critical role, the FMBN, he noted is set to establish the National Mortgage Registry as a digital repository to aggregate all mortgage transactions as may be perfected by the Land Registries of the 36 States of the Federation and the Federal Capital Territory.

The Managing Director/Chief Executive of FCMB said it is obvious that no single player can shoulder the burden of affordable housing provision, noting that under the current National Policy on Housing, the roles of Government and the private sector are defined and explicit.

He pointed out that although Government is saddled with the responsibility to provide an enabling environment to facilitate the performance of the private sector, the Policy also encapsulated a significant shift from dependence on government for the private sector to play the leading role and be the chief driver for housing delivery.

He maintained that the private sector has a critical role to play in bridging Nigeria’s housing deficit and advised that Private sector organisations in the industry must look beyond strictly financial gains, to explore and leverage innovative (albeit less financially rewarding) models, such as public-private partnerships (PPPs) with the Bank or the Federal Ministry of Housing & Urban Development, and through joint ventures, to develop affordable housing projects.

Thus, he said, that private sector players are the drivers of business and the main catalyst for change and progress in any sector, and it is no different in the supply of affordable housing.

 He cited among some of the benefits of private sector participation in affordable housing supply to include: Increased efficiency and effectiveness in housing delivery; Improved quality of housing units; Increased access to affordable long-term finance; Job creation and economic growth.

He harped on the need for Private sector investors also look towards other avenues for generating revenue from housing projects beyond just the sale of units for maximum value by integrating commercial properties such as schools, shopping malls, and other utilities to enhance value to residents within the estates delivered and ultimately provide long term returns to investors.

On the part of government, he revealed that efforts are being made to encourage private sector funding in the supply of affordable housing.

“One major step was the development of the Model Mortgage and Foreclosure Law aimed at de-risking the mortgage sub-sector by establishing clear costs and timelines for the issuance of title and grant of consent and approvals, as well as streamlining the foreclosure process in the event of loan default. It is commendable that some States have adopted the Model Mortgage and Foreclosure Law which is currently being reviewed into a Mortgage Administration Law. Additionally, progressive States have adopted electronic Geographic Information Systems (e-GIS) to remove ambiguities around land issues,” he emphasized.

He added that affordable mortgages and the contributions of the private sector are critical to catalysing housing demand and supply in Nigeria, stressing that as a Bank, FMBN is committed to working with all stakeholders to increase access to affordable housing finance and promote private sector participation in the housing sector.

Osidi acknowledged that Nigeria’s housing deficit requires the collaboration of the public sector providing an enabling environment with the private sector vigorously driving housing delivery.

It is imperative for Governments at all levels, and sub-nationals especially, he said to strive to create the enabling environment for affordable housing development, adding that this includes providing the appropriate legal and operational frameworks to reduce transaction costs and time as well as incentives to encourage private sector investments.

He lauded the role of members of the Press as critical to the dissemination of information to enable the public take decisions for the general improvement of society and encouraged their continuous commitment in the service to the nation.

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