FMBN approves N61.2bn estate development loans

Dachi Maduako, Lagos - updated: Thursday 19-06-2008

In a bid to provide more housing units for Nigerians who are facing acute housing shortage, the Federal Mortgage Bank of Nigeria (FMBN) has made total approvals for Estate Development Loans (EDLs) to estate developers of an unprecedented N69.2 billion, an amount that is in excess of the total amount of N32.74 billion collected in the National Housing fund (NHF) scheme.

The Federal Mortgage Bank of Nigeria, which is charged with the responsibility of managing the NHF, had also approved a total loan of N44.8 billion so far for estate development of 19,455 housing units nationwide.

This was disclosed by the Managing Director of Union Homes Savings and Loans Plc, Mr. Austin Aikhorin, who said that the excess in the approvals represented the amount that is yet to be disbursed since disbursements are made from monthly collections of contribution and repayments of loans granted already.

Aikhorin stated that as at January 2008, FMBN’s total loans granted through Primary Mortgage Institutions (PMIs) stood at N24.4 billion for disbursement to 18,676 contributors to the NHF. He observed that the N32.74 billion total collection was from inception to January 2008. The collections made in the first decade was N10.4 billion while there was marked improvement in collections in the past six years.

The Union Homes boss, who spoke on “Affordable Housing: the Masses Hope,” said for hopes to remain alive for the masses and provision of housing with availability of funds assured, there was the need for a secondary mortgage market operation.

“The capital market remains the impetus to finance secondary mortgage operations to ensure sustainable liquidity in the housing sector. For the first time, the Federal Mortgage Bank of Nigeria is set to commence capital market oriented operations for housing / mortgage finance in addition to the depository source of funding through NHF collections,“ he said.

He explained that FMBN loaded the bond in two tranches of N50 billion each. The proceeds of the bond were used to fianace the sale of over 30,000 Federal Government non-essential houses in Abuja to civil servants following the monetisation policy.

Aikhorin further explained that members of the Real Estate Developers Association of Nigeria (REDAN) have been obtaining loans from the NHF to develop housing units in the range of one bedroom, two bedroom and three bedroom with a precondition that such houses built with the fund shall not be sold beyond N5 million. N5million is the ceiling for loan obtainable from NHF.

He, however, listed the constraints facing the housing sector in its bid to achieve mass housing delivery. According to him, statistics from the National Bureau of Statistics shows that Nigeria currently has housing deficit of between 14 and 17 million units whose estimated cost is put at N2.143million per unit.

He stated that the 1978 Land Use Act is one of the major constraints to the smooth process of obtaining land titles, assignment and foreclosure. Areas that must be checked include the vesting of power of granting title to land and consent to transfer on the governor alone.

The issue of absence of long term funds in the system, he said, had made the PMIs source funds from the same money market where commercial funds are of short tenor and cost high due to high interest rate. This has made it impossible for the PMIs to service the low and middle income earners.

The absence of secondary market, he regretted, has denied his sector of a veritable source of funding for affordable housing. The proceeds, which would have securitised primary mortgages, would have equally ensured steady flow of fresh and long term funds for lending to new mortgagors.

Other constraints include high cost of imported building materials including cement, steel reinforcement, roofing sheets, piping and fittings as well as low purchasing power and inadequate flow of funds.

He, however, called for government’s intervention to address the militating factors while recommending that the provisions of the National Housing Policy of 2006 be re-examined, finetuned and re-presented to the Federal Executive Council to approve the document for adoption as the National Housing Policy document. Thereafter, states could be advised to adopt it as a working model.

He called on the government to hasten the on-going review of all land related laws and regulations in the amendment of the Land Use Act so as to ensure smooth access to land titling, transfer and foreclosure.

He also called for the provision of basic infrastructure by all tiers of government such as roads, drainages, electricity, water, sewage treatment plant in fulfillment of their responsibility. Such provisions, he said, would be an inducement to estate developers to deliver affordable housing.

According to the chief executive of the nation’s leading PMI, incentives such as allowance on pre-tax profiles and some regulated concessions should be given to PMIs adjudged to have exercised international best practices and had been giving mortgage loan landings.

On capital base of PMIs, he said, “talks about the appropriate capital base of the PMIs have been on for some time now. In order to end the speculation and the damaging effect on rumours, the government should take a stand on the re-capitalisation of primary Mortgage institutions in the country just as had been recently concluded in the case of commercial banks. Such a review will reposition and enable the primary mortgage lenders to originate more loans rather than having to queue up to access the National Housing Funds, as is presently the case.”

Aikhorin enjoined the government to consider a total waiver or reduction of import duties on the vital building materials such as cement and steel reinforcements which are sold at very high prices.