PROPERTY ‘Banks shying away from real estate market’
Musa Dangoggo Aliyu is the Chairman of an Abuja based real estate development company, Homes Group Ltd., and former Managing Director of Urban Shelter Ltd. In this interview, he speaks about the challenges facing the real estate sector. Excerpts:
Can you give us details about your ongoing projects?
The Homes Group is the mother of three companies namely, Rural and Urban Homes Ltd., Distinctive Homes Ltd, and the Rural Homes Ltd., which is developing the Karmo District Market, The project commenced about seven months ago, it is expected to be delivered within 24 months project so we have 15 to 16 months before the completion period as at today. We have done about 40-45% of the job, we have completed all the foundation and this week we are about to start the decking of the first floor that will culminate into roofing aspect of the market.
We thank Almighty Allah that we have come this far, the only snag is that there is a problem of financial intermediation in Nigeria, where you find all the banks shy away from giving financial support to the real estate sector. Thus we are left with the vagaries of the sector, forced to rely on our capital and depositors funds to see ourselves through, but by the grace of God we are going to deliver within the set time frame because we are also looking at affluent individuals with capacity to finance our projects and we have seen some individuals who are ready to do that.
We are happy we started with the market investment now because the shops at Karmo are within the limit of what the people can pay therefore we have a lot of clientele that are making installment payments which is good so we have off takers who will pay diligently as agreed so we’ll be able to complete the project within the set period.
The Homes Group is formed with the aim to go into partnership with foreign firms or individuals interested in the real estate sector. The Distinctive Homes Ltd and the Rural Homes Ltd are in business already doing one thing or the other, for example the Distinctive Homes is constructing homes in Durumi District called Distinctive Terraces 1 Estate with prices rangin from N70-80 million, Rural and Urban Homes are at the verge of signing agreement with a land owner of 100 hectares as partner for mass housing, ranging from 1-5 bedroom with the price ranging from N3 million to N45m and we intend to develop a different system of payment including rent to own.
Did you experience similar cash crunch at Urban Shelter?
Yes, we experienced it especially when we were building the Shippers Plaza. There was an inflation problem coupled with some political upheavals in 1993 at that time, and the interest regime was up to 40% at that period of time however, we were able to weather it because at that time there was money in circulation even though there was inflation. The interest of the loan was almost equal to the principal but we were able to pay back the loan plus principal through ballon payment, The issue now is that the banks, I don’t know whether they are now just there to speculate or make easy profit, the essence of banks are to help generate investments but in Nigeria it is not so, it is a big problem, the CBN is trying to intervene but I think they are too timid and afraid to take the risk and the mantle despite the leverage from CBN.
Have you explored other sources of funding like trust funds, cooperatives, pension funds etc.?
It is the same, there was a window before by the Federal Mortgage Bank of Nigeria FMBN where they provided loans to real estate companies for housing construction, which they in turn create mortgages on them, but they have since cancelled that. When I was in Urban Shelter we were able to build the Brick City Phase 2 in Abuja with the kind of loan from FMBN.
So if there are such intermediation you find that it would be easy for everybody in Nigeria to own a house, our problem is that we have good policies but it is the implementation that is always the problem, for example the pension fund have a lot of money in the banks but there is nothing in place to make people go near such funds.
What about the mortgage refinancing company?
With that you have to start the building first before the financing, it’s the same Catch-22, it’s not easy, you have to be well established before you can start to think of accessing such funds but I’m happy we are almost there.
Are you then considering other options like merger, partnership etc. as a way out of this?
Yes in fact, in this new clime, partnerships are the best form of project initiation as you don’t only save cost of acquiring the land, you also share the risks.