Bad structure, not capital base seen as mortgage industry’s major challenge
Contrary to the belief that lack of long term capital or low capital base is the main challenge of Nigeria’s mortgage industry, stakeholders in the industry and property sector analysts have spilled the beans, revealing that the structure of the industry contributes the most to its set back.
Over 10 industry players and analysts polled in a Businessday survey have, therefore, recommended a restructuring, not recapitalization, of the country’s mortgage system.
The industry has, in the last couple of years, seen far-reaching recapitalization and loans refinancing by the Nigerian Mortgage Refinance Company (NMRC), yet it is neither growing nor meeting market expectations, meaning that the problem of the industry goes beyond liquidity issues.
“The structure of the mortgage industry is the problem; there is high interest rate and this is coming
on the back of economic condition,” Adeniyi Akinlusi, president of Mortgage Bankers Association of Nigeria ( MBAN) and CEO, Trustbond Mortgage, told Businessday.
Akinlusi added that recapitalisation is not the main challenge, considering that mortgage banks do not “give loans from shareholders’ but fund from deposits.”
Nigeria has over 17 million housing deficit. According to the Association of Housing Corporation of Nigeria (AHCN), an umbrella organization for all federal and state housing agencies, more than 90 percent of new homes are funded from personal savings for incremental construction.
“The structure is the challenge; there is high default rate in the mortgage industry which is, most likely, because funds are diverted and not returned,” Adekunle Abdul, managing director, Metro & Castles Homes, said.
Kehinde Ogundimu, MD/CEO, Nigerian Mortgage Refinance Company (NMRC), the company “has refinanced mortgage loans totalling N18billion as at December 2018.”
He said it was in line with the company’s mandate to promote affordable home ownership in the country by leveraging funding from the capital market to deepen liquidity in the primary and secondary mortgage markets.
Imade Omogiafo is a single parent and a manager in one the consulting firms in Lagos. According to her, she has been trying to access a mortgage for the past two years without any positive result. “I sincerely cannot even tell what the problem is; I have signed up with more than three mortgage banks, but none has been able to come through with a mortgage,” Omogiafo lamented.
According to Abdulmalik Mahdi, managing partner at Modern Shelter Systems & Services Limited, an Abujabased real estate firm, the players in the industry particularly financial institutions need to be innovative in approaching fundraising for mortgages.
“There is a lot of scope for financial engineering if the banks are willing to think out of the box,” Mahdi said, adding, “the primary mortgage banks in Nigeria are part of the problem. They are not efficient in their transaction processes; it takes ages to process simple loans and a lot of their staff lack capacity.”
Industry players are of the view that the key culprit for the housing challenges in Nigeria is the mortgage rate. Typically, mortgage interest rate in Nigeria ranges between 7-10 percent for Federal Mortgage Bank of Nigeria ( FMBN) and between 15- 25 percent for commercial mortgage institutions, making it one of the highest in the world.
In advanced economies, the mortgage industry makes significant contribution to economic development with single digit interest rates. Nigeria’s roaring inflation rate and the at