PENCOM, NMRC partner on PRA implementation to ease homeownership pains

Aworking relationship between Pension Commission (Pencom) and Nigerian Mortgage Refinancing Company (NMRC) towards implementing the provision of Section 89 (2) of the Pension Reform Act (PRA) has raised hope for homeownership in Nigeria.

Section 89 sub-section 2 of the PRA provides that contributors to the pension fund could actually use part of their pension savings to pay their personal equity towards having a primary home and the authorities of the partnering organisations are saying the implementation of that section will help a great deal in assisting first home buyers.

The implementation of this Section of the PRA will be a major intervention in the housing sector coming on the heels of the Mortgage Guarantee programme being championed by the Central Bank of Nigeria (CBN), all aimed at easing access to finance to buy homes by low income earners.

Mortgage Guarantee programme is planned to give mortgage access to persons who ordinarily do not qualify for mortgage loan by reason of their income, but can now access mortgage through a third party who guarantees the loan and offsets the loan in case of default.

This initiative became necessary given the high cost of funds which has made access to mortgage by low income earners pretty hard. Interest rate on mortgage loan ranges from 18 percent to 22 percent with very short repayment tenor.

Pension fund is a large pool of long-term fund that could be invested in real estate to supply housing to the market. But that is not happening because, according to Umaru Farouk, head, research and strategy management department at PENCOM, “the Commission is committed to ensuring the safety of pension assets and also facilitating and fast tracking payments to retirees when due.”

Chudi Ubosi, principal partner at Ubosi Eleh + Co, had explained to Businessday that Pension Fund could not be invested in real estate because, apart from the risk involved, real estate, unlike other investible assets, is not liquid. “You cannot offload your investment easily whenever you want,” he said.

Farouk, who disclosed on the partnership with NMRC, corroborated Ubosi’s views, saying contrary to assumptions that PENCOM grants funds directly, the commission only granted funds when there were supporting instruments, either as a fund or a bond as contained in the commission’s existing regulations.