How pension funds can ameliorate housing crisis — Experts

Nigeria, while facing multiple economic challenges, also grapples with the all-important issue of providing shelter for its teeming population. The growing population, coupled with constant rural-urban migration, has worsened the housing crisis in the country.

It is estimated that millions of Nigerians are either homeless or live in rented apartments. Over the years, the government at all levels has not been able to address the housing deficit due to other competing demands.

Then the responsibility has fallen on private entities and businesses to bridge the deficit through different low-cost housing units.

But the businesses are also challenged financially owing to inflation, high-interest rates and the agitation for quick return on investment. 

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Over the years, access to finance has been shrinking on a daily basis, and according to experts, the country’s mortgage system is not that solid to finance affordable housing for Nigerians.

Worried by the funding challenge, experts in the real estate industry under the auspices of the Royal Institution of Chartered Surveyors (RICS) Nigeria Group gathered recently to discuss “New Financing Models for Construction and Real Estate”.

Participants specifically dissected the recently released guidelines by the National Pension Commission (PENCOM) which allows Retirement Saving Account (RSA) holders to use 25 per cent of their savings to fund their mortgage.

The commission said the approval was in line with Section 89 (2) of the Pension Reform Act 2014 (PRA 2014) which allowed RSA holders to use a portion of their RSA balance towards the payment of equity for residential mortgages.

But how far can this go in bridging the housing deficit which the World Bank estimates to be about 30 million and requiring over N20trn to bridge.

“It is neither here nor there. But at the end of the day it is a step in the right direction,” said Olasijibomi Ojuola, the immediate past Chairman of RICS.

This was the conclusion of many analysts who said that the new approval was a welcome development and a step in the right direction.

Keynote speaker, Mr Deji Alli, described the PENCOM guideline as a good development, saying, “It is something we are all excited about, but not sufficient for the size of this country and the huge demands for housing.”

He said real estate practitioners should work together to devise new funding models and reforms that would crystallise into a workable solution for the industry as, “The magic to home ownership is for practitioners to get together and solve the problems.”

Alli, who is the Chairman of Mixta Africa, a foremost real estate company, called on the federal and state governments to enact laws to have in place a social housing policy that would enable average Nigerians to have access to affordable, low-cost houses.

The Chief Executive Officer (CEO) of the Nigeria Mortgage Refinance Company (NMRC), Kehinde Ogundimu, said there was the need to increase mortgage penetration in the country. 

He said while people built houses, only five of them took up a mortgage, adding that, “At NMRC, we are trying to create an efficient market that works for everyone. For instance, at NMRC we have N10bn refinancing, we have not done up to 10 per cent.”

Ogundimu called for more stakeholders’ engagement with the government to address some of the challenges with increasing mortgage penetration, saying every Nigerian must explore the inherent opportunities in mortgage as, “Real estate is the only thing you buy and wait; you don’t wait to buy it.”

Bringing a different perspective into the discourse, the CEO of Small Small, a proptech firm, Mr Tunde Balogun, said it was high time property developers shifted attention from two, three-bedroom or four-bedroom flats to mini flats to reduce the financial burden on prospective tenants.

He said for upwardly mobile youths or newly married couples, they should not burden themselves by going after two or three-bedroom flats which they might not be able to maintain.

Speaking on his experience with monthly rent collection, he said the method was the way to go, adding that, “We have done that for the last 4 years against all odds. For years, we never paid any landlord a year’s rent and our landlords are excited about this. A huge percentage of our landlords came through referrals from other landlords and our default rate is less than seven per cent.

“In Nigeria we like it big, big but I think we should look for solutions that reduce the burden on the people. Fractional ownership is also another option. We need to unlock opportunities that benefit the society at large. Housing is a basic humanity and we all need to play our part. If you are homeless, it is as dangerous as someone that is hungry.”

Speaking with our correspondent after the discussion, the immediate past Chairman of RIC and MD/CEO of Built Reliance, said Nigerian real estate players must look inwards to solve the funding challenges confronting the sector.

He said, “It has to do with more of looking inwards, it has to do with making do with what we have. For example when it comes to construction, there is a need for the bank to encourage a whole lot of our industry, to encourage a whole lot of locals to produce more, to produce things that are of advantage to our people when it comes to real estate.

“For example we have a whole lot of tile industry in Nigeria as at today, there is a need to finance these people, there is a need to encourage them to do better. Where we are having our teething problems at this time, I think we need the support of financial institutions, the support of different pension managers to assist in bridging these gaps.”

While stakeholders explored various funding options, they said the PENCOM guideline on using RSA funds to fund mortgage remained a major option for all.

A former President of the Nigeria Institute of Building (NIOB), Kunle Awobodu, also agreed in a chat with our correspondent that the PENCOM guideline was a major decision that would ease pressure on both the subscribers and mortgage operators.