Here’s what must change for mortgage-backed homeownership to improve

For homeownership to improve in Nigeria, a couple of things have got to change, according to players and sundry experts in the country’s housing market.

Homeownership level in the country remains very low at 25 percent of the country’s estimated 200 million population, which is why it is burdened with a housing deficit variously put at 28 million, 22 million, and 28 million units.

The players say these scenarios are there because mortgage, which is a home-purchase enabler, is almost non-existent in the country. The country’s mortgage market trails its African peers in homeownership level and mortgage penetration.

The market is among the least developed in Africa, with outstanding mortgage loans accounting for less than 1 percent of the GDP.

“The total outstanding mortgage assets remain below ₦1 trillion, indicating a limited reach of formal housing finance in Nigeria, making it necessary for the country to  expand long-term funding for mortgage institutions, improve land registration and title systems, and introduce financing models that better reflect the income levels of Nigerian households,” the players stated.

For Odunayo Ojo, CEO, UPDC, what the mortgage market needs is structural reform, assuring that this would improve access to home ownership for low-income earners and stimulate growth in the real estate industry.

Ojo said the mortgage system must be anchored on three key pillars, including affordable interest rates, reduced construction costs, and improved income levels to become effective and inclusive.

“To have a vibrant mortgage industry, you need three things. First is a demand-side enabler, access to loans at single-digit interest rates with long tenures of 20 years and above. That is what the Ministry of Finance Incorporated Real Estate Investment Fund (MREIF) aims to address,” he said.

He noted that such financing models are common in developed economies and should be replicated locally to expand home ownership, adding that the second critical factor is the supply side, which includes reducing the high cost of construction, infrastructure, and land access, while the third is improving the income levels of Nigerians, which currently limits their ability to access mortgage financing.

“If people’s incomes remain low and construction costs high, only high-income earners will continue to benefit from schemes like MREIF, using them largely for investment purposes rather than meeting housing needs,” he said.

Ojo observed that the real estate sector has emerged as one of the top contributors to Nigeria’s Gross Domestic Product (GDP), reflecting its growing importance in the economy. He described the sector as a major driver of employment and economic activity due to its wide-ranging value chain.

He, however, noted that the capital-intensive nature of real estate development continues to limit participation by individuals, despite the availability of intervention funds such as the Family Homes Fund (FHF), MREIF, and the National Housing Fund (NHF).

Dotun Bamigbola, Senior Partner at Bamigbola Consulting,  agrees that  the real estate sector is already making notable contributions to Nigeria’s economy, accounting for over five per cent of GDP.

He noted that property values have surged sharply in recent years, with increases estimated between 100 and 150 per cent across major cities and emerging urban centres, affecting affordability significantly.

“Properties that sold for about N100 million a few years ago now go for between N150 million and N200 million. This creates a major affordability challenge for many Nigerians, especially when disposable incomes remain low,” he said.