BusinessDay

How growing pension funds will boost mortgage market

The pension industry, which has seen assets swell to N14.36 trillion as of the end of July 2022, is expected to boost growth of the country’s mortgage and housing loan market.

This is coming on the heels of the recent guidelines by the National Pension Commission (PenCom), which allow contributors to use 25 percent of the balance in their Retirement Savings Accounts (RSAs) to access residential mortgage.

Oguche Aguda, chief executive officer of Pension Fund Operators Association of Nigeria (PenOp), said the indirect positive outcomes of the guidelines would be the growth in the mortgage and housing loan market in Nigeria.

According to him, very importantly also will be growth in the construction industry as this will create strong effective demand for houses backed with the purchasing power that this policy will create.

“Of course, this will trickle into construction jobs for both blue-collar and white-collar workers in all aspects of the value and supply chain. There will be a growing need for plumbers, bricklayers, carpenters, welders, etc. It will also create a growing need for home appliances and building materials,” Agudah said.

It would also increase revenue for federal and state governments.

As contained in the guidelines, application for equity contribution for residential mortgage shall be in person and not by proxy.

The guidelines specified that the maximum amount to be withdrawn shall be 25 percent of the total mandatory RSA balance as at the date of application, irrespective of the value of equity contribution required by the mortgage lender.

“Where 25 percent of a contributor’s RSA balance is not sufficient for payment as equity contribution, RSA holders may utilise the contingency portion of their voluntary contributions (if any)”.

To qualify as a mortgage lender for this purpose, the guidelines state that the company must be licensed by the Central Bank of Nigeria, comply with the Contributory Pension Scheme and have a valid Pension Clearance Certificate.

Chika Onwunali, managing consultant at Premium Debate, said this is a good development because it will also increase compliance from the lending firms that want to be part of the scheme.

“I expect that there will be a positive impact on the contributory pension scheme in terms of increased compliance; employees will be better protected and the mortgage industry will get inflow from the pension industry,” he said.

Experts say there are growing opportunities to unlock the potential of Nigeria’s mortgage sector valued at over N6.4 trillion, but lack of awareness, accessibility, security, lack of infrastructure and government policy kept dampening demand.

Speaking at BusinessDay Property Investment Conference in Lagos recently, they said the mortgage sector in Africa’s biggest economy was grappling with high cost of construction, surging land prices and excessive financing costs.

“There are more than enough market opportunities for mortgage products through affordable mortgage schemes, but lack of awareness and struggling infrastructure are major challenges,” said Olufemi Seyi, chief operating officer at Casafina Capital Limited, an investment company exposed to Nigeria’s real estate sector.

“The Nigerian mortgage sector is large enough to drive Nigeria’s capital market but there is little or no accessible information about mortgage products, which is a major challenge in attracting millennials,” he added.

Gbenga Olaniyan, CEO of Estate Links Ltd, said over 90 percent of Nigerians had no clue regarding mortgage opportunities in Africa’s biggest economy.

“Without access to these mortgage opportunities, it’s impossible to fix Nigeria’s housing deficit,” he told the audience at the event.

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