Growth prospects for rent-to-own market high over positive mortgage outlook

Growth prospects for the rent-to-own and buy-to-let property markets in Nigeria have been significantly high in the past 6-12 months, following an encouraging and positive outlook for the country’s mortgage market within the same period.

From the last month of 2013 through the first quarter of this year till now, the mortgage market has seen major developments, including the conclusion of recapitalisation exercise for primary mortgage banks (PMBs) by the Central Bank of Nigeria (CBN) and the inauguration of the Nigerian Mortgage Refinance Corporation (NMRC) in January, as well as the Lagos State Home-Ownership Mortgage Scheme (LagosHOMS) in March this year.

Expectation is high among investors and home buyers that the combined operational impact of these mortgage institutions would improve access to mortgage loans and  enhance affordability in terms of low interest rate.

At the launch of the NMRC in Abuja, Ngozi Okonjo-Iweala, the Minister of Finance, pointed out that apart from increasing the nation’s housing stock by750,000 units annually, the corporation would also drag down interest rate on mortgage loan to lower double digit.

Real estate developers are therefore leveraging this development and changing their housing development model to accommodate the interest of those who cannot on their own buy houses without any form of mortgage.

According to close watchers of the housing market, this development incorporates both buy-to-let and rent-to-own models which are mainly driven by a functional mortgage system. They add that during the boom days of the property market, high tenancy rate at the low-end market was the main driver of investment in buy-to-let.

Gran Imperio Group, a holding company to Howard Roark Limited, is one of the few real estate firms well into this development at its EssentialHomes scheme in Lekki, Lagos.  

“Our ‘Rent-to-Own Housing Scheme is a flexible housing savings scheme for tenants  anticipating to buy their own property in the next 2 to 3 years; it guarantees rental yield to investors interested in buying our products, while we provide potential tenants for their units,” Isaac Etim, the company’s marketing manager, explained to BusinessDay.

EssentialHomes, he said,  is configured in two-bedroom, three-bedroom, and four-bedroom terrace bungalows; exquisitely finished and delivered.

Similarly, the Lagos State government is, through the LagosHOMS, considering the rent-to-own housing model for the informal sector and low income earners in the state.

“We have run the mortgage scheme (LagosHOMS) for some time and we have seen that there are some people who cannot yet afford a mortgage but if we give them more time, we think they can. So, we are opening the door of accessibility further, by starting  this new scheme which we think will bring them in to benefit”, the governor, Babatunde Fashola, said.

Fashola explained that beneficiaries of this new initiative are expected to pay rent for a period, after which they are invited to take an offer to buy the houses. During that period, the scheme would have saved some of their rent for them as their equity to pay for mortgage, and from there, they migrate to become mortgage holders.

He further said the rent-to-own scheme was looking at teachers and junior public servants who cannot at this point, keep a mortgage because they have not worked for long enough to acquire the kind of savings  necessary. 

Lekki Gardens Limited, a special purpose vehicle (SPV) established by GTRich Investment, for its real estate investment and development in the highbrow areas of Lagos, is also offering mortgage facility to buyers from its buy-to-let homes.

An official of the company who did not want to be identified,  told BusinessDay that as part of their unique home offerings, they were introducing Lekki Gardens Mortgage to help bridge the gap between suitable financing and affordable housing.

“Our mortgage allows you to take immediate possession of the house while your outstanding balance is spread out over time at a low and fixed interest rate, as monthly or quarterly repayment to fit into your income capacity”, the official explained.

CHUKA UROKO