As the economy continues to wait for President Muhammadu Buhari government’s clear policy direction with attendant negative impact on businesses, property developers have resorted to funding engineering to enable them remain in business.
In addition to this strategy, the developers have also adopted off-plan sales and pay-as-you-build funding plan, and these are most common among the developers who are also constrained by lack of credit facilities from the lending institutions.
Though property prices have remained relatively stable, demand has dropped considerably, and, for that reason, “people are being clever on how to fund who wants to buy,” Edward Akinlade, group managing director, Suru Group Limited, noted in an interview with BusinessDay.
With this strategy, the seller asks the buyer to pay 50 percent of the value of the property and gives him one or two years to pay the balance, Akinlade said, adding that, apart from stimulating demand, this also saves the buyer the burden of looking for huge capital requirement for outright purchase.
“This is a win-win situation because the seller gets customers who ordinarily would not have come, while the buyer is encouraged to buy at a time he/she would not have bought,” Akinlade said.
For Propertymart Real Estate Investment Limited, pay-as-you-build is a strategy that has helped them attract buyers to the Citiview Estate in Arepo, Ogun State, and, according to Olawale Olayanju, the company’s product manager, the strategy is one of three options open to their buyers.
The other two, he pointed out, were outright and off-plan purchase, saying that a buyer who goes for the pay-as-you-build option enjoys staggered payment made in the ratio of 30, 25, 20,15 and 10 percent instalment.
“The buyer makes an initial deposit of 30 percent of the value of the house, which takes construction to foundation level. This is followed by 25 percent, which is paid when the buyer sees the carcass of the house; then 20 percent when the house is almost finished. 15 percent is paid at fixtures and fittings stage and the final 10 percent is paid when the house is completed and the buyer takes possession,” Olayanju explained further.
The off-plan sales, a strategy that allows home seekers to buy their houses from the design stage, he said, is their own way of funding their developments in the absence of bank loans, adding that buyers under this strategy have only 18 months to complete payment to guard against inflation.
Akinlade lamented that after one year, the original purpose of the Nigerian Refinance Company (NMRC) as a vehicle for affordable housing funding through the provision of liquidity in the mortgage system was still to be seen.
“Money has been raise from IFC, World Bank, Nigerian government, mortgage operators etc, but I don’t know where the money is. This is one area the new government should look into and the new housing minister is very crucial in this,” he said.
Continuing, he said, “the ministers of finance and housing should be able to ask questions to find out what is happening with the money so far collected or invested in the company. The wheel of the company is turning very slowly and I am sure that all the money they have collected may be sitting in bank accounts, earning interest for only God knows who.”
According to him, there is long-term money in this country contrary to popular belief that we don’t have, as the pension money is long-term money, which, as at the last count, was about five to six trillion naira.
“Imagine if that money is given to NMRC, the effect will easily be seen because it will start pulling the wheel.”
CHUKA UROKO
