Owning a home, anywhere in the world, is a great milestone that gives the owner a sense of worth and fulfillment. This is because housing, in the Maslow’s hierarchy of man’s basic needs, is second, coming after food which is quite essential to keep man alife.
But in Nigeria, this basic need has turned out to be a luxury for various reasons chief among which is finance. Lack of or inadequate finance to buy houses in the country is the reason the country’s housing deficit is growing almost on daily basis even though houses being built on daily basis too.
Nigeria’s housing deficit is estimated at million units and this is because as against 700, 000 required to be produced annually to close the gap, annual output is not up to 100, 000 units.
Read also: Growing housing gap requires N5.5trn/yr to close
Shehu Osidi, the managing director and chief executive of the federal mortgage bank of Nigeria (FMBN), reasons that “Nigeria is a country that has a lot of houses it does not need but needs a lot of houses it does not have.”
Osidi who spoke at the on-going Africa International Housing Show (AIHS) explained that in the highbrow neighbourhoods of the country’s major cities, particularly in Lagos and Abuja, there are many empty, unaffordable mansions which the country does not need whereas in the low-mid-income locations, the houses the citizens need are largely unavailable.
Nigeria is one of the most expensive housing markets in Africa and this is explained by limited and, in some cases, lack of access to housing finance mechanisms like mortgage.
According to Matthew Ashimolowo, a Senior Pastor at Kingsway Christian Church (KCC) in Maryland, Lagos, finance is central to housing and real estate development.
In his keynote speech at the AIHS, Ashimolowo described real estate as a financing game, explaining that “capital is a basic factor of production; finance is required at both ends of the value chain to actualize the demand and supply of housing.
On the supply side, construction or ‘wholesale’ finance is required by developers to deliver on housing projects; whilst on the demand side, mortgage or ‘retail’ finance is a key driver of buying or renting decisions.”
Nigeria needs as much as N59 trillion to bridge its housing gap, according to a World Bank report, meaning that the country needs to deploy the whole of its two years budget to housing alone to make this happen. But the government has other interest than housing.
Experts are, therefore, wondering how the country can ever raise this size of funding required to bridge the country’s housing deficit, hence individual efforts to source the finance for the housing they need.
According to Ashimolowo, “long term funding suitable for housing sales/finance is hardly available. The rates are extremely high – sometimes up to 30/40 percent.
He noted that tenures are generally short – often shorter than the gestation period of a housing project for which the loan is taken.
Read also: Nigeria needs ₦5.5trn, 550,000 units annually to close growing housing gap
Off-plan sales/finance is fraught with danger and grave risks due to macro volatilities in the economy – exchange rate, inconsistent monetary policies.
Because of all these challenges coupled with the absence of mortgage, Ashimolowo said home buyers have to be intentional, innovative and pragmatic about their financing strategy.
One of such strategies, he said, is land banking, defining land banking as a veritable strategy to create, consolidate, accumulate and unlock finance for future projects.
“In simple terms, land banking is the process of purchasing land at relatively cheap prices, perfecting the title to the land, waiting for the value to rise and then sell the land at profit.
The proceeds of the sale will often constitute a strong source of financing for current and future housing projects,” he said.
Over the past three years, the pastor revealed , his company has implemented land banking strategy in several states of the federation, including Lagos, Ogun, Oyo, FCT, Nasarawa.
“Let me briefly share two of our very successful land banking initiatives – Bluestone City in Mowe, Ogun State and Makarios Luxury Place, Lekki, Lagos State.
In our experience, land banking is very attractive for severa reasons. Chiefly it provides a robust source of financing for your current and future projects, ” he said.
Ashimolowo, however, advised that buyers have to watch out for some common errors of land banking mainly because of the complexity of land ownership in Africa which can be discouraging.
Read also: Addressing housing affordability among low-income earners requires collaborative efforts—Adebayo
He cited Nigeria where the Land Use Act vests the ownership in the state governors, yet the natives lay their claims on land.
“When buying land , you have to navigate between buying from natives and also regularising your purchase and documentation through the state. This could be discouraging.
However, you must learn how to swim with sharks without being biten in the process. Your due diligence must be top-notch, including some very practical steps,” he advised further
