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‘Public, private sectors must work with mindset that housing is an emergency’

Femi Adewole is the MD/CEO of Family Homes Funds (FHF). An alumnus of the Harvard Kennedy School and Warwick Business School, Adewole is a housing finance professional and chartered architect. In this interview with CHUKA UROKO, Property Editor, Adewole looks back 5years when the FHF began operations as federal government’s major intervention in the housing sector. Excerpts:

In 2016, the Family Homes Funds came into the housing market with a bang, raising hope for 500,000 housing units to be built and 1.3 million jobs to be created in 5years. What is the journey so far?

As with any start up, the journey so far has been both exhilarating and challenging. In the two years since we became operational, we have completed the first phase of building a strong institution capable of delivering President Mohammadu Buhari’s promise to ensure that Nigerians, particularly those on low income, have access to a decent home they can afford.

Today, with the support of our key stakeholders – the Federal Ministry of Finance and the Federal Ministry of Works and Housing, we are committed to the development of about 30,000 homes, with 5,408 of them completed across eight states, and 9,148 under construction, and another 13,543 awaiting take off before the fourth quarter of this year. Through these projects, about 64,000 direct and indirect jobs have been created.

The immediate future looks promising. Having substantially completed the first phase of the start up of the company, including having adequate financing and a highly competent and enthusiastic staff team, we are now well placed to deliver significant number of homes for Nigerians. Our corporate plan envisages commitment to over 150,000 homes by December 2022. With the pricing of homes as low as N2m for the starter units, the commitment of President Buhari’s administration to ensure that Nigerians on low income have access to a home of their own is being realized.

Read Also: Nigeria’s housing problem and the Singaporean model

 

Nigeria’s housing 

The Funds recently signed a historic N10 billion Sukuk Issuance. Tell us about this and what it seeks to achieve.

Yes, we are very proud of this landmark transaction, which is the first ever certified corporate Sukuk issued in Nigeria. Through the Family Homes Sukuk Issuance Program, we successfully completed the issuance of N10 billion 7-year 13 percent Series 1 Ijara Lease Sukuk due 2028 under the N30 billion Sukuk Issuance Programme.

The issuance is unique for several reasons. First, it is the first corporate Sukuk to be issued in Nigeria and to be registered by the Securities and Exchange Commission. It is also the first ever corporate Sukuk certified by the Financial Regulation Advisory Council of Experts (FRACE) of the Central Bank of Nigeria. The transaction also represents Family Homes’ debut in the Nigerian Debt Capital Markets, and the issuance was highly oversubscribed.

The transaction was well received and attracted significant demand from a wide range of high value and quality investors including pension funds, ethical funds, fund managers, non-finance Islamic institutions, trustees, corporate and high net worth individuals. With this issuance, the domestic debt capital market has given us the opportunity to further diversify our funding sources and strengthen our commitment to the provision of affordable homes across Nigeria. The strong support for this transaction, given the challenging environment, is indicative of the depth of the market, and investor-confidence in Family Homes Fund’s long-term strategy.

Social housing is undoubtedly a tough task. It is one that would require a lot of partnerships to surmount the peculiar challenges we face in Nigeria.

This success is not just about us. We give a lot of credit to our transaction parties including the Financial Adviser, Buraq Capital Limited; the Lead Issuing House, Chapel Hill Denham; Solicitors to the Issue, Metropolitan Law Firm; the Rating Agencies, Agusto & Co, and Global Credit Rating Co.; the Stockbrokers, APT Securities and Fund Limited; the Joint Trustees, and the Financial Regulation Advisory Council of Experts (FRACE) of the Central Bank of Nigeria for their certification.

The feedback we have been getting suggests that this issuance will inspire more organizations to go to the market, and it is also not going to be the end for us as we hope to continue to explore that option for funding our affordable housing projects. The issuance has basically opened a flood-gate of financing, especially for the housing sector, and this is a great way to accelerate housing supply in Nigeria for those on low income.

Read also: Nigeria’s housing problem and the Singaporean model

Headline inflation in Nigeria today is over 17 percent and may rise if measures are not put in place. What are your fears as rising inflation affects virtually everything including a Sukuk Issuance?

The Covid-19pandemic has taken a toll on most economies of the world, including Nigeria. Of course, it is a major concern, both for Nigerians and the government, and we hope for improvement as soon as possible. I know the government is putting policies and controls in place to help the economy fight some present challenges, including inflation.

The Economic Sustainability Plan (ESP), for example, is one of those plans initiated by the government to help the economy recover from the adverse impact of the COVID-19 pandemic. Under the ESP, you have the National Social Housing Programme (NSHP), which is being implemented by the Family Homes Funds to provide up to 300,000 homes to Nigerians on low income in every state including the FCT.

Remarkably, the NSHP is the single largest investment in the history of Nigeria towards ensuring that Nigerians have decent homes. In addition to homes, the programme will create up to 1,500,000 jobs and contribute to revitalizing local manufacturing of local building materials.

The facility for this has already been guaranteed by the Federal Ministry of Finance, and over 2,000 hectares of land has already been provided by several states across the country for this programme. So, with activities like these, the economy will in due course stabilize and allow for more growth.

At different times in Nigeria, the Federal Government has come up with interventions in the housing sector. Many of these interventions or programs have not fared well. FHFL is about the latest of such interventions. What is your story; what are you doing differently?

Our model revolves around a lot of innovations and strong partnerships. Our major focus is to finance affordable housing. So, from that standpoint, we have to be extremely critical and diligent about those we finance to deliver affordable housing – there are minimum standards that are not negotiable at all. Our solutions go beyond those we finance to deliver affordable homes, but also to those who want to live in those homes.

For example, we have the ‘Help-to-Own’, which is a long-term home loans assistance facility that enables low-income earners move into our completed homes with the benefit of 5-year moratorium on the loan.

We also have the Rental-Housing-Fund that supports those on low-income, including students to move into a new home with just a month’s rent till they eventually own the home. So, all of these and the National Social Housing Programme that will deliver 300,000 homes across every state in Nigeria are what set us apart. We are strictly focused on social housing – both in terms of financing and building capacity.

However, all of these succeed because of people. We have an enthusiastic team who are not only very competent, but also passionate about what we are trying to do.

FMBN, NMRC and FHF are all FG’s institutions set up to create or raise liquidity for the housing sector. In what major ways do these institutions differ in their operational models; what are their targets or focus?

The housing market is like a team with different players playing different roles to achieve success. Each of these institutions play very important roles in Nigeria’s housing market and we are committed to investing in effective relationship through the various agreements we have with them.

The FMBN provides mortgage loans to home loan applicants through the National Housing Fund (NHF) amongst other things, while the NMRC is a secondary mortgage institution providing refinancing facilities for mortgage loans. Family Homes Funds on the other hand is an institution that is focused on financing social housing.

Some people argue that affordable is not social housing; others say it is a house-type that takes 30% of household income. Now, given that funding affordable housing is integral to what you do, what then do you define as affordable housing?

This is a tiring argument. The two terms speak to different things. Affordability speaks to the cost of housing relative to income. Experts, particularly UN Habitat, the United Nations agency responsible for Housing and Urban issues, suggest that for housing to be affordable, the monthly cost (on a mortgage used to buy the home, or rent) should be about 1/3 of the household income. It is agnostic about market segment. If you earn a lot of money but the cost of your housing is higher than that benchmark, then it’s not considered affordable.

On the other hand, Social Housing speaks to a market segment – particularly housing that is developed for people on low income. So, you can have social housing that is not affordable because the cost to the target beneficiaries is more than 1/3 of their income. And you can have affordable housing that is not social housing because the homes are not developed for people on low income.

Experts at this year’s Abuja International Housing Show (AIHS) identified sectoral collaboration as good route to housing finance where bank credit or mortgage is not available. Besides this, what other options would you recommend?

A lot of great points were raised at the Abuja International Housing Show, and I totally agree and advocate for much more collaboration and partnerships. Social housing is undoubtedly a tough task. It is one that would require a lot of partnerships to surmount the peculiar challenges we face in Nigeria. Also, there is a great need for innovation. We must figure out a way around our old problems with new solutions. A lot of engagements must happen across board, and the public and private sectors must work closely and with the mindset that housing is an emergency.

Let’s consider these numbers as they relate to housing in Nigeria: an estimated 20 million housing units deficit; less than 100,000 housing units annual output; over 5.5% urbanization rate and a 200 million population projected to hit 400 million by 2050. Based on all these, would say Nigeria is in a housing crisis?

We don’t have unassailable data on Housing Need. Although we know that various colleagues are working to ensure that this gap is addressed. However, if what we see and what we know about our demography is anything to go by, we do have significant challenges with housing need.

Housing Need is not necessarily about numbers. You can have a housing need problem even if you have a lot of empty homes. Housing need can arise if the available homes are either located in the wrong places or are not affordable to the people who need them.

So, if you take that wider perspective of housing need, particularly the affordability dimension, the housing problem is even more challenging. For many people on low-to-medium income (say earning below N100k/month) which probably represents about 70 percent of our population, access to a decent home they can afford is often a major source of anxiety.

The administration of President Muhammadu Buhari is confronting this challenge head-on with the largest social housing programme in our history as a nation. The Mass Housing Programme and the National Social Housing Programme under the Economic Sustainability Plan both managed by the Family Homes Funds, both targeting up to 500,000 homes for people on low-medium income, will go a long way in helping to address this challenge.

 

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