The new mortgage fund which the federal mortgage, through the Ministry of Finance, unveiled on Tuesday, has been described as a catalyst that will not only rejuvenate real estate but also drive up investment in the sector.
Investment in the Nigerian real estate sector has been slowing due, largely, to bad macroeconomic conditions which have increased the cost of construction and reduced supply. It has also crimped consumers’ purchasing power and, therefore, reduced demand for housing.
The fund, which is spearheaded by Wale Edun, minister of finance, as part of the federal government’s One Million Homes Presidential Initiative, is called ‘Ministry of Finance Incorporated Real Estate Investment Fund (MREIF).
It is expected that the fund will be given to home loan seekers at affordable interest rate, which will encourage them to buy homes and, by extension, encourage more developers/investors to invest in real estate and the economy.
The fund, according to the minister who spoke at the unveiling of the fund in Abuja, is designed to provide low-cost mortgage options, particularly for pension account holders, enabling a broader segment of the population to own homes.
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“The fund has the potential to provide cost-effective mortgage options for a large segment of pension account holders,” Edun stressed, highlighting the need for an open dialogue that will enable key stakeholders to exchange ideas and contribute to the fund’s success.
Armstrong Takang, the CEO of the Ministry of Finance Incorporated, added that “the MREIF is designed to be market-driven while adhering to all regulatory standards.”
The unveiling of the fund and what it sets out to achieve has, however, raised concerns among mortgage and real estate investment experts as to what becomes the fate of the Nigerian Mortgage Refinance Company (NMRC) and Family Homes Funds Limited (FHFL).
But Kehinde Ogundimu, the managing director and chief executive of NMRC, assured in a chat with BusinessDay that there will be no point of conflict in the operations and functions of the two entities, explaining that the fund would provide liquidity for housing supply (construction) and mortgage origination that will be refinanced by NMRC.
“No conflict with NMRC, but it may conflict with or overlap with family homes funds (FHF),” Ogundimu said.
NMRC is a private sector-driven mortgage refinancing company, with the public purpose of developing the primary and secondary mortgage markets. It is a vehicle set up to bridge the funding cost of residential mortgages and promote the availability and affordability of good housing to working Nigerians
FHFL, on the other hand, is a social housing financing fund aimed at improving the quality of life of Nigerians on low income through the provision of affordable housing.
On how MREIF may be funding homeownership at an affordable rate, Femi Johnson, CEO, Homebase Mortgage Bank reasoned in a chat with BusinessDay that the fund might be subsidised such that it would come at a lower interest rate.
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Johnson, who is a director at NMRC, noted that currently (and by design) NMRC raises funds from the capital market and intends or refinances at market rates, so as not to create distortions and rent-seeking.
“With the new fund, the Federal Government may choose to either put funds at 0 percent or a low interest rate, or blend their low-interest funds with market funds, or take funds from the market or multilateral institutions and apply interest rate subsidy to it to give single digit loans to lower-income households,” he reasoned.
He added that the government may choose to disburse the funds through NMRC, Family Homes Funds, or through any other agency they choose, or a combination of all of them, pointing out that the government could even choose to use the Federal Mortgage Bank of Nigeria (FMBN) to do that.
“Even though they have called it a mortgage fund, they have also called it a Real Estate Investment Fund; so, some or all of the funds may be applied to the supply side for housing construction and not necessarily to the demand side for housing purchase alone,” Johnson noted.
