Financing options, opportunities that may be lost to coronavirus

Evidently, coronavirus is a health phenomenon that could be described as an uncertainty. As it is today, it remains largely uncertain how more devastating its impact will be going forward. It is also uncertain today when, how and from where the exact cure for this deadly virus will come.

What is certain, however, is that when it pleases God to heal the world and the virus is no more anywhere on the phase of the earth, the global economy will not only be badly bruised, but also bartered.

Because the world is at a standstill, practically motionless, the aviation sector has become a wreck. Airlines, including the big names—Virgin, Australia, Lufthansa, are busy grounding aircrafts, cutting jobs, reversing earlier decisions  and re-ordering their priorities.

The next sector to fall is the hospitality sector where hotel occupancy rate has dropped to between 30 percent in most cases. Social distancing and government’s restrictive policies have kind of outlawed conferences and other social gatherings. Airport Hotel in Lagos has just sent its staff on three months’ leave without pay.

At the receiving end of all these is real estate which provides the space needed for living, working and leisure.

As an aspect of real estate, housing is already hard-hit by the deadly virus. Rent default is as good as given. No new supplies because construction activities have been halted. This means that when this crisis is over, there will be crisis in the housing bordering on demand and pricing.

Housing in Nigeria has always been struggling for a combination factors including finance, government’s policies and high cost of input  materials which are over 70 percent imported.  Of all these challenges, finance is critical.

This was why, when Nigerian professionals, experts and sundry stakeholders in the housing  sector gathered at a housing forum in Abuja to look at these constraints, the focus of discussion was on innovative and sustainable financing model for the sector.

The forum, according to the organisers, was to realise a housing sector that would not only shelter man, but also contribute to GDP, provide jobs and create economic opportunities for those on the demand and supply sides of the housing value chain.

Consistent with the theme of the event, ‘Driving Sustainable Housing Finance Models in the Midst of Global Uncertainty’, expert opinions, ideas, insights and possible solutions were offered on how public and private capital could walk into the sector to deliver decent and affordable housing.

Besides private equity and debt from lenders, co-operatives, public and private partnerships which have not fared well in Nigeria due to policy inconsistence and trust issues, other finance and funding models were highlighted and these are some of the opportunities the sector may have lost to COVID-19.

Institutional funding and Diaspora remittances are also other major finance sources and models for delivering housing with reduced risk and cost. According to the experts, there is a direct correlation between the availability or otherwise of financing for housing and risk.

Diaspora remittances into Nigeria are quite huge and have increased significantly in the last couple of years. Robert Honsby, Co-founder and CEO, American Homebuilders of West Africa (AHWA), estimates Diaspora remittances into Nigeria at $24 billion.  It is also estimated that only 10 percent of this figure is deployed into real estate.

Hornsby noted that risk in Sub-Saharan Africa was generally over-priced relative to market fundamentals, pointing out that those who understood that could earn outsized returns. According to him, public sector, bilateral and multilateral donors, NGOs, resident citizens and the Diaspora all wanted solutions to the housing sector.

“Private sector actors who can deliver quality and value, and build a trusted brand will find significant opportunities for decades to come. Diaspora investors hunger for a partner to trust with their money and they dream of a home in the land of their birth,” noted Hornsby who spoke on ‘Diaspora Housing and Financing: Opportunities and Challenges’.

Micro-finance is another model that the experts considered to be of potential help. Debra Erb, MD, Real Estate Project Finance at Overseas Private Investment Corporation (OPIC) raised hope in this connection when she disclosed that they were already seeing more attempts to adopt that model to the lowest income housing needs and incremental demand, particularly in live and work developments.

Significant hope was also raised on institutional funding. It is expected that over the next five years, about $180 million will be invested in the sector by Shelter Afrique. The continental housing finance institution will be disbursing this money through credits to financial institutions, mortgages, construction finance for public private partnership projects.

Andrew Chimphondah, the CEO, who disclosed this also revealed their intension to assist Nigeria to raise bonds as soon as the country’s macro-economic environment stabilised, adding that the institution was planning to partner with the Federal Housing Authority (FHA) on affordable housing for low income earners under the Affordable Nationwide  Housing Project (ANHP) scheme.

To create an enabling environment for all these to happen, the Senate has assured of a legislative intervention in the housing sector, disclosing that the Land Use Act and the national housing fund (NHF) were captured in the legislative agenda of the 9^th Senate.

“The importance of housing cannot be over-emphasised,” noted Ahmed Lawan, the Senate President, adding, “Our needs are enormous while resources are lean. But the good thing about the future is that it comes one day at a time. Today presents us with the opportunity to consolidate on what we have built and to start new projects where necessary.”

Continuing, Lawan said: “I am aware that there are critical areas that require legislative intervention like the Land Use Act, the National Housing Fund (NHF), housing regulations, and many more enabling policies. It is in the legislative agenda of the 9^th Senate to see it that all policies required to get us closer to our dreams are achieved.”