How helpful are developers-lenders partnerships to home buyers?

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One of the brilliant ideas that real estate product suppliers always flaunt as bait to product buyers is the partnership that exists between them and mortgage lenders who, according to them, are there ready and able to give mortgage facility to the buyers.

Whenever there is a real estate event where these developers and lenders meet, a major sideline event is the signing of partnership agreements which leaves one wondering the purpose and the interest those agreements and partnerships are meant to serve, given experiences of mortgage subscribers.

Currently, a lot of things are changing in tune with unfolding realities and one only hopes that these new partnerships are coming to change what used to be the nature, character and intent of what was known of partnerships between estate developers and providers of housing finance.

Almost always, when experts, home seekers and sundry stakeholders gather to discuss the mortgage industry in Nigeria, the focus is generally on reasons for the slow growth of the industry and poor access to housing loans which they blame on high cost of funds, demand for high equity contribution by lenders, etc.

But there are more yet unknown. Oftentimes, little or no note is taken of other contributors to this slow growth among which is the huge stress which mortgage lenders pile on borrowers and the empty partnerships which some of the lenders deceive home seekers into believing  that they have with estate developers, giving false hope that they are just a few steps away from home ownership.

Part of the statutory functions of primary mortgage banks (PMBs) and mortgage lenders generally is to provide housing finance to those who need same to build, buy or renovate existing houses. But, in more cases than one, those who apply for loans from these lenders hardly get them and where they do, they are often subjected to harrowing experiences through near-impossible requirements that leave the borrowers stressed out and almost frustrated.

Many have been cajoled into subscribing to buying their houses through mortgage only to get in and find out that the invitation is a mere cover shielding the stress and pain in accessing loans for their dream houses.

‚ÄúMy experience with one of these lenders is better imagined than expressed‚ÄĚ, says Israel Okafor, a staff of an oil company who applied for mortgage loan from one of the PMBs.

Okafor explains that he was ‚Äúdeceived‚ÄĚ by the PMB into believing that it was in partnership with a developer who was building over 500 housing units of various house-types at relatively low prices for¬†¬†mid-low income earners.

‚ÄúThe PMB told me that it was also financing and marketing the estate and, at the same time, providing mortgage for prospective buyers. My attraction was not as much in the financing and marketing aspect as it was in the comparatively low interest rate of 17 percent and 10-year loan repayment period which the bank dangled at me‚ÄĚ, he said.

According to him, the bank demanded just 20 percent equity contribution from him for any of the housing units that he wanted to buy from the estate selling for between N5million and N8 million per unit, adding that as a demonstration of his readiness to take up the mortgage and buy the house, he made an equity contribution in excess of 30 percent of the cost of the house.

‚ÄúOver six months down the line, the developer, the mortgage bank and I have been on a Round Robbin, occasionally stopping at the middle of nowhere only to discover that, in all of this, it has been motion without movement. It has been one story after another‚ÄĚ, he fumed.

Ayodeji Adediji, is an ex-banker who worked with one of the big names in the industry, but resigned because ‚ÄúI want to do my own thing and see what impact I can make on the economy from this point‚ÄĚ.

He also has a similar experience, differing only in the approach adopted by his own lender who, he said, has kept his N5 million which he paid as equity for the house he wanted to buy from a developer who is also in another empty partnership with the mortgage bank.

‚ÄúAs I speak to you, my money has been with the mortgage bank since the past eight months; I am told it is in escrow account in which case it is not yielding any interest for me; the developer is very slippery and insincere with delivery date for the estate. Every day, like a fraudulent referee, he shifts the goal post. By the last count, he has shifted the delivery time three times and still counting‚ÄĚ, he lamented.

A banker, who does not want his name mentioned also shared his experience, saying he came close to losing his money to developers over unrealistic delivery dates. He lamented that on each occasion, his money was given back to him after he had nurtured and came close to realizing a home ownership dream.

People with these experiences will hardly ever seek mortgage facility, nor will they encourage any of their relations or friends to have same experience and this is one of the major factors that slows the growth of the mortgage industry.

Not too long ago, in a move aimed to address the housing problems in Nigeria, some notable PMBs and real estate developers entered into another strategic partnership aimed to provide housing and mortgage for prospective home buyers. That partnership which, it was hoped, would in 24 months deliver a residential community comprising 554 housing units is yet to make any impact.

This is a worrisome development that may continue to stultify the growth of this all important industry. The setting up of both the Federal Mortgage Bank of Nigeria (FMBN) and the National Housing Fund (NHF) were well intentioned, but their operations have justified the good intentions.

It is only hoped that the new partnerships would serve out their goals and ultimately lead to increased home-ownership level and growth of this industry which has remained a fledgling for too long.

 

Chuka Uroko

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