The principle of mortgage, anywhere in the world, is that there must be income flow, meaning that any mortgage loan seeker must be in gainful employment or have an income flow that is not only verifiable but also dependable.
But in Nigeria and the rest of Africa, poverty which is derives from unemployment or under-employment, in some cases, is prevalent and/or endemic.
Most households in Nigeria are without steady income that could support mortgage loan of any level. This explains why many of such households live in rented accommodation, especially in the cities.
Despite its relative large population size, Africa is said to be economically underweight with high-level poverty among its people which explains the low standard of living and sub-human conditions in which some of the people live.
With only €113 billion gross asset value of real estate, representing 1 percent of the world’s total value, Africa is also said to be underweight despite its large and growing population estimated at 15 percent of the world total.
The black continent is underweight in asset value of real estate relative to other continents. But this has its positive side because it has made Africa an attractive prospect for investible funds in real estate.
Home ownership in most parts of this continent is almost a luxury because houses are literally unavailable and where they are, they are inaccessible and unaffordable because of their high prices.
The World Bank estimates that only 3 percent of the African population, about 15 percent of the world’s 7.3 billion population has income viable enough to qualify them for a mortgage, underscoring the level of poverty in the black continent where some households live below poverty line.
In Nigeria, the continent’s most populous nation and one touted as its largest economy, it is estimated that 70 percent of its 170 million people lives below poverty line, which explains the low home ownership level that is a little above 20 percent in the country.
It is also estimated that about 90 percent of houses in Nigeria are self-built with less than 5 percent of them in possession of formal title registration. Close real estate industry watchers note that mortgage loans and advances in the country stand at 0.5 percent to GDP in contrast to 30-40 percent in emerging economies and 60-80 percent in advanced economies.
Major obstacles to mortgage finance in Nigeria particularly include dearth of long-term funds, absence of a secondary mortgage market, inadequate branch network of Primary Mortgage Banks (PMBs), among others. A lot still needs to be done to grow housing finance in the country.
The growth of housing finance in Nigeria needs the support of the small microfinance institutions in their efforts to expand and diversify their offering. He added that the growth would also come from the large commercial banks which are becoming more and more attracted by the low to medium income segment of the housing market.
The argument here is that both the microfinance institutions and commercial banks need support to develop housing products and build up projects which would positively affect the low income segment, urging organizations and institutions to help one another to achieve these goals.
Training sessions need to be organized to promote housing microfinance and develop the capabilities of banks in that field. Experts see governments as critical stakeholders required to create the regulatory framework that would make the housing market work for the low income segment.
The setting up of the Nigerian Mortgage Refinance Company (NMRC) and the institutions for housing finance, including microfinance and mass housing financing, with the support of the World Bank, is a good example of a platform which would facilitate the growth of initiatives there.
This will progressively enable a decrease in interest rates in the mortgage industry. However, more support from the government is needed to lower the interest rates for the funding of affordable housing and social housing projects.
It needs to be stated that there is a need to improve the affordability of construction itself in which case social housing projects should be setting the stage by showcasing new construction techniques that could improve quality, deliver faster and reduce the cost of construction.
African governments need to creatively innovate in order to improve the living standard of their people through the provision of affordable and mortgage-backed housing programmes. Also, the mortgage system has to be improved to make it not only accessible but also affordable.
