Infrastructure deficit opens $300bn investment opportunity in housing sector

Nigeria’s infrastructure deficit, which gave rise to the 30-year National Infrastructure Master-plan (NIM), has opened huge investment opportunity for private sector operators in the housing sector of the economy.

The Federal Government, through the NIM which was released late last year, estimates that the housing sector requires $300 billion investment over the next 30 years to close the lingering housing deficit in the country conservatively put at 17 million units.

The NIM also says that the country needs to deliver about one million housing units annually for 30 years to be able to provide decent and affordable housing for Nigerians as contained in the 1991 National Housing Policy as amended.

Housing deficit in the country is a direct product of dearth of affordable housing and government’s failure to provide enabling environment for private sector operators which the NIM expects to make 60 percent of the $300 billion investment required to close the deficit.

The Nigerian housing sector presents compelling opportunities but the reason these opportunities are not being tapped, according to Obi Nwogugu of African Capital Alliance real estate unit, is because the structures needed to do that are not yet in place.

Housing demand in the country is quite strong because people want housing, but the houses on offer are largely unaffordable such that what would have made it affordable is a mortgage instrument.

“Up till now, the country does not have up to 50,000 mortgages for a nation of about 170 million people”, Nwogugu says, adding that people are not investing in residential housing because the thing that will open up that sector hasn’t crystallised yet.

“So I am not so much worried about how much is needed or where it comes from as I am about what will make it work, that is, how people can get a mortgage that is reasonably priced to buy houses. If government gets all that needs to be done right, you will find that investment in residential housing will explode and that will have a positive effect on the economy”, he assured.

It is estimated that 60 percent of the 17 million housing units deficit in the country resides in the low income housing market which is explained by the fact that people in the low income bracket cannot afford what is on offer in the market without some form of mortgage.

The Nigerian Mortgage Refinance Company (NMRC) launched by the Federal Government in January 2014 to provide liquidity in the mortgage system and encourage investment in affordable residential housing came with much hope and Nwogugu describes it as a good initiative, believing that “if that initiative is done properly, it will single-handedly unlock housing in all its ramifications including construction, bricklaying, roofing, furniture, services and all the whole value chain that goes into somebody’s house”.

Asides mortgage which challenges the demand side of housing, the supply side is also constrained by the near-absence of critical infrastructure and land titling which comes with enormous cost and tortuous process which, analysts note, have capacity to frustrate the good intentions of the master plan.