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Mortgage opportunities abound in Nigeria’s real estate – Experts

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There are growing opportunities in unlocking the potential of Nigeria’s mortgage sector valued at over N6.4 trillion but lack of awareness, accessibility, security, lack of infrastructure and government policy are dampening demand, experts have said.
They said this on Thursday at BusinessDay’s Property Investment Conference, tagged PRINVEST, in Lagos.

The mortgage sector in Africa’s biggest economy, according to them, is grappling with high cost of construction, surging land prices and excessive financing costs.

“There are more than enough market opportunities for mortgage products through affordable mortgage schemes, but lack of awareness and struggling infrastructure are major challenges,” said Olufemi Seyi, chief operating officer at Casafina Capital Limited, an investment company exposed to Nigeria’s real estate sector.

“The Nigerian mortgage sector is large enough to drive Nigeria’s capital market but there is little or no accessible information about mortgage products which is a major challenge in attracting millennials,” he added.

Gbenga Olaniyan, CEO of Estate Links Ltd, said over 90 percent of Nigerians had no clue regarding mortgage opportunities in Africa’s biggest economy.
“Without access to these mortgage opportunities, it’s impossible to fix the Nigeria’s housing deficit,” he told the audience.

Findings by BusinessDay showed some mortgage banks, including Cooperative Mortgage Bank, have reduced their interest rates by taking the burden of building residential properties and placing those properties on mortgages at single-digit interest rates of about nine percent per annum.

Other mortgage banks have also executed partnerships with cooperatives to design a system where their members can make convenient monthly contributions to the banks to enable them to qualify for affordable and quality homes over time.

For instance, a Future Africa-backed start-up, Bongalow, serves as a mortgage marketplace for well-curated properties, connecting banks and property developers with people that require financing to purchase homes.

Andrew Nevin, the chief economist at PwC Nigeria, said to fix the current housing deficit in Nigeria, the country would need a minimum of 10 years if it continued building 700,000 units of houses every year.

According to him, all the stakeholders in Nigeria’s real estate sector need housing programmes that will accommodate the country’s large middle class in order to fix the growing housing deficit.

“There are currently lots of real estate housing projects scattered around the country that are vacant because a lot of people cannot afford them; we need housing mortgages that are easily affordable for most Nigerians,” he said.

Nevin believes Nigeria holds as much as $900 billion worth of dead capital in residential estate and agricultural land, which can add value to the economy and lift more people out of poverty.

“This means if we could unlock $900 billion real estate dead capital and invest, it would make an enormous contribution to the Nigerian economy and solve Nigeria,” he told the audience.

In a panel session on infrastructure for growing cities, Rolake Akinkugbe-Filani, chief commercial officer at Mixta Africa, described infrastructure investment as critical to making sure more Nigerians take advantage of mortgage opportunities outside Nigeria’s commercial capital, Lagos.

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She advised the government to re-evaluate the infrastructure projects that it prioritises.
According to her, major infrastructure projects are committed to roads in Lagos but the dynamics of the state as a megacity experiencing population explosion does not need that now; hence the government needs a mindset shift.

“There is a need to be clear on the objectives that it wants to achieve but Nigeria lacks an integrated infrastructure development system,” Akinkugbe-Filani said.

According to the COO of the pan-African company, government and private sector developers need to focus more on transit types of infrastructure such as rail, taking a cue from other developed cities around the world and finding ways to create geographic equity.

She made reference to a Mixta project carried out in Morocco which recorded huge success because public sector performance was excellent while both the public and private sectors agreed on the terms for deliverables.

Ayo Ibaru, chief operating officer and director of research at Northcourt, highlighted the importance of infrastructure investment to countries’ economic growth.

“Of the many things the government focuses on, infrastructure is a priority because it has a multiplier effect on how the entire economy runs, with research showing that the introduction of a main arterial road increases the residential real estate values,” he said.

According to him, Nigeria is suffering a huge infrastructure deficit, while the government is struggling to grow its revenue.

He said if there was a faster way to get out of the economic rot, infrastructure would top the charts with the partnership of the private sector.

“The government will need to reduce the complexities developers have to face in setting up infrastructure, in terms of raising money to develop infrastructure, disbursing funds and planning the private sector participation should increase,” Ibaru said.

Evelyn Edumoh, chief operating officer of Arkland Group, said the quality of a good residential product is in the quality of its infrastructure.

“In Lagos, populace overruns the available infrastructure; so the quality of infrastructure has to be upgraded and I believe there has to be a public-private partnership arrangement around that as it is extremely crucial we work with the government,” she said.

“We need to see how the government can create policies where we can partner and achieve a sustainable environment for infrastructure investments,” she added.