If Nigeria wants to bridge its housing deficit and deliver affordable housing to its citizens, the government would have to partner the private sector to deliver easy access to homeownership, Stephen Jennings, Founder & CEO, Rendeavour has said.
Nigeria has a housing deficit that is more than 20 million units and estimates by BusinessDay shows that the country with the highest population in Africa would require in monetary terms, between N170trillon to N200trillion to bridge the housing gap if each unit is estimated to cost N10million.
“The private sector is the best partner the government can have to build affordable housing. Private developers can deliver a quality product,” Jennings, told BusinesDay by mail.
Nigeria’s housing challenge borders on the insufficient stock that meets the demand of low-income earners, low ownership level and lack of demand enabler in terms of mortgage or low-rate housing finance.
According to Jennings even though real estate developers would like to deliver affordable housing, they cannot sell units below a price that gives them profit. He, therefore, stated that “Governments can help drive down the cost of housing further by giving tax breaks to private developers, streamlining approvals, guaranteeing partial off-take and allowing a percentage of the units to be sold on the open market.”
Latest doing business report by the World Bank ranked the ease of registering property in Nigeria at 183, one of the worst positions among its Africa peers.
With the current ranking by the Washington-based lender, Africa’s largest economy was only better than 7 countries from the 190 that were surveyed.
Analysis of the 16th edition of the ease of doing business report revealed that Ghana which has almost the same population as Lagos, Nigeria’s business hub and South Africa, the continent’s most industrialised country were ranked ahead of Africa’s highest producer of crude oil.
Ghana was ranked 111th country with the most ease of registering property while South Africa stood at the 108th easiest country to register properties.
It takes 33 days to get a property registered in Ghana. If that is to be done in South Africa, it will take 10 days less. One can obtain a property document at the end of 23 days in South Africa but in Nigeria, it takes three months and two days to get the same property documentation.
“Total time required to register property has reduced from 105 days to 75, and the total number of procedures required to register property has reduced from 12 to 8,” the document read.
On why Nigeria was lagging it Africa’s peers in the number of days needed to secure property documentation the World Bank report revealed that Nigeria requires 12 different procedures to obtain the document while in Ghana, it involves only 5 procedures.
Checks by BusinessDay shows that the difficulties in getting property documentation in Nigeria has left lands and some real estate projects without a title; one of the reasons why it is difficult for banks to validate claims to land or for land occupants to use their properties to create wealth, hence, the sector’s liquidity challenges.
A recent report by PWC said an estimated 95 percent of household dwellings in Nigeria do not have a title or a contestable title’s citizens.
“This process is made difficult due to the low quality of land administration in a city like Lagos for example. This does not encourage formal declaration of assets and discourages people away from registering their properties,” the London-based professional services firm said.
According to said Nasir El Rufai, Kaduna State governor, the major issues that continue to affect housing delivery in Nigeria, which also account for the wide demand-supply gap, “include constraints related to the high cost of securing and registering secure land title.”
Another factor cited by industry experts on the reasons why Nigeria’s housing deficit has continued to expand in the last decade is the low earning capacity of the country which is a reflection of the state of the economy.
Recent data shows that only 5 million of the 69.54million Nigerians reported by the National Bureau of Statistics (NBS) to have been gainfully employed as at third quarter of 2018, earn a salary of N3 million and above per year,
According to the data by Graeme Blaque Group, a Lagos-based advisory firm the data put employed Nigerians who can buy affordable housing at only 7.19 percent, meaning as much as 64.54 million people who earn less than N3 million cannot afford to own their own home except of course there is an increase in their income level.
“We found that less than 5 million Nigerians earn up to 3million a year and when we first brought out the data a lot of people shouted, so when you put that into consideration and look at affordable housing; if I give you a house at zero interest rate for even 50 years, what type of house can you afford?” Zeal Akaraiwe, CEO of Graeme Blaque Group and Member, Technical Advisory Committee to the Nigerian Senate questioned.
According to the CEO, before addressing the issue of affordable housing and whether or not one can afford or have access, earning capacity of the average Nigerian needs to be able to allow for it to happen. With the current income level in Africa’s most populous nation, Akaraiwe believes that Nigerians cannot afford to own real estate property in the urban areas.
Nigerian economy continued to expand at a sluggish rate in the third quarter of 2019 after state data agency, NBS, reported a 2.28 percent growth for the period.
Although that’s the fastest growth in four quarters, it’s unlikely to resonate with many Nigerians because even though the headline GDP seems to be expanding, it is shrinking in per capita terms.
Since 2015, Nigeria’s GDP per capita has been on contraction mode every year and that helps explain why despite the growth in headline GDP, Nigerians are getting poorer.
Individual efforts at increasing Nigeria’s real estate properties by way of developing more houses shows offering insights into possible solutions, have not helped to reduce the demand-supply gap or increase the ownership level estimated at more than 20 million units.
Despite its large-size population and self-acclaimed biggest economy in Africa, Nigeria is crawling behind its peers in terms of homeownership level.
Whereas homeownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, it is only 25 percent in Nigeria whose population is estimated at 200 million. Going by United Nations projection, the country’s population will be as high as 400 million in 2050.
According to the Association of Housing Corporation of Nigeria (AHCN), the underdevelopment of Nigeria mortgage sector in driving homeownership is worrisome as more than 90 percent of new homes utilise funds from personal savings for incremental construction.
“The biggest problem of the mortgage in Nigeria is the high cost of the very limited mortgage that is available. If they can develop a policy to ease housing finance, it will be impactful,” WoleOlabanji, the CEO of CoBuildIT, a real estate firm said.
The high mortgage rate in Nigeria is considered one of the key culprits of the country’s housing challenge. A typical mortgage in Nigeria ranges between 7-10 percent for Federal Mortgage Bank of Nigeria (FMBN) and between 15-25 percent for commercial mortgage institutions, one of the highest in the world and the main reason the industry has become less attractive to many whose purchasing power was eroded by the 2016 recession.
