We need to democratise real estate by creating a model that ensures the informal sector can access it—Mayor of Housing

Low mortgage penetration in Nigeria means many citizens’ dream of owning homes can hardly be realized, hence the need for alternative housing finance models. In this interview, My Ace China, CEO of Port Harcourt-based The Mayor of Housing Limited, canvases institutionalising thrifting with an institutional backbone that ensures security of individual contributions. He also advocates the democratisation of real estate in a way that ensures even informal sector operators can access it. He spoke with Zebulon Agomuo and Chuka Uroko in Lagos. Excerpts

For you, democratising access to housing is the way to go. In a market where formal mortgage remains shallow, what financing models have proven realistic in turning ambition into deliverable projects?

I love to get to the root of words and their meaning. Mortgage actually comes from the root word mort, which has to do with death. That’s why we have mortuary, mortality and all that. So, mortgage means indebted until death and the only place where they sell debt as a product is where financing has been so institutionalised and structured that the institution and the system know that no individual can escape the system.

So, the more people borrow from that system, the richer the system becomes. The system is interested in lending. Nigeria has not evolved into that system. We don’t have the institutional strength to back mortgage. We don’t have the systems to back the individual borrowers to ensure that they don’t escape the system.

If we don’t have a functional mortgage system, as you have observed, what is the current situation and what exactly works for us?

As a matter of fact, the basic system in the world Nigeria has been grappling with since its creation and has not got right yet is census. For a family where the father does not and cannot count how many children he has, can any other thing that has to do with the welfare of those children ever succeed? This is why Nigeria is not qualified for mortgage. That’s one.

Two, Nigeria interestingly does not have the background and history of mortgage. Nigeria has never succeeded on the back of mortgage because our individual village systems already had traditional, cultural, aboriginal systems that are anti-mortgage but thrift-driven.

The origin that every tribe, every community had since before the creation of Nigeria was thrifting. The Igbo people call it Isusu. The Hausa people call it Esusu, while Yoruba people call it Ajo. In local parlance, it is called contribution. So, thrifting is what works. And when individuals had character, thrifting succeeded on the back of that. What we need to do right now is to institutionalise thrifting with an institutional backbone that ensures security of individual contribution.

For instance, it was the character of the leader of such cooperatives and thrift communities that ensured everybody got their money as and when due. When character began to fail, you started hearing stories of a thrift chairman or coordinator that ran away with the money of the members. So, we now need to have institutions that will not run away. Just like you have the banking system built on the backbone of NDIC. We need to have an NDIC equivalent in thrifting and cooperatives and then go back and ensure a renaissance of what Nigeria was built on.

What case studies or footprints of successful thrifting and cooperatives can you point to as proof of what is possible?

The tallest house in West Africa and the first skyscraper in West Africa is the Cocoa House in Ibadan built or finished in 1965 and it was built on the back of Cocoa Cooperative. The tallest pyramids outside the pyramid of Egypt were the Groundnut Pyramids of the Northern region. And guess what? When they were built, there were no cranes.

They were built on the back of cooperatives. The agro-trade boards were the strongest trading boards in Nigeria during the agricultural boom because that was where they turned the sweat of co-operatives into liquidity. And then cooperative banks were bigger than commercial banks. Individualisation first of all started dividing Nigeria across regional lines.

From regional lines- north and south- it went into sub-regional lines and we started having south-south, south-east, south-west, north-central, north-east, and north west. That was not enough. It went into tribal lines where we had Igbo, Yoruba, Hausa, etc.

As if that was not enough, it now went into religious lines. Divide and rule was a strategy of the colonialists. But, unfortunately, when they left, they not only left remnants of that, but also established and coronated some of us to now become the new imperialists.

Are these enough justification or basis for you to call for democratizing real estate?

Yes, we need to democratise real estate just like we democratise other things by creating a model that is so informal that the non-formal sector, which is about 80 percent of our economy, can access it.

Besides the thrift system you have canvassed, what other option do you think can work in our kind of environment?

We’ve tried something in the past called social funding, which is a hybridisation and innovation of that thrift system. It works where there is an institution that ensures security, and a lot of other things.

We made it in such a way that there was no multiple payment and we decided it would be a variant of the multiple payment contributory system. It is so simple; it’s not rocket science. In contributions, when it’s your turn, you pack money. If it is thrift housing, when it’s your turn, you take the house.

Social funding, if you have what it takes to make up in people what you lack in cash, you can pay once and use a referral system to make up for that. So, we’ve tried it and it worked, but the weakness of that system is the institution behind the security must be secured with extra security. And our own suggestion for the extra security is land. This is because land assets are immovable, just like when you go to the bank, banks always ask for real estate as collateral.

And the banks, apart from being secured by NDIC, are regulated by CBN. And CBN has a mandatory capital threshold and deposit they must have for them to run. So, that institution must have those things so that there is a framework that secures the securer.

Why real estate is the most secured investment in the world is because nobody can ever carry land and run away. No matter how you dig land, it’s still land. You can’t steal land.

In thrifting, there is a major challenge. As we observed in our villages in those days, people contributed very small amounts of money, and here we are talking housing. How much do you think people will be contributing to enable them to access housing? Who will be building the houses?

This question shows you really understand thrifting. We, as the Mayor of Housing, are creating a hybridised system. The hybrid is that we are going to have a financial arm. When you have a mortgage system, there’s a financing bank. And then there’s a developer who relates with the bank. The bank pays the developer upfront to build. The developer builds. The contributor is now indebted to the bank.

We intend to discuss with CBN where we also have access to that bank. We own the bank or a third-party bank. The banker creates the money in advance. But you know that contribution has to do with a pool of funds.

For instance, if we have group of 10 people contributing for a house of N10 million for N10,000 every month, maybe for 5 years. But at the end of month 1, group A has only done N10,000 times 10 people, which is N100,000.

But if we have 100 of such groups, 100,000 times 100 can build 50 houses. But nobody in each of the pool has qualified for a house. So, the developer has access to now start building with those houses that not only service those people, but can trade and sell to other people that are buying outright.

They are not members of the group. As they are trading, they are turning over the money so that each time a group is almost ready, their house is ready because this man has had access to more funds than the person. So, that is what it is all about.