Though a major demand for mortgage access is being gainfully employed or having a regular income flow, the reality in the mortgage market is that it is not enough to be just gainfully employed.
What mortgage lenders are looking at is not just the job the borrower is engaged in. They are, instead, looking at how fat and sustainable the borrower’s income is. More often than not, income is just too low to ‘carry’ a mortgage loan.
In Nigeria, people whose income is below N1.2 million per annum are classified as low income earners. National minimum wage in the country today stands at N30,000 per month. That wage cannot, technically speaking, be called national because many states of the federation are unable to pay.
This means that all civil servants who earn minimum wage are automatically excluded from mortgage loan even if the interest rate is as low as 6 percent which is the lowest interest rate only offered in the country by the National Housing Fund (NHF).
Based on the terms of mortgage structuring which requires repayment of not less than one third or 33.3 percent of a monthly income, a borrower on N30,000 per month has to deduct approximately N10,000 for loan repayment, and a monthly payment of this sum for 30 years, as required by law, will mean that the prospective home owner will contribute only N3 million for the 30-year period.
However, apart from the fact that there is no decent accommodation for N3 million in a good location, there is also no 30-year mortgage available for loan applicants. Besides, given that minimum wage remains N18,000 for some workers, 33.3 percent of N18, 000 will be N5, 994 and a monthly payment of this sum over 30 years period will amount to only N2.15 million.
“Many households cannot own homes through mortgage because, given their low per capita income, they won’t qualify for mortgage,” confirms Adeniyi Akinlusi, former CEO, Trustbond Mortgages.
Mortgage deficit, he notes, stands at N49.05 trillion and out of a population of 180 million people, with 30 percent, representing the 44.4 million working class, the mortgage-able adults are only 19.9 million, representing 45 percent of the total population.
This is why mortgage experts insist that job creation is critical to ease homeownership. They maintain that government and private sector developers could build all the affordable or social housing they want to build, but people have to have jobs to be able to buy either cash or through mortgage.
Nigeria is one the world’s most expensive housing markets where the cost of renting a three-bedroom apartment ranges from N15 million to N20 million per annum in highbrow areas like Victoria Island and Ikoyi in Lagos; Asokoro, Maitama in Abuja; GRA Phase 2 in Port Harcourt or Trans Amadi also in Port Harcourt, among other areas in Nigeria.
A report on The Lagos Housing Market by Pison Housing Company notes that a mortgage period of 30 years and a housing unit of N2.15 million are hardly available, and this amount excludes interest rate on the mortgage facility. Consequently, even the middle income earners struggle to have access to affordable housing.
The report notes further that Nigeria is faced with a multi-dimensional housing problems stemming from poor planning. It recalls that many initiatives have been launched in the past which did not translate to visible results.
“The country is fraught with abandoned low cost housing projects, inadequate funding, regulatory bottlenecks, lack of focus on residential housing development and unsupportive finance mechanisms,” the report says, pointing out that in most developed countries, affordable housing at different income levels is achieved through assistance from government through planning incentives, tax credit, land provision, infrastructural support and required building approval concessions.
The bane of mortgage access in Nigeria is high interest rate which ranges from 18 percent to 22 percent and this is one of the major reasons for the low homeownership level in the country whose housing deficit is estimated at 20 million units.
Roland Igbinoba, Vice Chairman, Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD), laments that, though Lagos currently has the most vibrant property market in Nigeria, home ownership level is still at less than 20 percent.
“With a daily intake of 3,000 immigrants, the housing supply has failed to keep up with rapid urbanization and population expansion, especially in the low income market. The housing demand estimate in Lagos is roughly 4.4 million units while the estimated current supply in the state is 1,417,588 units”, he reveals.
“This leaves a gap between demand and supply at roughly 3 million units; output is relatively low although there has been increased participation in housing projects from both the government and private sector,” he noted
The extent of housing shortage in Lagos is enormous and the deficit is both quantitative and qualitative, such that 72 percent of Lagos residents are tenants paying rent as high as 50 percent of their monthly income while most of the existing accommodations are provided by private landlords.
On the qualitative housing deficit side, most low income earners live in congested settlements usually characterised by buildings with structural defects, bad roads, poor drainages and pollution, posing health hazards for the inhabitants.
