August 29, 2014

Exploring Funding Options for Nigeria’s Real Estate Industry

Dolapo Omidire

Niyi Adeleye, Head Real Estate Finance West Africa at Stanbic IBTC Capital and Damilola Akindolire, general manager at AlphaMaed Property Development Company joined CNBC Africa to discuss financing options for the sector.

See the video below and an analysis of what was said after.

0:40 – NMRC

The NMRC which was kicked of several months ago gave out 10,000 mortgages 3 week back, and the target is for first time home buyers. Currently, market rates tend to typically vary depending on the financial institution. They can range from 14% – 20%. However the target is to get them to very low double digits or high single digits. That way the affordability bracket is widened and mortgages underwritten are sustainable.

1:50 – Affordable Housing Units

We have a housing deficit in excess of 16 million and we need to build approximately 720,00 units each year to keep up. For starters increasing financing options will increase home ownership in Nigeria. As long as mortgage rates can come down to single digits it will improve home ownership and affordable. Currently there is a lot of supply on the market but there is no liquidity for prospective home owners to acquire with.

 3:25 – Crowd Funding

Crowd funding involves a group of individuals that have come together to form an investment vehicle for development on a small or large scale. It’s highly regulated by the Securities Exchange & Commission and this is a constraint.

On a practical level however, generally more than 80% of mortgages issued have to be from primary financial institutions.

7:20 – Typical Target

Middle income owners who are first time buyers within the 25 – 40 age bracket that can key into mortgage products over the lifetime of 20 or 15 years.

Less than 25% of Nigerians own houses. Additionally, Nigeria is typically an 80:20 market in favour of the rental market. Products need to be created to change some of the renters to owners. This could be done by having mortgage repayments that are lower than annual rental divided monthly.

9:00 – Thoughts on Growth in the market

Lagos accounts for 40% of the country’s real estate market. Constrains growth and development of home ownership is infrastructure. If the Lekki axis is taken as an example, with a couple more parallel roads to the Lekki Epe Express way would make home ownership there more affordable.

With London as a case study people live in the City of London and commute from Luton and Milton Keynes. So in Lagos we can have have people living in Ibadan and working in Lagos. Proper infrastructure can help to make this happen.

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