The 9th edition of the Abuja Housing Show, being the premiere and largest annual housing Expo in Nigeria was held between Monday, 6th and Wednesday, 8th July, 2015 at the International Conference Centre, Abuja.
The theme of the mammoth industry event was ‘Delivery of Affordable Housing: Financing, Building Technology and Land Issues in Nigeria’. It was organised by FESADEB Communications Limited and attended by over 600 participants spread across the full range of stakeholders in the Nigerian housing industry.
At the Opening Session, Goodwill Messages were received from various government functionaries and industry operators from the organised private sector.
A very rich array of activities was held at the three days show. Apart from exhibition which held as a parallel event throughout the show, there were six main discussion sessions at Plenary during which three keynote addresses, fourteen technical presentations and several panel discussions were made. Also, there were special sessions for building products presentation and artisan-based training. Each aspect of the deliberations was targeted at disaggregating the sub-themes of the show which included issues of affordable housing, land administration and property registration, housing financing, mortgage market rejuvenation, low income and social housing, among others.
The expectations of conference participants revolve around evolving strategies toward surmounting past and present challenges in an effort to make housing accessible and affordable to the different strata of the nation’s population. In appreciating the challenges, industry pundits stressed the need to liberalise the environment in terms of land ownership, management and administration, such that all transactions in land matters will be simple, easy and achievable within a time frame that in a business sense will be seen to be cost-effective.
The summit had several workshop sessions during which papers were presented and panel discussions were held on the following areas:
- Affordable Housing Finance: An Adoption of Market Based Approach from the Nigerian Mortgage Refinance Company (NMRC)
- Leveraging Reforms in Land Administration, Property Registration, Title Perfection and Foreclosure
- Financing the Delivery of Standardized and Affordable Housing
- Low Income Housing Finance
OBSERVATIONS & FINDINGS
Having carefully considered the issues that were raised in the presentations and discussions during plenary at the 9th Abuja Housing Show, the following observations and findings were established:
- As a core strategic objective for the Federal Government, the Nigerian Mortgage Refinance Company (NMRC) is needed for Nigeria to achieve broad based and inclusive growth by unlocking markets that have the potential to generate jobs. The increasing gap in residential homes in Nigeria is estimated to be in a deficit of about 17 million housing units as at 2013.
The contributions of NMRC were enumerated to have stimulated investment and changes to enhance efficiency of the mortgage and housing markets, including the adoption of Uniform Underwriting Standards; introduction of a draft Model Mortgage Foreclosure Law (which is on-going); first bond issue in the capital market (currently being finalized); other on-going mortgage relief packages intended to tackle, among others, challenges faced by borrowers with respect down payment and high interest rates.
The model of operation of NMRC included operation a market-based approach upon which its successes revolve. This was further expanded to state the various sections which included strong shareholding that cuts across banks (and other development agencies in waiting); a strong management team with professional prowess to lead the change; a strong risk management mechanism which has been endorsed by the World Bank; adopting a transparent process in the capital market positively rated B+++ by credit rating agencies; and innovation in creating mortgages and foreclosures by advocating for the establishment of mortgage registry.
- Over the years focus has been on closing the housing deficit gap, which in real sense is misleading and not sustainable. This has resulted in treating the various components of the housing delivery chain as individual entities, hence has yielded but unsustainable results. For more sustainable progress to be made towards solving Nigeria’s housing problems there is need to de-focus closing the housing deficit gap, and to pursue overarching value chain/market-based approach which links together all the various components of the housing delivery chain.
- The Housing and Construction Sector presents a huge opportunity for private investment and job creation. It is estimated, following labour impact assessments in countries such as Columbia, Malaysia and South Africa, that at least 5.62 direct jobs can be generated with every new home and 2.48 indirect jobs associated in housing related expenditure.
- Absence of equity contribution from prospective home owners is a big issue. To this end, the NMRC is currently partnering with National Pension Commission (PenCom) to explore options of financing mortgage through the Retirement Savings Account (RSA). Efforts are currently being put in place to introduce guidelines for RSA as a source of mortgage financing.
- A combination of scenarios which include dramatic population growth, rapid urbanization, massive housing shortages, inadequate investment in housing construction, comparatively low level of contribution into the National Housing Fund (NHF) managed by the Federal Mortgage Bank of Nigeria (FMBN), poorly developed primary/secondary mortgage market, weak housing legislations, lack of institutional capacity, scarcity of housing market information, insufficient calibre of technical and artisan-based skills, among others, has created a veritable crisis in the Nigerian housing sector.
- The Nigerian Labour Congress (NLC) has been side-lined in the discussions and dialogues around providing affordable housing for Nigerians.
- The Federal Government through the Debt Management Office (DMO) has provided umbrella guarantee for NMRC bonds which will issue up to NGN450 billion. This will ensure great degree of enforcement for the NMRC to succeed in its strategic objective of stimulating long term investment in the market. Also, the second-tier financing option available in the NMRC is another way the Federal Government hopes to strengthen capital financing in the mortgage market.
- Some of the approaches currently adopted to address the supply and demand segments of the Nigerian housing industry are fashioned ‘top-down’, bereft of sufficient stakeholder participation and inclusive engagement that are critical for successful policy implementation.
- The efforts of the Federal Ministry of Lands Housing & Urban Development at repositioning the housing policy direction for improved performance and that of the entire body of estate developers under the auspices of Real Estate Developer Association of Nigeria (REDAN) to stimulate housing production under economically harsh conditions are commendable but there are obvious room for improvements,
- The situation of housing in Nigeria in which mortgage contribution to national GDP is less than 1 per cent compels the need for systemic overhaul and increased investment in housing through attraction of untapped potentials in insurance, pensions and banking industries.
- At the same time, all other housing financing options, including cooperative housing and funds from interested Nigerian in the Diaspora needed to be explored, the capital market including unclaimed dividends, creation of Special Purpose Vehicles, among others.
- The average total cost of delivering houses in Nigeria is at present unacceptably high due to a wide combination of reasons including costs related to land for housing, building materials, construction funds, ancillary infrastructure, etc.
- Indeed, all government and non-government stakeholders have failed to jointly redirect efforts at taking deliberate cost saving approaches such as reduction in costs of title documentations and transactions, processing of building approvals, taxes on building materials, adoption of suitable/economical building standards; use of technology for mass production, among others.
- In a specific instance, State Governments have unfortunately interpreted the provisions of the Land Use Act to add internal revenue generation concept into providing land for housing purposes.
- The Model Mortgage and Foreclosure Law (MMFL) when introduced to the states is ongoing is pivot to facilitating affordable housing for low-income earners. It is designed to streamline mortgage administration and housing delivery processes to enhance efficiency reduce costs and ultimately generate revenue for state governments.
- The average time for delivery of housing products in Nigeria is unnecessarily long and this is compounded by protracted delays in the processing of land titling and associated transactions.
- The continued neglect of supply of affordable housing, such housing that could be conveniently accessed with a maximum of 30 – 35 percent of annual income of the intending buyer, is a major contributor to massive homelessness and dismally poor access to housing by majority of Nigerians.
- The prevailing micro and macro-economic indices in Nigeria are not conducive for supporting desirable mortgage lending rates and efforts must be redoubled at all fronts to generally improve the robustness and stability of the Nigerian economy,
- There is general lack of enabling laws and standards that are crucial to govern issues of land, finance and technology for successful and sustainable transformation of the Nigerian housing industry.
- There is need to revisit the nature and type of title deeds given to individual home owners within estates as the current format does not allow for individual home owners to use the title deed as collateral.
- Private sector and development partners need to drive the research and development of alternative building technologies, in terms of providing the financial resources, technical assistance that can move tested solutions to scale and motivate investments in the solutions to drive structural transformation.
- To achieve significant impact and effectively address numerous housing supply challenges in Nigeria, there is the urgent need for the development of innovative, alternative and possible home grown strategies such as Home Renovation Financing Scheme of the National Housing Fund, Rent-to-Own initiatives, Asset Classes or Quasi-Equity, Cross Subsidy, Government Guaranteed Offshore Facilities,
RECOMMENDATIONS & DECLARATIONS
At the end of exhaustive deliberations on the above findings, participants at the 9th Abuja Housing Show made several revolutionary decisions. They also identified continuing increase in population especially in the urban areas of Nigeria which, in turn, lead to astronomical increase in the demand for affordable housing whilst the supply side remains for the most part underdeveloped and unable to meet growing demand. Participants said that attempts by the Nigerian government to increase investments in the real estate side of the economy have remained unsuccessful as a result of several factors: They resolved that:
- Land tenure and transfer of legal title in land procedures are expensive, cumbersome and complicated.
- Passage of the MMFL by state governments will boost investors’ and lenders’ confidence, hence strengthen with the knowledge that foreclosure process and procedure are clearly identified and defined.
- In view of the obvious crisis situation of the Nigerian housing sector and in consideration of inherent capacity of the sector to drive economic rejuvenation of the country on multiple front, direct government intervention must be injected with immediate effect.
- Since the objective of the affordable housing project is targeted towards Nigerian workers, it is natural that the NLC be carried along in the discussions and dialogues.
- The Federal Government must, as a matter of urgency, dedicate a Special Intervention Fund for housing which would be managed by frontline stakeholders in the industry,
- Cost of funds is expensive as a result of high interest rates for construction and mortgages in comparison to the long-term rentals expected by an investor in the real estate market.
- There is need for rent control legalisation for the mass residential rental market.
- Since the delivery of affordable housing requires an integrated approach, government should lead the way in creating necessary synergies and collaboration among stakeholders to unleash the full potentials of housing sector in reducing poverty, increasing shared prosperity and ensuring economic sustainability.
- In order to sustain anticipated revival of the Nigerian housing sector, government at all levels should take steps to demonstrate strong ‘political will’ to drive the sector. The Federal Government should also lead the way to mobilize higher levels of stakeholder participation to achieve desired results.
- To guarantee delivery of finance and technology for affordable housing in Nigeria, respective stakeholders should take conscious efforts to nurture innovative approaches such as the value chain and market solution approach to deepen the mortgage market through the use of Special Purpose Vehicles, cooperative housing, among others.
- Potential financing options presently locked away in the capital market, insurance, pensions and banking industries should be explored. Moreover, the provisions of the National Housing Fund (NHF) Act on statutory share contribution should be executed and access to mortgages must be expanded by recourse to investments by Nigerians in the Diaspora whilst principles surrounding collaterals are relaxed.
- To ensure smooth delivery of land for housing development, governments must sustain the ongoing efforts at Systematic Land Titling and Registration (SLTR) and Geographic Information (GIS) -related activities with the ultimate goal of providing land that is secure and permanently indivisible.
- Government should lead the way in reducing the average cost and time of delivering houses through downward review of cost and time implications of securing title document, associated transactions, processing building approvals and taxes on building materials.
- Real estate developers should adopt appropriate building standards and relevant technology to drive mass production of housing.
- Concerted effort should be directed at production and ease of access to affordable housing through application of target specific strategies such as direct subsidy, cross subsidies, Rent-to-Own Schemes, Rent to Buy Schemes, among others,
- Special attention should be placed on training and re-training of different levels of skills for housing production, especially at the artisan-based level.
- Fresh impetus must be given to ongoing efforts to entrench social housing in Nigeria and the options for funding this must be expanded beyond direct funding by government to attraction of corporate social responsibility investments, and,
- Whilst ongoing efforts at exploring new sources of funding for use in the mortgage market is commendable, the ultimate solution rests in making mortgage affordable to the target population through progressive reduction of the prevailing mortgage interest rates to single digits which is most amenable to the relatively low income of majority of Nigerians.
- There is need to encourage corporate organizations to incorporate the provision of homes to the communities as part of their corporate social responsibility.
In conclusion, participants at the summit brought to fore the Social Housing Initiative under the new National Housing Policy. Stakeholders at the 9th Abuja Housing Show strongly recommended a Social Housing Stimulus Plan for the purpose of delivering new homes. Housing sector operatives wants the Federal Government to set effective machineries in motion with a view to delivering both cost-effective and quality social housing programme which will significantly increase the supply of social housing across the country and provide accommodation to many disadvantaged Nigerians with low or zero income.
COMMENDATIONS & APPRECIATIONS
The efforts of the Nigerian Mortgage Refinance Company (NMRC) and Federal Ministry of Lands Housing & Urban Development at repositioning the housing sector for improved performance and that of the entire body of estate developers under the auspices of Real Estate Developers Association of Nigeria (REDAN) at housing production under economically harsh conditions are commendable but there are obvious room for improvements to create effective housing delivery chain.
Summit delegates noted and commended organizers and sponsors of the 9th Abuja Housing Show for the numerous ways it is already changing the real estate landscape of the nation. They particularly commended the organization and approach adopted in presenting the conference. Summit participants also expressed sincere appreciation and offered profound gratitude to the Vice President, Professor Yemi Osinbajo, GCON, for his support for the summit and expressed hope that the current administration of President Mohammadu Buhari, GCFR, would sustain its manifest support for the revitalization of the Nigerian housing sector.