For an average Nigerian, getting an affordable house is paramount.What is OPIC’s effort in this direction?
What we have done is to put in place flexible schemes that make it easier for people to acquire our homes. That is why we have the ‘OPIC Advantage Plan.’ This is not a mortgage plan, but a financing plan that allows you to spread the course of acquisition over a three to four year period. A lot of people struggle to build their own house in our country; most of such people buy land in the first year; save money and do the foundation in the second year; and in the third year, they complete the building and call everybody to a party. Nobody builds over less than three years in this country. This is a typical Nigerian style of building especially where the owner is not rich. So, for such category of people, what we have done is that instead of the person bearing all the burden, we (OPIC) will build in one year, and allow the person to pay over an extended period of time. That is what OPIC is all about- targeting an extended period of time for housing payment to make it easy for the people. We believe that easily within the Lagos – Ogun market axis, we have over 200,000 people that fall into this category. For people in this category, affordability is about how to pay, not what to pay. That is a smaller market.
For the larger market, it is about cost and how to pay, which is where we are bringing in people like Lafarge Holcim and other banks. We enter into an agreement with firms like Lafarge and use them to build houses for us. We can pay in installments over an agreed period of time; we can spread the payment a bit and we can get some form of credit from their system. This makes us to get construction done at a reduced rate and by getting it at a reduced rate, we are able to get those buildings to the aspiring owner at reduced price. We are aware this effort is still not enough but we now think the last step is aggregating some mortgage banks, who we are working with now, to create a product that will make it possible for such people to get facilities. Once they key into the scheme and they show over a period of time that they are reliable and can be depended on to pay as and when due in a 20-year mortgage loan, then we as OPIC come in to work with everybody to make it viable.
Our goal is to try and get cost of houses as low as possible. In New Makun City, located in Shagamu interchange, if it is possible, we want to get N2 million as construction cost for our houses. But let’s be candid, people want to build houses of N2 million, but this is not possible. Government doesn’t have unlimited resources now. Ogun State is fortunate in having a number of agencies working together on different housing schemes; so that is why we have been able to subsidise.
How can housing cost be reduced?
Introducing a multi-level unit apartment into the system would reduce cost. But from survey we conducted, we were shocked that the market doesn’t want that because our people still have that cultural thing of everybody wanting his own separate space. We tried to educate people that the space they are talking about will make the house more expensive. If you are talking affordable housing then you are talking commercial transactions where you make it viable, so that is a challenge. I know that Lafarge has done a lot of work trying to simplify cost of construction, by bringing in form works and aggregates to reduce construction cost, but if you aggregate all of that together, there is no way as of today where you can get a house for less than N2.5 million, excluding profit and all other elements.
OPIC is the business arm of government. Does this presuppose that social housing is closed to your Corporation?
Well, of the four agencies that work in Ogun State, Housing Corporation does social housing, and now they do government subsidised housing. We, as OPIC, deliver dividends to government; while the other three agencies get subsidies from government. These are two different things. So if the government decides that for this year she wants to spend N200 million subsidising housing, the first set of people that can access that kind of money is Housing Corporation and Ministry of Housing, which takes care of public building. Housing Corporation takes care of subsidised social housing. For instance, in Abeokuta, we have 160 housing units at Laderin workers’ estate, which is a new estate just built by the government comprising of 2-3 bedroom semi-detached bungalows. The cheapest unit there is sold at about N3.5 million to N4 million. However, on each unit sold at that price, government subsidy is at least N2 million. So if you remove the government subsidy, it is actually N5.5 or N6 million.
In your quest to provide housing for the people, are you considering rent-to-own scheme as an option?
Yes, we will probably go into the rent-to-own space probably when we are done with the first face of EMTR gardens. One of the things we have noticed is that the element of the rent-to-own is also characteristics in the OPIC advantaged scheme. This literally means you pay 30 per cent of the total cost of the house, take your keys and you move in and every month you are required to pay a fixed minimum sum and then you have bullet payment points along the line over a 36 month period, with no interest elements. What we have done with OPIC advantage is to take the characteristics of rent-to-own scheme and characteristics of a typical housing loan and bundle them together to make it affordable. Our sister agencies like Housing Corporation, have variance of their own models that work but not as elaborate as this one because we are the ones that interface mostly with the commercial end of the market, but they also have schemes modelled to make it affordable and flexible for people.
So, how many units do you propose to have and how do you intend to build them?
Well, the first face of New Makun City is 400 hectares; 50 per cent is meant to be commercial and the other 50 per cent residential. Within the residential phase what we have also done is to partner with some developers, who come in to pay for the plots to do commercial housing, we have about three of them. We have also agreed with every partner in the scheme on their house pricing and the kind of houses they are to build. Reason is to encourage cross cooperation and to avoid cannibalising each other’s market. Between the interventions, we intend to have a minimum of 2,000 units in all within this first phase. We are responsible for building a minimum of 500 units on our own which is going to be mostly in the lower entry level. What we really want in New Makun City is to get to a point where entry level homes does not exceed N8 million instead of the N15 million we are selling now. We are looking at over the next year or two for 50 per cent reduction in the prices.
How has the crashing naira impacted on your projects?
Well there is a direct impact because the prices of building materials tend to fluctuate; but the flip side is somewhat good, because in the housing market if we look inward we can source many things locally. So one of the good things of working with Lafarge is that everything, except for the frame work, is sourced locally. We really don’t have any imports other than the pipes, because the top grade pipes are still imported. The finishing stage is where we have problem as we still have to import titles and sanitary fittings, lightings, etc. But then, the bigger problem is not even the supply side but the demand side, as the economy is contracting peoples’ ability to afford homes. Because we have had economic downturns in the past, people start right sizing their pocket; they start scaling and prioritising what they hope to do. For us, part of what is likely to happen to our model is that we will have more people key into our ‘OPIC Advantage’ scheme.
Ogun State housing projects seem to be mainly concentrated along the boundry of Lagos. This probably presupposes that you are trying to eat into the Lagos market. What are your housing projects for the interiors?
By factor of providence, Ogun State surrounds Lagos, there is no way you can enter or exit Lagos State, even by water, without passing through Ogun State. Only a foolish man wants to go on walking when he is given an option to fly. A reasonable man will say let me take the one that will be less stressful, so for us here, the least stressful impact is to take care of the significant over flow of Lagos. So we started working on ourselves and that is why we find that most of our border towns now compete favourably with their neighbouring towns in Lagos. I live in Lekki, but I tell people that it is easier for me to live in Abeokuta than to live in Lekki, the only thing I go to do in Lekki is shopping, but very soon we will have our own mall here so I will not have to go to Lekki for shopping. To get from my house in Lekki to toll gate or phase 1 takes about two hours, whereas to get from my house in Ibara, Abeokuta to Ikeja, Lagos, takes an hour and 50 minutes. Is this not better than facing a constant two hour nightmare to get from Chevron roundabout to Lekki Phase 1. People were going through it because that is where the infrastructure was, that is where services are, but now we are providing the same thing and better grade of services here (Abeokuta). So why would you have to go through that stress when you can live here more peacefully? So its like starting from a point of least resistance by dealing with that sector first, generate revenue from there and then go to the inner cities and start turning them into upscale communities too. Incidentally, OPIC is in Agbara, Isheri, and Abeokuta. The Ministry of Housing is doing interventions in Ijebu-Ode; Housing Corporation is doing interventions in Ota. So when you look at the government interventions in housing holistically, you will see that we have covered the entire spread of the state.
With the crash in crude oil price, the real estate sector is believed to be the next phase to drive the nation’s economy. Do you agree with this and why?
When you are checking the health of an economy, you check the consumer index and also the housing sector index. It is only in Nigeria that we check crude oil price. This is an aberration because no country survives by depending on a single commodity. I see the downturn as an opportunity, because it makes everybody that is focusing on the top of the pyramid are now forced to come down. I believe that we are going through a tightening period but it is an opportunity and a window for growth of the sector. If you begin to create policies that supports the sectors that are productive in the society, then things will begin to get better. It will interest you to note that 21 per cent of America’s GDP is from the construction industry and the major index is how much they sell houses in a month. It is a chain economy- the importation guys working; the transportation guys working; the labour, and everybody is working and generating money and they are spending. So it is a wing that could turn this economy.
By: Muyiwa Lucas