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Real Estate Investment Trusts (REITs) and workers cooperative societies were top of considerations as experts gathered in Abuja recently to discuss the way forward for affordable housing delivery in Nigeria.
Though the REITs market is still evolving in this country, it is considered a good opportunity for financial intermediation in the housing sector and, according to the experts who gathered for the 11th edition of the annual Abuja Housing Show (AHS), cooperatives have the capacity to amass and coordinate household savings towards homeownership.
But to achieve the 2030 target of affordable housing for all, Kecia Rust of the Centre for Affordable Housing Finance, South Africa, believes that investors need access to finance while household affordability needs to be broken down, hence the need for REITs and cooperatives.
In the developed economies of the world, REIT is a major catalyst for the growth of the real estate market and a close look at the performance of the REITs markets shows that domestic and foreign investors are more attracted to properly structured REITs, which is why Nigerians are being encouraged to look out for such an instrument.
Again, the complexity and capital-intensive nature of real estate developments and transactions demands proper and adequate funding different from what obtains today where investors fund their projects from either own savings or loan facilities from lending institutions.
Rust believes that there is need for massive investment in housing, which, she believes, has the best returns on investment in terms of job creation. But the challenge of mortgage finance, which makes housing development a lot easier remains.
Simon Walley, a Senior Housing Finance Specialist at the World Bank says bridging Nigeria’s housing deficit, estimated at 17 million units, is achievable, but the state governments have to be fully involved to make property registration, building approvals etc easier for developers.
Walley adds that to tackle the deficit, there is need to build social housing, just as there is need also to reform the construction sector to address the shortage of skills and artisans which, in his view, is a missed opportunity for creating jobs for the people. “Increasing housing affordability in Nigeria will make the 2030 target a reality”, he said in his paper presentation at the housing event”.
In other economies, including South Africa where mortgage system is developed and functional, housing finance is taken for granted because it is not only accessible, but also affordable with low interest rate and long repayment period depending on the age of the mortgage loan seeker.
In Nigeria, mortgage financing of homeownership is as tedious as it is costly and the way forward, according to Adeniyi Akinlusi, MD/CEO, Trustbond Mortgage Bank, is to de-risk the sector in order to attract private capital.
Mortgage operators see payment default, high level poverty, job insecurity, unemployment, the mismatch between short-term deposits and long term lending as huge risks for the sector. Akinlusi canvassed uniform under-writing standard to enable investors know the level of risk they are taking.
“As we speak, there is no underwriting standard for the informal sector and the self-employed which is not supposed to be so because these people constitute about 50 percent of the population”, he said.
Source: Business Day