Path to homeownership opens with Mutual Alliance’s N3bn mortgage fund

With an offer of 30 percent equity contribution for property off-takers and beneficiaries of the National Housing Fund (NHF), the new mortgage fund being raised by Mutual Alliance Mortgage Bank (MAMB) lends itself as a good route to homeownership.

The fund, known as Mutual Alliance Mortgage Fund (MAMF) valued at N3 billion, is focused on bridging the housing deficit in Nigeria and raising civil servants’ hope of becoming homeowners.

Already approved and registered as a close-ended unit trust scheme, the fund has Goldbanc Management Associates Limited (GMA) and GTI Asset Management and Trust Limited as issuing house and fund manager respectively while United Bank for Africa (UBA) is its custodian.

Given a conservative estimate of 17 million housing units deficit and N5 million per moderate housing unit, the size or value of this deficit is estimated at N85trillion.

But despite the above massive opportunities, the mortgage market remains small, underdeveloped and costly. Therefore, off-take remains low even where supply is high due to affordability issues.

It has been observed that the only true mortgage available in Nigeria remains the federal mortgage bank of Nigeria’s (FMBN) NHF which gives beneficiaries longer tenure at an interest rate of between 6-8 per cent at the value of N5 – N15million. And this is what Mutual Alliance’s fund is out to facilitate.

According to Okon Amasi, MAMB’s managing director, mortgage-backed by money market is expensive, assuring that MAMR would reduce the cost of housing in Nigeria. “It is the beginning of capital market taking over mortgage from the money market,” he noted.

For investors, this facility comes with good returns. “Returns on investment will be interest and dividend payments. Interest should be 12 per cent yearly. Interest for year one will be lump sum and paid at the end of the year while semi-yearly payments of interest will commence first half of the year two and every half year through the tenor of the fund,” Amasi assured.

The fund comes with a number of benefits for various stakeholders. To workers in government parastatals, particularly, it is a unique investment opportunity to access lump sum for equity contribution for a mortgage loan, leading to owning a home.

It also gives an average civil servant access to a decent and affordable house which translates to the realization of the dream to become homeowners.

The government also benefits from the fund as it minimises the housing deficit, thereby solving one of the country’s socio-economic problems. The fund is expected to deepen the financial market and also limit employment-related migration from point A to point B.

In addition to the unique investment opportunity it offers, the fund also leads to portfolio diversification to unit-holders and enables them to earn consistent returns, represented by the interest payment.

The hybrid fund promises to assure a 12 percent return on investment. At a time when returns on investment assets, including the federal government Treasury Bill, is at their lowest, a 12-percent, analysts say that return on this offer is a good yield.