Despite efforts towards achieving affordable housing for Nigerians and closing the accommodation deficit of 17million units, low-income group, according to experts. might not be able to build or buy houses of their own except through government subsidy.
It has been estimated that Nigerian government would need to build 900,000 housing units annually for the next 20 years to bridge the current housing deficit in the country.
Currently, annual construction of houses in the country (both government and private) is not up to 50,000 units annually, leaving a huge gap of 850,000 housing units.
Rising housing cost and declining purchasing power, despite the recent N30,000 national minimum wage increase, have put low income earners at a crossroad as many of them cannot afford to buy a house for N3 miilion or qualify for mortgage.
In most cases, most of the ‘affordable’ houses built by government or private developers are always beyond the reach of the target group, low-income earners, due to cost.
New Telegraph findings show that the selling price for a unit of two-bedroom apartment in two housing estates recently completed by the Lagos State Government in Igando and Badagry cost between N7.5million and N9million respectively.
During an enquiry, one of the government officials said the two – bedroom flats available cost N7.5million, while the 3-bedroom cost N10million.
According to the source, while mortgage between 10 and 15years is being worked out for would be subscribers, it is not so in some other estate as they are asked to pay 60 per cent upfront and complete payment in six months.
Figuring out how low-income working-class Nigerians can actually have roofs over their heads, an expert, who refused to mention his name, estimated the cost of erecting a three-bedroom bungalow in Nigeria at N4million.
This does not include the cost of land, which prices vary from state to state and cities to cities.
On the amount of money needed for foundation of a three bedroom bungalow , he said: “The cost of setting out is N20,000; excavation – 40,000; foundation footings – N60,000; foundation wall – N200,000; German concrete – N400,000, amounting to N820,000.
On the super structure, he budgeted N700,000 for blocks; and N300,000 for lintel/head course/concrete facial, totaling N1,000,000.
On roofing, he said the roof truss and workmanship would cost N400,000 ; roofing sheets – N200,000; ceiling – N190,000, amounting N790,000.”
He added: ”Finishing is the next stage after roofing. Rendering (plastering) – N400,000; floor tiles – N250,000; painting – N250,000; windows -250,000; and doors – N250,000 “Total cost of finishing for a 3-bedroom bungalow is N1.4million. Adding up all cost, we can see that the cost of building a 3 bedroom bungalow is N4million.”
When cost of land is included, New Telegraph gathered that the estimated price of N4million for the 3-bedroom bungalow could climb between N7million and N14million, depending on finishing materials and locations.
Mortgage vs rent to own
Considering a few scenarios during the hot arguments on what affordable housing looks like on a social media platform, a former General Manager, Aso Savings and Loans, Mr. Idris Fonahanmi, said the Federal Mortgage Bank of Nigeria (FMBN) was ready to finance individual loan at six per cent for a maximum tenor of 30 years.
Listing the cheapest one, two and three bedrooms, he stated that the two options available for easy access by people were through either mortgage or rent to own.
There are only two options available: Option A- Mortgage and Option B – Rent to Own.
For one bedroom flat at N3.8 million, Idris said the initial deposit would amount to N400,000 under mortgage with the repayment of N24.500 per month for 20 years, while the same would go for N300,000 per year in advanced payment under rent to own scheme for 20 years.
When the tenor of the same house is increased to 25 years, the financial expert said the repayment would be N22.000/monthly, while the rent to own would be N270,000 yearly in advance payment.
“For 30 years, one would need to repay N20.500 monthly or rent of N250,000 yearly in advance,” he said.
For two bedroom at the cost of N5.2million with 30 years tenor, Idris said would-be subscriber would need to cough out an initial deposit of N500,000 after which he would be paying N28, 500 monthly mortgage.
For rent to own scheme, the subscriber would be paying N350, 000 yearly for 30 years.
For 25 years mortgage, he said the repayment would N30, 500 monthly or advance rent of N380,000 yearly.
He said such individual could also repay N34.000 monthly for 20 years or pay advance rent of N400 Affordable housing: Low-income earners still in dilemma,000 yearly.
Citing example of three bedroom selling at N7.7 million, Idris said the initial deposit for mortgage tenor of 20 years would be N800,000, with the repayment of N50.000 monthly.
For rent to own, he said subscriber would need to pay N600,000 yearly for 20 years.
Idris also stated that for mortgage of 25years on three bedroom, the repayment would amount to N45.000 monthly or N550,000 yearly rent.
“For 20 year tenor, the loan repayment is N42.000 monthly or N500,000 yearly rent for the same period,” the mortgage and financial expert said.
According to Idris, the above scenarios are what developers and mortgage banks should be marketing to off takers in the private and public sectors.
Experts views
Managing Director, Value Chain Project Consultants Limited, Dr. Joshua Egbagbe, said there was need to consolidate on the paradigm shift to an offtakers affordability-centred pre-construction and pre-finance pre-qualification model, with risk metrics & analytics, along the value chain of different critical factorials in the affordable Housing delivery matrix.
He pointed out that with the great work that the Federal Mortgage Bank of Nigeria and the Family Homes Fund (FHF) have been doing targeting lower to medium income earners; concerns of how to include the lower income groups were being gradually addressed.
Another expert, John Olubayo, explained that affordability was mainly an issue for those who could not or were struggling, to afford ‘whatever it is they need (to afford).’
Idris cautioned that FMBN, Federal Housing Authority, FHF, and Federal Ministry of Housing had no single reason to be dealing with any developer that’s not addressing the issue of low cost housing.
Managing Director, Okupe Adewunmi, said the Hydraform two – bedroom model was built at N3. 2million
He said: “Let’s assume all other costs come to N1.3million, making N4. 5million. Which income group can afford this according to above analysis?”
Okupe said it was high time experts came up with good ideas to present more decent and adequate provisions within same cost parameters.
“What we need from them is to judge their financial status affordability by what they have done for themselves. If they can only afford houses that cost N1million, building for them at N3million becomes unaffordable,” Okupe said. He added: “We need our building research people too at this point. If Hydraform built the prototype at N3. 2million. What other materials can be used to do same at N1. 6 million? ”
Another affordable housing advocate, Mr. Francis Onwuemele, said the practical solution was how government could absorb or use its power to peg or eliminate some cost like land cost.
He narrated how he just built one bedroom apartment with N1.1million and two bedrooms for N1.3million on his farmland on Igbanke, Edo state with minimal land cost.
Managing Director, Eximia, Hakeem Oguniran, explained that it was impossible for the private sector to deliver affordable housing promise without the support of government.
In other jurisdictions, he pointed out that successful affordable housing delivery was usually driven through collaborative platform such as “government, developers [as aggregators), financiers, development agencies, specialised service providers, etc.”
He said: “Let’s not deceive ourselves. If a developer has to acquire land in the open market, (with all the risks and uncertainties) undertake permitting and approval in the same way as others pay “usual custom duties” on imported finishing products, provide primary and secondary infrastructure without recourse, borrow funds at “cut-throat variable interest rate”, bear all development, finance and market risks for the project, that developer can never deliver affordable houses.
“Developers will always be driven by three “R”s. “Risk, Return and Regulation”.
Oguniran said it was the responsibility of government to stop competing with developers and focus on creating the environment that will help to mitigate the pain points and incentive developers to fly.
SOURCE:NEWS TELEGRAPH
