Nigeria Housing Sector 2020 – the New Agenda by HDAN
2019 was a pretty busy year for Nigeria, especially for the fact that things kicked off with a presidential election. An election year is typically a major distraction from everything but politics. The country’s economy continued to struggle and as a result not much was achieved in the housing sector. With less allocation to the sector and other persistent issues like poor business environment, failing infrastructures and weak or absent policies, there is a need to expect drastic measures that will salvage the housing sector in 2020.
With a housing deficit of over 18 million units, the real estate sector’s GDP growth in second quarter 2019 was–4.78 percentage points lower, compared to the 0.93 percent it reported in Q1 2019, and the -3.88 percent recorded in second quarter 2018.Also, the sector continued in its low ebb in the third quarter as it contracted by -2.31percent, from -3.84percent recorded in second quarter 2019, and -2.68 per cent in third quarter 2018. The industry emerged the sector with the worst growth performance in Q2.
Economist and analysts have already noted that 2020 macroeconomic expectations would most likely centre on a Gross Domestic Product (GDP) growth rate of 2.35percent to 2.42percent, inflation rate of 12.32percent, external reserve of about $41.44 billion and crude oil price at the rate of $59.2 PBL. Others, according to economist, Dr. Biodun Adedipe, would include exchange rate of N306 and N364/per dollar, diesel price of N205, and interest rate of a lower double digit.With that in mind, below are some of the most important expectations from the government, stakeholders and Nigerians in need of housing in 2020 as expressed by the Housing Development Advocacy Network – HDAN.
Agenda Setting and Expectations from the Federal Government& Other Stakeholders in 2020
In terms of a recovery, hope of a total recovery for Nigeria real estate in 2020 might not be in sight, as industry experts have predicted that there won’t be a guaranteed rapid growth in the property market. Instead, they anticipate a combination of heightened uncertainty, as financial and political issues globally gets tighter, but a possibility for increased access to housing for the lower echelon of the Nigerian population, if certain reforms are implemented.
For instance, rather than seeking to raise an infrastructure bond of 10trillion to pay contractors (a practice that would likely continue to promote cronyism), the Federal Government should facilitate the creation of an enabling environment for infrastructure and housing guarantees to thrive. Such a policy move will also spur a derivative market that allows asset backed Investments in infrastructure and housing to grow and attract requisite Investments from local and foreign Investors. Nigeria’s infrastructure needs have the proven cash flow models to match returns with risk per virtue of our population size and the increasing demand for better service alternatives (Proven and Successful cases are MM2 and Lekki toll gate).
The government must keep off from involving in direct construction of housing and infrastructure, in order not to create a clash of interest and focus solely on its core responsibilities of creating an enabling environment for business and investment to thrive through effective legislation and enforcement of policy. From our view and experience, the government should be leaning towards credible partnerships with the private sector in terms of infrastructure and housing developers who have proven track record for infrastructure and housing delivery even in the absence of government support. Such private sector players need this partnership with the government in order to deliver more in 2020.
The federal government in response to global best practice should be fixated in creating incentives that will stimulate infrastructure and housing development. Incentives should be given to players and developers who are providing infrastructure and housing services for lower to upcoming middle income segments and those who really need the housing and infrastructure. Following and in support of such incentives, the government could promote policy initiatives that better positions and drives demand for large corporates and multinationals to allot investment and funding towards affordable housing – e.g. Shoprite, Honeywell, Shell, Oando, Churchgate, Julius Berger, RCC etc.
The government should push for the amendment of laws that will foster infrastructure and housing sector development. If done, this will increase sector’s contribution to GDP of Nigeria.The Federal government under the aegis of the Central Bank of Nigeria should ensure absolute implementation of the Interest drawback system for the housing sector, and should be done in collaboration with critical private sector and public sector players to avoid political mis-use or diversion.Asides the absence of liquidity in the market, the myriad of challenges bedevilling the sector including high cost of land registration and titling, policy and licensing issues, lack of risk sharing mechanism, lack of adequate credit database, knowledge gaps, lack of favourable contract enforcement mechanism, cost of construction, high skilled labour costs, and costs associated with poor infrastructures may continue to worsen the woes of the industry except things are changed rapidly
Stakeholders expect the Federal Ministry of Works and Housing to deliver and eventually close the delivery of its National Housing Programme which is expected to deliver affordable housing to Nigerians across the country’s six geopolitical zones and subsequently empower private sector players to deepen and carry on with the efforts already made in partnership with the government while the government takes a back sit and regulator role going forward.
Stakeholders expect that the Minister of Works and Housing, Babatunde Fashola steer clear of controversial assertions that might plunge the housing and infrastructure markets into deeper uncertainty. Challenging the likes of World Bank on housing deficit or claiming that Nigerian roads are better than reported creates a body language of insincerity of character and purpose. Such will only cause investors to price our infrastructure Investments with a higher risk premium. You can’t lend money to a man whose words do not match with reality (too risky). Rather than seeking to raise an infrastructure bond of 10trillion to pay contractors, the government should facilitate the creation of an enabling environment for infrastructure and housing guarantees to thrive. This will also allow a derivative market that drives asset backed Investments in infrastructure and housing to grow and attract requisite Investments from local and foreign Investors. Nigeria’s infrastructure has the proven cash flow models to match returns with risk per virtue of our growing population and the desire for better and improved service alternatives for infrastructure and housing.
National Assembly
It is the expectation of stakeholders that the National Assembly would become more people focused and expedite actions to review infrastructure and housing related laws that are necessary for the sector’s speedy growth and to ameliorate the growing restive population in terms of infrastructure and housing provision.
After decades of neglect, the 9th National Assembly, especially the Senate and its new leadership under Senator Ahmed Lawan, must realize that a lot of legislation is needed to develop Nigeria’s housing and infrastructure sectors. This call has been made several times by the Housing Development Advocacy Group of Nigeria who believe that with good legislation, some of the perennial problems – notably land use act – bedevilling the sector will be ameliorated. The group is already working with stakeholders and the committee on housing to see that these laws including foreclosure, NHF, housing sector regulation bill, and other affordable housing legislations are passed.
Central Bank of Nigeria
The Central Bank of Nigeria should in 2020 see to the complete fruition of the mortgage interest drawbackscheme andcollaborate with the bankers committee towards deepening the liquidity and opportunities derivable from affordable housing and mortgage provision. The Central Bank is also required to broaden its engagement skill set and extend its hand of fellowship and the benefits it has accorded to Commercial Banks to other financial institutions regardless of the systemic risk or balance sheet size as this will improve its monetary policy effectiveness.
The bank should also become more sustainable in its focus by seizing every and any opportunity to address issues with predatory banking and do more with regards to high lending rates in terms of regulation and ensuring that those who want to access mortgages have various options and can also afford them in order to rent and or own their homes while accumulating disposable income (which has always been the time tested one of the most globally accepted means of wealth creation). we call on cbn Governor not renovate National Theatre iganmu with N32billion.We advise that such fund should be given to family homes funds for social housing
Family Homes Funds ( FG Social Housing Initiative)
With an allocation of up to N30 billion, the federal government social housing scheme, Family Homes Funds, is expected to consolidate on already made progress in the provision of affordable housing to low income earning Nigerians across the country.
The Fund is expected to sign up on more agreements like it did in 2019 in order to provide more affordable housing to those who need them.
More results are expected in terms of the physical delivery of those houses, following the paper agreements that have been signed.
The Fund should also consolidate on its ongoing partnership initiatives in order to tap into the competitive advantages of other bodies in the sector as it moves towards its goals.
Government must have the political will to make family homes funds a success story, and every politicking or interference from politicians that can affect the achievement of its mandate must be resisted by all stakeholders and advocacy groups in the sector.The management team of FHF is a great asset to the attainment of the goal
Federal Mortgage Bank of Nigeria
It is worthy to acknowledge the current achievements of the leadership of the bank under which a lot of innovations have been brought on by the management, but in spite of this, a lot of stakeholders still expect more to be done especially in the area of transparency and audited accounts.
The bank should strike more partnership with other public and private institutions in the housing sector to achieve common goals. FMBN should build on the present awareness campaigns on how to access and benefit from NHF.The pending NHF act 2018 must involve the inputs and involvement of all stakeholders including the advocacy group. All outstanding estate development loans must be recovered to enable the bank to provide more houses.
The bank must sustain the rent to own and cooperative housing schemes that were recently introduced. FMBN should do more collaboration with Family Homes Funds, NMRC, MBAN, REDAN, AUHF, Shelter Afrique.
Nigeria Mortgage Refinance Company
The Nigeria Mortgage Refinance Company is making some progress under the present management.
The major challenge to resolve for efficient performance is the impediments that come with the fact that its board of directors largely consist of mangers of its prime customers which by global standards is a textbook case of conflict of interest. It is expected that its regulators under their code of governance laws should make necessary efforts to address and resolve this Achilles foot.
However two critical areas where the company is in pole position to change the housing market landscape in 2020 is in the introduction of technology, policy innovations towards addressing Nigeria’s housing and land use laws while positioning mortgage banks and brokers for a futuristic, fast changing and customer focused model of housing finance through the soon to be launched Mortgage Guarantee Scheme in partnership with the Central Bank and other stakeholders.We call on NMRC to collaborate with AUHF in making 2020 Nigeria Housing data year
Commercial & Merchant Banks
While commercial and Merchant Banks are out to increase their stakeholders profits, the current foray into real estate and mortgage lending is largely mercantilist and very unaffordable for many Nigerians except the few rich ones. It is also known that the long tenure of housing projects discourages commercial banks from financing them. If that be the case, they should be more compliant in the area of contributions to the National Housing Funds as mandated by its act.
Feelers from the Federal Mortgage Bank suggests that Banking Institutions and Insurance Companies are not fully complying with regards contributions of portions of profit before tax as stipulated by the act, and this we believe ought to change. We however expect as already stated, that the Central Bank of Nigeria and the Federal Government should consider as a priority the need to resolve the oversight issues that currently exist with FMBN’s administration of the NHF system to enable participation by commercial banks, insurance, pensions and other investors for wider reach and impact.
Development Finance & Multilateral Institutions
Aside from the activities of the World Bank in focusing on housing development through the national housing finance programme in partnership with Central Bank and the ministry of finance, most development finance and multilateral institutions both local and foreign have left so much to be desired in terms of their contributions to affordable housing development and mortgage finance.
We understand the challenges posed by Nigeria’s sovereign ratings and socio-political terrain but multilateral institutions also invest in terrains that have worse conditions and as such should not make Nigeria a poster child of uncertainty by requiring sovereign guarantees are putting in place unbearably stringent conditions for investing in the affordable housing and mortgages. We do commend the efforts of Shelter Afrique and the Africa Development Bank but as Africa focused financial institutions, they can do far better than what they have so far proposed particularly in the areas of Mortgage Financing and Affordable Housing Provision.
Expectations from Housing Sector Stakeholders in 2020
Stakeholders in 2020 should focus more on purposeful collaboration between and among members of the sector in order to achieve better results and in quicker time.
The stakeholders and practitioners should not only focus on engaging government for cheap funding and interventions but to also pressurize government across all strata to do more of policy enablement and regulations in 2020. It is time to drive for more engagement with other stakeholder institutions such as Multinationals, Large Corporates and Faith based organisations to seek alternative solutions to affordable housing challenges in the country.
Housing Development Advocacy Network
The Housing Development Advocacy Network will also be expected to sustain its stakeholders’ engagement initiatives and its advocacies regarding affordable housing, housing sector policies and general innovation in the sector. More stakeholders are expected to join in and work towards a common goal.In the same vein, housing sector expert, Kunle Faleti, noted that in a country of uncertain economic times and limited resources, it is more important than ever to ensure that there are affordable housing options for families and individuals in need for generations to come.
HDAN, he said, must strive is to be a catalyst that will cause Nigeria’s leaders to find ways to dramatically increase capacity and production to close the gap that exists between the supply and demand for affordable housing.All over the world, Stakeholders and Special Interest Groups converge for common interest, and from within, develop lobbyists and advocacy platforms to pressure government.
One essential component of HDAN is its Public Policy Education and Advocacy goal that aims to support efforts to promote policies – both legislative and regulatory – that will improve housing opportunities for those in need. HDAN must engage every level of its membership and use the combined experience to develop and promote national, state and local policies aimed at narrowing the housing affordability gap of rental homes for lower income persons / the very poor and stabilize communities.HDAN must work with other practitioners and interest groups / advocates to advance its goal.HDAN priorities will continue to focus on the following for the immediate term;
1. Advocacy for the reorganization and restructuring of FMBN and NHF.
2. Pioneer affordable housing as a platform for ending homelessness and restiveness.
3. Promote and support charitable giving through philanthropy and community partnerships.
IHS Abuja 2020
The 14th Abuja International Housing Show will hold in 2020. The show which is Africa’s biggest show in housing and construction is expected to attract more local and international stakeholders to dialogue on ways to improve the sector, innovation and expertise. It is also expected that other housing sector events in the sector will also lead up to their billing in 2020.
It is expected that some professional bodies in the housing sector that have recently changed their leadership will let such changes reflect in the way things are conducted in the coming years, especially with the development of their members to become globally competitive enough for the needs of the ever changing housing market.
Real Estate Developers Association of Nigeria – REDAN
All eyes are now on REDAN towards a successful hand over to a new president. The major task before the REDAN new president will be how to sustain advocacy, trainings and programs that the outgoing president has established. Beyond that, REDAN needs to adequately evolve as it stilllacks structure and institutional capacityunlike what was envisioned by its founders.
REDAN should become operationally sustainable. The new exco must follow the vision of the founders of REDAN which is to be a pressure group that will influence housing policy decisions in Nigeria.The incoming REDAN team must prioritise and see to the establishment of the REDAN act which will professionalise real estate business in Nigeria and to this end regulate its activities and protect many subscribers that have fallen victim as a result of lack of regulation.
The incoming REDAN leadership must do everything possible to attract erring and non-compliant members and must enforce unity.
Professional Bodies
The professionals bodies such NIA, NIESV, NITP, NIOB, NIQS, NSE, NIS, FOCI, APBM, and others must wake up to work together for the interest of the Nigeria housing and construction industry in the wake of salient issues like increased job losses to more competitive foreign labourers as well increase in the number of collapsed buildings across states in Nigeria amongst other matters.
The era of rivalry among professionals must end as we step into 2020. The building code bill which is aimed at regularising the sector must be championed by all stakeholders to foster collaboration, efficiency and effectiveness. The regulatory bodies must continue to leave above board. Professionalism, quality, job creation and youth development must become the cardinal focus for the long term.
Partnership for mass housing development
Leading affordable housing promoters such as Echostone International, Hydraform, Moladi, Lafarge, and other construction technology promoters that can help in increasing the spate of housing delivery from conventional methods to full blown mass manufacturing methods should become more active in the coming year and expand their frontiers.
The need to expand their frontiers include investing in Nigeria and the people for the long-term rather than hoping to gain arbitrage by demanding that local partners and subscribers bear all the risk as the current approach will see them continue to miss out on the opportunities that abound in affordable housing and mortgage finance,
Hike in price of cement and building materials
If there is any other area that government must intervene, it is the issue of regular hike in the price of cement and other building materials. It will be difficult to attain affordable housing without looking into the components of housing construction most of which are imported. Nigeria must begin to promote policies that will attract investments in the development of local manufacturing of building materials by adopting results of research centres like NBRI and Universities for local building materials development and manufacturing.
There is also the longstanding argument about a quasi-monopoly in the production of cement. The government should enable an equal playing field to facilitate innovation and competition that can drive down the cost of building materials. More so, government should encourage and support the development of alternatives to cement. For building sustainability in the 21st century, there are several alternatives to cement which have been successfully implemented in several places. These alternatives are not only dependable but cheaper.
Import duty wavers should also be introduced for those who import certain resources that are not locally available to enable the local production of building materials. If the cost of building materials like cement are reduced, it will definitely help increase the production of affordable houses for more Nigerians in need of houses, if this is not achieved, 2020 being a landmark years like many before it will only continue to mark the dream of owning a home as still being impossible for majority of Nigerians.
Predictions for 2020
Private Equity Participation, Mergers & Acquisition in Housing finance
In 2020, there is an expectation for more mergers and acquisitions especially in the mortgage sector of the Nigerian economy. In 2019, Trust Bond Mortgage, Abbey Building Society, Resort Savings and Loans have experienced acquisitions which has positioned them to deliver on their mandates. It is expected that more will follow suit, raise their capitals and provide affordable mortgages for more Nigerians on the low to upcoming middle-income range.
Linking Proptech & Cooperative Housing
As means of meeting the teeming demand for affordable housing there are opportunities in pursuing impact that the pooled effort offered by cooperative housing however it is also important that cooperative structures in Nigeria are bedevilled by governance issues as the enabling laws and cultural underpinnings that has made it a success and a force to be reckoned with is largely absent in Nigeria. This is where linking this opportunity with technology will become the next frontier for our affordable housing finance market. Proptech by itself will not yield the expected leverage in Nigeria but with the transactional base of Cooperative Housing and Mortgage the mutual benefits of both innovations should become a key focus for investors and practitioners in 2020.
Linking Youth Restiveness & Millennial Housing
For 2020, it is expected that there would still be lull in the provision of housing for the high-end segment, however, there would be a boost for those in low to upcoming middle-income, and hence the focus for developers/investors in 2020 should be how to develop a catchment market for the provision of housing for upcoming middle-income earners and the youthful or millennial segments of society if we are to successfully combat restiveness, banditry, kidnapping, and terrorism.
