Official records place the country’s housing deficit at 17 million units. In the current economic downturn, the real estate sector contracted by -7.4% y/y in Q3 2016 after -5.3% the previous quarter. Demand for residential property has been relatively low and resulted in some cases in subdued prices for rental accommodation. This month, we learnt that the Federal Mortgage Bank of Nigeria (FMBN) is currently developing a diaspora mortgage housing scheme to assist Nigerians living abroad own homes in Nigeria; by its estimates the diaspora community is as large as 17 million.
The Federal Housing Authority recently disclosed that mortgage default cases in Lagos rose sharply last year. This reflects the squeeze in purchasing power across income earners in the country.
The housing deficit in Lagos State alone is estimated at 2.9 million units. We gather that the Lagos State government aims to develop 20,000 housing units over the next three years. This initiative will be modelled as a rent-to-own scheme, which will afford first-time home buyers with a verifiable source of income the opportunity to own their homes.
Successful candidates will be required to pay 5% of the total value of the property as a down payment while the balance is to be spread over a ten year repayment period. The scheme is an improvement on the previous administration’s Lagos home ownership mortgage scheme, which required an initial deposit of 30% of the total cost.
The FGN also has plans to develop a similar scheme but only for low income earners. The plans include the construction of 360 houses in the first phase through a public private partnership. Based on industry estimates, about 700,000 housing units are required on an annual basis to bridge the housing deficit.
Furthermore, on the supply side the FMBN is expected to receive up to US$2bn from Shelter Afrique (a pan-African housing finance institution) for the construction of 10,000 housing units across Nigeria.
About US$200m will be disbursed annually to real estate developers. This should spur growth in the construction sector and the ripple effect will create additional jobs.
These efforts together indicate that the FGN is moving in the right direction in terms of housing provision.
However, there is a possibility that most of these housing units are located fairly distant from the city centers, so the repair of road networks to ease commuting also needs to be considered.