With the housing deficit running into the tens of millions, many Nigerians are faced with the challenge of owning their own home at some point in their lives. No doubt buying or building is one of the options available, but only very few have the financial strength to do so due to the huge capital usually required.
Normally, mortgage was a viable alternative to owning a home, but several factors made it difficult for most Nigerians to obtain mortgages.
Some real estate experts, who spoke with Nairametrics in separate interviews, highlighted these factors that make it difficult for most Nigerians to own property through mortgage. According to them, these factors will continue to make access to mortgage loans a mirage for the average Nigerian.
What the experts say
Company Secretary, Living Trust Mortgage Bank Plc, Timothy Gbadian, explained that high interest rate, low wages and corruption are some of the main factors that make it difficult for most Nigerians to obtain a home-owning mortgage.
According to him, if these challenges are not addressed, they will continue to make mortgage access a mirage for the average Nigerian.
He said, “Getting a mortgage in Nigeria at an interest rate of around 17% or in some rare cases 16%. If the bank wants to give you N14 million and your salary is N120,000 in a state capital like Osogbo for example.
“Of this N120,000, your mortgage amount should not exceed N40,000. What type of property would you buy up to N40,000 that would be able to service principal plus interest within a 10-year period? So when you look at a mortgage Commercial real estate as it is. It’s out of reach for the masses.”
Gbadian said the mortgage industry in the Western world is dominated by three players in that cycle. Mortgage brokers, mortgage service providers, and mortgage financiers.
“Mortgage brokers are the ones who do the prequalification. They are like marketers, they get all the details, do the basic work required and send it to the servants. The servants are the ones who will finance the mortgage. They do the due diligence that the mortgage brokers did, they do their little checks, And they give money.
The third tier that consists of mortgage financiers is similar to the market itself. The market finances it. They can just go to the market and collect the bonds. They have different ways of raising money. The thing is, our system is different. Here, what the mortgage broker and service provider do is what mortgage banks do,” He said.
Gbenga Adebowale, another real estate expert who is a member of the Nigerian Institute of Builders, agrees with Gbadeyan that the industry has not had a mortgage financier for many years.
According to him, on this basis, the Mortgage Bankers Association met with the Ministry of Finance and there were a lot of engagements which led to the creation of the Nigeria Mortgage Refinance Corporation (NMRC).
He explained that NMRC was created as a liquidity vehicle. They are the ones who go to the market to issue the bonds and the primary mortgage banks can then demand liquidity from them but the situation is still different from what is obtained abroad in the sense that in order for the primary mortgage banks to request liquidity from the NMRC, they need to give them a block of ideal mortgages. They must have created those mortgages for at least six months. Banks also cannot get as many funds as you are looking for. They must meet the standard underwriting standard.
“Mortgage is affordable in the Western world because all mortgage rates are single digits. The highest you will get in the region will be six to seven percent. This brings more people into the affordability bracket.
“In Nigeria, people fix their money in a mortgage bank at up to 12%. Even NMRC, when they give money to banks, their rates are as high as 12%. So, can any mortgage bank now give you a single digit mortgage? That’s Impossible. The business of banks is the business of margins and brokerage.” Adebowale said.
He added that the systematic corruption in the private and public sectors made the process of obtaining a mortgage, especially government-financed mortgage schemes, very difficult.
It appears that until global best practices in this sector are adopted in the country, along with a significant shift in the average wage structure, the topic of mortgage will remain a distant reality for most Nigerians.
Comparing the earning power of the West with Nigeria, it is observed that the driver earns between $1,000 to $3,000 per month, while the professors do not earn much in Nigeria. If these issues are not fixed, no matter what kind of inclusion you drive in Nigeria, it will keep a lot of people out of the category.