If the implementation of the newly passed National Housing Fund (NHF) Act 2019 is fully carried out, banks might be compelled to reduce their mortgage financing to real estate sector, New Telegraph has learnt.
According to the Director, Deals Advisory, PWC , Mrs. Bola Adigun, this is due to the new housing law, which stipulates compulsory minimum investment of 10 per cent of banks’ profit before tax in the NHF.
Besides, she stated that insurance companies and Pension Funds Administrators were also compeled by the new law to make compulsory minimum investment of their profits to the funds.
According to the law, she said that penalty for non-compliance of up to N100 million was stipulated for corporates and N10million for individuals.
Giving the highlights of the new NHF Act 2019 at a summit organised by the Nigerian Institution of Estate Surveyors and Valuers, Lagos branch, the PWC’s director of deals advisory said workers were expected to contribute 2.5 per cent of their gross income to the fund, while 2.5 per cent levy was also on price of cement.
The implication of these on the real estate sector, Adigun pointed out would lead to increase in fund available for mortgage loans as a result of increased in inflow to the housing fund.
Apart from this, she said Nigerians might experience increase in the cost of housing as a result of the introduction of 2.5 per cent tax on cement.
New Telegraph gathered that there had been outcry from housing stakeholders over the new law as regards extra levy on price of cement, which has made them seeking fresh amendment to the law.
However, the PWC director told New Telegraph that as at present, the law was in public domain.
The PWC’s deals advisory expert listed poor access to loan facilities, high cost of building, difficulty in obtaining property titles, huge urban population, N20trillion mortgage finance deficit among other challenges of the real estate sector.
Giving analysis of the situation, she stated that only four percent of Nigerians over the age of 15 had received loan from a financial institution in 2017; while 85 per cent of the urban population lived in rented accommodation.
She also decried poor budgetary allocation to the housing sector, despite huge deficit.
Meanwhile, stakeholders in the the built environment are mounting pressure on the National Assembly to expedite action on outstanding housing bills before it.
Some of the bills, New Telegraph gathered, had been in the National Assembly since 2004, and are yet to be passed into law.
The housing bills for review and subsequent amendments include the Foreclosure Bill; Land Use Act of 1978; Real Estate (Regulation and Development) Bill 2018; Federal Government Housing Loans Bill; National Housing Fund (NHF) Scheme Act 1992; Mortgage Banks Act 1989 (subsumed in BOFIA); Federal Mortgage Bank Act of 1993; and Trustee Investment Act 1962. Others are the Nigeria Insurance Social Insurance Trust Fund (NSITF) Act 1993; Insurance Act 2002; Pension Funds Act 2004 (reviewed 2014); Investment and Security Act 1999; Federal Housing Authority Act 1990;Climate Change Adaptation Policy; Policy Creating the National Council on Housing for Sector Regulation; and securitsation Bill and other affordable housing policies.
On how to explore the current realities and fund projects, Adigun explained that typical and emerging real estate finance structures had presented opportunities for investors, practitioners and other stakeholders in the industry.
She listed pre-sales (upfront payment from potential tenants); equity financing, debt financing Public-Private Partnerships and mezzanine structure (convertible debt stock) as typical available real estate financing.
She urged investors and practitioners to explore other innovative structure for project finance, listing Real Estate Investment Trust (REITs), mortgages and specialised real estate She added that government efforts to revitalize the mortgage industry have positioned mortgages as a viable funding source to be explored for future real estate development in Nigeria.
According to her, Nigeria has continued to have strong fundamental factors for sizeable growth in real estate sector due to its growing middle class, growing population and urbanisation.
Talking about inherent opportunities for investors and private partners, Adigun said: “Nigeria’s middle class outnumbers that of any other states in sub-sahara Africa,” adding that with growing population of over 180 million, Nigeria offered enormous opportunities for real estate despite structural weaknesses in its economy.
“Nigeria has seven cities with a population of over one million people, presenting several possible markets for investors to enter,” she said.
On his part, Chairman, Lagos branch of NIESV, Mr. Adedotun Bamigbola, stated that paltry N60 billion budgetary allocation to housing would not make much impact considering the nation’s 17 million housing deficit.
“The issue is that the N60billion is going to make little or no impact. We still have a long way to go if we are supposed to cover from 17 million to 22 million housing deficit,” he said.
However, he noted that critical issues were actually funding, availability to land and technological and skill mindset of people in the industry.
While PPP seems to be one of the way out, Bamigbola warned that government needed to understand that it was not using contractors when it comes to the issue.
“It is more or less a joint venture. You have the private sector partnership with you, so you have to give that respect to the fact that some people are bringing in funds,’ he said.
He advised on the need to rejig the nation’s legal system and create value re-orientation to solve problem associated with securing cheap funds from abroad for project development by private investors.