Issues Affecting Housing And Property Ownership In Nigeria

 

According to the Association of Housing Corporation of Nigeria (AHCN), the underdevelopment of Nigeria mortgage sector in driving home ownership is worrisome as more than 90 percent of new homes utilize funds from personal savings for incremental construction.

With about (25 percent), Home Ownership in Nigeria is relatively low compared to other countries such as South Africa (56 percent), Kenya (73 percent), Indonesia (84 percent) and Singapore (91 percent). 

Although the Nigeria’s Real Estate sector is currently growing at a fast pace— 6th largest sector of the economy at about 8.1 percent of GDP. However, majority of the growth recorded in the sector can be attributed to retail, industrial and commercial real estate development even though there has been a rise in demand for residential properties by the growing bourgeoisie.

The World bank had estimated that Nigeria still has housing deficit of about 17 million units which will require over $390 billion to fix.

Housing issues in Nigeria affects both the Rural and Urban settlement of the country. In the Rural settlement it is characterized by poor condition, and lack of potable water, toilet and decent environmental conditions.The Urban settlement on the other hand, is overcrowded as over 80 percent of Nigeria’s population live in urban areas, with inadequate infrastructural amenities.

The major issues that is continuously affecting housing in Nigeria include; 

Legislation: Since the year 1960, when Nigeria gained independence all the housing policies by the federal government, though laudable, have failed. 

Also, the Land Use Act of 1978 continues to dictate and hinder all land matters in Nigeria because land is vested in government. There is a need for this law to be amended to allow for easier land transaction and making available land for those who want to genuinely invest in the country.

This law has hindered a lot of development not just in the housing sector only. it has continuously prevent Foreign Direct Investment in the country because some investors are not just ready to go through the stress of the cumbersome process of land ownership in Nigeria, when they can easily set up in neighboring countries. According to a Corporate Services expert, that except for Shell Petroleum, there is no multinational company operating in Nigeria that owns real estate in Nigeria because they can’t just deal with the madness that goes with our land matters.

Another issue affecting housing in Nigeria is High cost of land registration and titling: This has been improving over the years, for example, according to World Bank’s report “Doing Business — How to Reform”, some reforms in Land registration especially in Lagos and Abuja led to the reduction of days required to complete the process of property registration from 274 days to 80 days in 2007. However, nearly a decade after, we have only been to reduce the process further by only 3 days as it now about 77 days to complete registration of property in Nigeria going through thirteen procedures and with an average of 10 percent (up to 20 percent in some states) of the property value as charges in the process according to the World Bank’s report “Doing Business 2015”. Whereas it takes 22 days, 4 percent and 5 procedures in OECD countries and 58 days, 8 percent and 6 procedures in other sub-Saharan African countries.

Despite the improvement recorded as a result of the reforms leading up to 2007, over 95% of lands in Nigeria do not have registered title according to the Chairman of the President Technical Committee on Land Reform in this report. Another challenge with this registration process is the culture and work ethics in different Land Registry Departments across the country.

Why does our own take forever? It’s very simple because Governor’s are the ones to sign Certificate of Occupancy. In a country like Singapore which leads in home ownership, it takes only about 5 days under 4 procedures and about 3 percent of the property value charged for registration. That should be our target but we can start with maximum of 30 days and 5 percent charge while working towards reducing the procedures considerably.

Policy Formulation which is also the national housing policy includes implementation, inadequate research and studies on the formulation and execution of the policy. For example, the Federal Government’s Affordable Home Ownership Scheme set up in 2014 to provide affordable housing to the lower end of the pyramid had the minimum price of N4.5million to be paid over a period of 15 years. Rough estimate of monthly repayment without interest element gives N25,000. Going by the National Housing Policy which states that not more 20% of monthly salary should be used to offset housing expenditure, it means that only someone with N125,000 monthly pay can afford the house. In a country where N18,000 is the minimum wage, I don’t see how this was/is going to work. Even some middle income earners as categorized by African Development Bank as people who earn between N75,000 and N300,000 are not able to afford home in this scheme because of the cost hence Affordable Housing Scheme has only provided about 3 percent of the required housing stock needed.

With efficient policy formulations and implementation as well as monitoring and evaluation of the performance of the policies to stimulate the private investor participation and not Government being in the business of building and delivering housing, land and property investment by every class of persons in Nigeria would be on the rise.

Inadequate Access to Finance and Risk Sharing Mechanisms is still an issue, although access to finance increased, according Global Findex (2014), from 30 percent in 2011 to 44 percent in 2014. Access to loan only grew from 2 percent to 5 percent within the same period. The concept of mortgage finance is still not popular in Nigeria due to lack of a robust system. Mortgage remains a very small percentage of Nigeria’s GDP, at 0.5 percent. In comparison to Ghana (2 percent), South Africa (31 percent), US (77 percent) and UK (80 percent).It is very clear that mortgage finance is still at very elementary stage in Nigeria and it does not cater to the low income earners.

The commercial banks, in addition to the PMBs, create mortgage loans for home acquisition with interest rate ranging between 11 and 31 percent with a down payment of up to 30 percent of the value of the property required for repayment period of 10–15 years. UN Habitat also acknowledged that there are “two extreme outcomes of current shelter systems being witnessed today: affordable shelter that is inadequate, and adequate shelter that is unaffordable.”

There are so many factors contributing to dearth of mortgage financing in Nigeria but top on the list will be liquidity issue i.e. absence of long term funding to match average duration of mortgage loans being 20 years (South Africa), 25 years (UK) or 30 years (USA).

Other issues affecting housing and property ownership in Nigeria, includes;

Lack of adequate Credit database, Knowledge gaps, Lack of favorable contract enforcement mechanism, High cost of building materials, and inadequate infrastructure.