- The new policy reducing equity deposits while seeking mortgage should boost home ownership and housing delivery
The cheery news came from Gombe, via the 7th National Housing Council on Lands, Housing and Urban Development, from the policy table of the Federal Ministry of Power, Works and Housing. Speaking at the meeting, Babatunde Fashola, the minister, announced that the Federal Mortgage Bank of Nigeria (FMBN) had been mandated to slash equity contributions by prospective applicants, for mortgage.
To start with, by the new policy, anyone applying for mortgage of N5 million and below, from the FMBN would no longer be required to have any savings as equity contribution. Even for mortgages from N6 million to N15 million, the concomitant savings are down from 20 per cent to 10 per cent of the housing loan.
As part of the revamped housing policy, the minister also announced the Federal Government’s intention to re-capitalise the National Housing Fund (NHF), and open it to workers in the private sector. This is to pave the way for more Nigerians to own their own homes.
The minister also issued a report card on the FMBN, vis-a-vis mortgage loans. Between May 2015 and July 10, 2018, according to the minister, FMBN granted 3, 362 mortgages to Nigerians to acquire their own homes. Given the serious housing deficit, that would appear not so impressive. Still, it is hoped that the new policy would help to galvanize more positive action on that front.
But beyond building homes or buying them, the minister also broached the imperative for a better deal for tenants, by landlords; given the cold reality that as ideal as home ownership can be, not everyone would end up building own houses.
In other words, there would always be the housing market, in which landlords and tenants play. Indeed, many invest in household property not because they want to live in these buildings but because they want to rent or let them out for income. The new thinking — which even as the former Lagos State governor had canvassed — involves better deal for tenants.
The first radical step, in that direction, is to make landlords collect not only monthly rent — as against annual rentals that predominate now — but to also collect the rent in arrears, not in advance, as in the current practice.
If this suggestion sails through, it would bring the housing market back to the pre-acute scarcity days, at least in bustling urban centres alike Lagos, Port Harcourt, Kano and other thumping Nigerian cities. It was the crippling scarcity that turned the housing sector into a seller’s market, where the landlord has made himself king. To reverse it, there must be a radical change in the market structure — a boom in housing delivery to revert the market to where the consumer is king.
It is doubtful if government policy-cum-legislation alone, or moral suasion, could revert the situation. Yet, it is good and sound thinking, for the moment almost every tenant can seamlessly pay his monthly rent, after he has received his salary, and goes ahead to settle other commitments, the market begins to enjoy a sustainability, such that the landlords themselves could become ultimate beneficiaries.
The challenge and beauty of this new FMBN policy are that, aggressively pushed and well publicised, every category of citizens with housing needs can benefit from it. That could lead to higher home ownership and even bigger housing delivery. For the very low earner, it is the mortgage equivalent of financial inclusion, epitomised by the collateral-free new trader loans.
