Real Estates Developers have expressed fears regarding the transparency of the selection process of the Central Bank of Nigeria’s N200 billion Housing intervention programme targeted at low-income earners.
They tasked the apex bank to ensure genuine developers with sincere intentions benefit from it in the public’s interest.
This was disclosed by the Chairman, South West, Real Estate Developers Association of Nigeria (REDAN), Bamidele Onalaja, according to Punch.
He explained that he doubts the workability of the price tag of N2million on the housing units except in places such as Gombe, Jigawa and others but not in major cities across the nation.
Back story: Nairametrics reported when the CBN approved the sum of N200 billion as mortgage finance facility to the Family Homes Fund Limited (FHFL) and targeted at low-income earners.
According to a circular, which was issued by the CBN and seen by Nairametrics, this financing initiative is to be implemented in collaboration with the Family Homes Fund Limited as the lead developer, as it is introduced to support the Federal Government’s Economic Sustainability programme.
This fund is to fast track the construction of 300,000 homes in the 36 states of the federation and the Federal Capital Territory and to create up to 1.5 million jobs in 5 years
Onalaja, who is also the Managing Director, RevolutionPlus, advised Family Homes Fund Ltd to ensure they give only to those who were qualified with a track record of providing affordable housing.
He said, “Land acquisition is a major issue but it is not impossible. In states such as Jigawa and Gombe, a one bed may be possible excluding land.”
On the criteria for qualification, Onalaja stated that a developer should have genuine land with title while the CBN would provide a consultant.
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He said the association was elated because the facility type was a term loan to enable FHF to finance the construction of social housing units for low-income earners for a three-year tenor from the date of disbursement.
According to a statement issued by the association on Sunday, the fund is to fast track the construction of 300,000 homes in the country, in addition to creating up to 1.5million jobs in five years.
However, he lauded the initiative, adding that if sincerely applied, it would achieve the long dream of affordable housing by the public.
“In that regard, the programme will deliberately aim to revitalise local manufacture of construction materials. If the government is able to effectively handle their side of the bargain, then the whole programme will run through,” he added.
Lagos Real Estate Regulations: The peaks and the dips
The regulatory process also appears to be one that will help recover more taxes from real estate transactions and practitioners.
The Lagos state government recently enacted a Law: Lagos State Real Estate Transaction Regulatory Authority Law, which will curb activities of unscrupulous real estate agents and those who pose as estate developers to scam investors.
A lot of citizens have fallen victims to fictitious real estate investment opportunities that are non-existent in reality. Hence, this law will be enforced by the Lagos State Real Estate Transaction Department to avoid repeated occurrences.
Although, the department has now been upgraded to an agency called Lagos State Real Estate Regulatory Authority (LASRERA). The regulatory agency will coordinate, monitor and regulate the activities of practitioners in the real estate business in Lagos.
The regulatory process also appears to be one that will help recover more taxes from real estate transactions and practitioners. The government should track real estate transactions for tax remittance and inventory purposes. But with a process that improves real estate business efficiency.
Section 11 and 12 of the Code of Conduct states that;
(11) Agency fee(s) shall be as follows –
(b) Sale or Purchase of interests in Land and Buildings where two or more agents are retained by the owner/vendor for the sale, the fee shall be the 15 per cent of the total proceeds of the sale.
(12) A Licensed Real Estate Practitioner shall not prepare any legal document pertaining to any transaction handled by him but must be prepared by a Legal Practitioner and the fees shall not be more than 12.5 per cent of the total consideration.
This means that each principal in a transaction would bear a certain cost of at least 15% fee to realtors or brokers. The party who must also have an attorney will add an extra cost not more than 12.5%.
These closing costs are not the only cost associated with a real estate sale or a buy transaction. There are several other expenses associated with a real estate business or transaction. Any cost on a real estate transaction affects the asset value and a part of these costs recurs every time a piece of real estate is bought or sold.
There is an agelong deficit in housing inventory besides the over $900B dead capital. An increase in real estate transaction costs put a nail in the coffin of the already dead capital. This means the hope of resuscitating the dead capital is now almost zero.
Without a doubt, there is a need for proper inventory and records of real estate transactions. There must be other efficient ways to achieve an updated inventory, while also ensuring proper taxation where necessary.
For instance, in enforcing the land use charge in the year 2018, Lagos State embarked on an activity to capture the assessed value of properties in the state. The activity was carried out working with stakeholders in the state such as Estate Surveying and Valuation Companies. This shows that there can be a more efficient way to capture real estate transactions in the state without much increase in the transaction cost.
The 15 per cent fee as stated in Section 11b of the Code of Conduct would also appear as an incentive. To draft in for formal registration, more real estate professionals in the brokerage business. Although, this does not mean tax remittance will come naturally.
Going by the 27.5 per cent least added cost per sales transaction as suggested by the Code of Conduct, to an investor, there has to be a strong justification and value exchange for such fees. A real estate investor will prefer to reduce these fees as much as they can and in any ways possible; although, caution is advised here.
There are lots of creative ways to reduce transaction cost while getting the best value and also preventing falling victims of a scam.
A few ways to keep transaction costs low while still getting quality services are;
- Be real estate investment literate. Profitable real estate investing is not rocket science neither is it a walk in the park. For a first time or repeat investor, sufficient knowledge through education or experience is key.
- Set a clear real estate goal. A goal is a picture of the desired outcome with steps on how to get the desired outcome.
- Integrate teams and collaborate where possible on aspects of your real estate project or purchase regardless of your portfolio size.
- As a major decision-maker in your real estate purchase, you can leverage on relationships that you have built with experienced professionals where applicable.
Federal Mortgage Bank disburses additional 8,700 homes, N112 billion in three years
NHF collections increased by 80% or N186 billion to reach a cumulative amount of N418 billion as of September.
In a bid to boost the delivery of affordable housing for Nigerians, the Federal Mortgage Bank of Nigeria (FMBN) has disclosed that it spent an additional sum of N112 billion and built additional 8,700 new homes between 2017 and 2020.
This information was revealed in a statement issued by the Head, Corporate Communications Group of the Federal Mortgage Bank of Nigeria, Mr. Lawal Isa, on behalf of the Managing Director, Mr. Ahmed Dangiwa.
Highlights of the statement:
- The total sum of N265 billion has been disbursed as housing fund by the Federal Mortgage Bank of Nigeria. This sum indicates an increase of N112 billion or 74%, up from N152.5 billion disbursed by the institution as of 2017.
- About 8,700 new homes have been built between 2017 and 2020, representing a growth of 43 percent to attain a cumulative of 29,133 funded housing units.
- Within the period, the National Housing Fund (NHF) collections increased by 80% or N186 billion to reach a cumulative amount of N418 billion as of September.
- Home renovation micro-loans increased by over 2,000% from about 2,600 loans to about 56,000 loans in the last three years.
- About 570,000 contributors had been added to attain a contributor base of over 5.1 million NHF subscribers.
- 34 out of the 36 states of the Federation were compliant regarding workers’ contributions, with five states resuming contributions within the past three years.
How to own your home in 5 years without a mortgage
The invest-to-homeownership option is ideal when you do not have enough cash to buy a home in one fell swoop of payment.
Home ownership is usually top on the list of all the reasons why people want to invest in real estate, globally. Real estate is in no doubt an indispensable tool designed for the support and sustenance of human life. It is also a tool created for mankind to express creativity, desires, and ambition. When the Coronavirus pandemic spread across nations, governments were forced to give shelter-in-place orders, causing us all to stay in our homes for months. This shows that homes are indeed a necessity. Yet, it is beyond reach for many people in developing countries who desire to own one.
Mortgage loans are one of the common options for homeownership in many countries because it is believed to create some ease of home ownership. In Nigeria, mortgages have not been effective. In cases where it is accessible, it is expensive.
The case for mortgage ineffectiveness is a result of many underlying issues bedeviling our development as a nation. This article seeks to provide you with a creative homeownership option that is legitimate and efficient in achieving your real estate investment goal as an individual seeking to own a home.
The mortgage option requires you to provide equity of 20 – 30 percent of the total value of the home sale price. This also means that the home will be the collateral for the loan as you increase your equity over a period of years. Loss of income or ability to earn an income during the tenure of the mortgage translate in most cases to losing the home to the lender.
The loss of ability to earn income high enough to repay a mortgage is bad in itself. Losing that home to the lender makes it worse as you would have lost your homeowner status and in some cases, the equity.
An alternative to the mortgage option is the invest-to-homeownership. It is a creative real estate investment option. It allows you to invest equity with a real estate business or private home developer. The equity is used to execute projects and turned over until the equity builds up to an agreed amount required to own your home. This option creates leverage that is not available in the traditionally popular options.
The invest to homeownership option is ideal when you do not have enough cash to buy a home in one fell swoop of payment. It also does not need you to pay interest. Instead, the returns on your equity accumulate towards your home purchase. The real power of compounding in real estate comes into play.
Five major conditions that make invest-to-homeownership work
1. Your choice of the real estate developer
The developer must have a track record of executed and sold-out residential units. Invest-to-homeownership relies a great deal on the integrity of the developer. The first test of the integrity of a real estate entity is the track record and the quality of claims.
You should choose based on qualitative pieces of evidence and not emotions or appeal.
2. The project locations.
The developer must have ongoing residential projects in strategic locations of the city. These projects must be real and positioned to sell out. This is because not all locations are profitable for all kinds of real estate business goals.
3. The readiness of the developer to work with you
The developer must be desirous to accept your equity on respectable terms. This is because people management can sometimes be a tall order. If managing a bank loan will be easier, a developer may choose the bank above accepting to use your funds to execute projects thereby growing your homeownership equity.
4. Your mindset and belief
Many people, hold the belief that owning a home in Lagos, Nigeria is hard. This belief sets you up to miss creative opportunities.
Invest-to-homeownership option is a simple yet effective way to achieve a homeownership goal. A cheaper option that takes money out of your pocket fewer times than the popular mortgage option.
5. Ability to adopt and trust the process.
Your readiness as an intending homeowner and willingness to trust a transparent process when you find a developer who offers you one. The real estate investment terrain in Nigeria is still evolving. With many unpalatable experiences dotting the landscape. These experiences are due to a combination of several issues. Some real estate stakeholders have been able to master some fundamentals of the evolving terrain and can minimize foreseeable issues. Your ability to identify a trustworthy process, helps you harness the opportunity to own your home interest-free.
With the invest-to-homeownership option, the risk of losing your home to a lender in the case of protracted default or loss of income is eliminated. The developer that you choose to work with is obligated to deliver to the terms that will be agreed upon at the point of investment. You should carefully choose a stakeholder who can and will deliver on your homeownership goal in record time.
You may be interested or have questions about the possibility of the invest to homeownership option. In addition to letting you know this option is possible and available, we want to answer your questions too. Send ITHO via WhatsApp to 07062028677 or email to [email protected]