Key highlight
- UPDC is forging a partnership with Nigeria’s pensions regulator, PenCom, to reduce the housing deficit among Nigerians
- About N14 trillion in pensions savings are being managed by PenCom, of which 80%, stuck in government bonds and other instruments, can be used to grow other sectors of the economy
- Middle-income housing may be the preferred segment for investment for UPDC
UPDC, an institutional property development company, has said it is developing a partnership with the pension regulatory commission, PenCom to reduce Nigeria’s housing deficit. The move is spurred by PenCom’s nod to allow holders of Retirement Savings Accounts to access 25% of their savings to invest in acquiring a home.
The revelation was made recently by the chief executive officer of UPDC, Odunayo Ojo, while addressing journalists at UPDC Hotel in Amuwo-Odofin LGA, Lagos.
The Pension Reform Act 2004 established the National Pension Commission (PenCom) as the body to regulate, supervise and ensure the effective administration of pension matters in Nigeria. The functions of the Commission include Regulation and supervision of the Scheme established under the Act.
UPDC is an institutional property company, founded in 1997, and listed on the NSE in 1998. UPDC has a track record in the acquisition, development, sale, and management of a diverse mix of commercial, residential, hospitality, and retail assets across Nigeria.
What Ojo said
Ojo said the pension industry has N14 trillion that is being managed, and about 80% of that money is stuck in government bonds and other instruments. He said while it is safe there, it’s not being used to address problems in other segments of the economy. He stated that due to a lot of advocacy the government decided that under certain conditions, Retirement Savings Account holders can use 25% of their savings to part-finance the acquisition of their homes so that by the time they retire the home will be theirs.
He said such assets can be used, with the collaboration of individual account holders, UPDC, and the relevant authorities to secure homes for Nigerian workers so that they can have a home for themselves when retiring.
The imperative of middle-income housing
Ojo said middle-income housing is the future of real estate in Nigeria, and It is the cornerstone of UPDC’s commercial direction.
“Affordable housing is important, but it requires the support of more than the private sector; it’s a collaboration between the private and public sectors. It’s how the industry is currently structured, and we also want to participate in that area. Bur for 2023, one of our major focuses will be to continue to sell that middle-income housing, especially workers’ housing,” he said.
“Sometime last year, the Pension Commission gave the directive that workers can use 25% of their retirement savings account as equity for housing acquisition projects. We intend to look at that area; we see it as a very good policy shift by the government; and we believe that this will improve the ability of workers especially to acquire their own homes.
“So we are actively looking at partnering with Pension Fund Administrators to create products that workers can able to own their own homes. If workers can be able to convert their rent into some form of payment plan to own their own homes under the right circumstances, especially if there is some flow of income, we can address workers and the housing shortage sector by sector and segment by segment.
The PenCom mix
He stressed that the moment that arrangement was approved by the PenCom, UPDC started engaging pension fund administrators who are the people that direct the use of these funds to create products.
“So what we did is that we started looking at what the average contribution of the average worker is; and we broke it into segments such as N50 million and above in their RSA account, N40 million and above, N30 million and above, etc., like a pyramid. The people with lower contributions are more than people with higher contributions, which is expected. So, what we decided to do was to look at the middle and see what middle-income earners can afford.
“Realistically, if they use 25% of their RSA account, how much more money do they need to complete it, we are using all that data to start to look at locations where such products can thrive. We are looking at locations where these products can be matched to people and be affordable. Luckily for us, in the Custodian Group, we also have a pension fund administrator called Crusaders Sterling; so we have a lot of data, and this is something that we are very serious about because we believe that it’s a sustainable way of providing housing.
“With this pension intervention, over the years people will have saved up for 10, 15, 20 years; you can start using some of that savings to meet your housing need, and we believe that in the not too far future, we will come back to the market as a result of this data analysis we have presented, and that’s how we are going to solve this problem, one person at a time.
“Within the next 18 months we believe that that product should be ready for the market, and we will deploy it,” Ojo said.