The Federal Mortgage Bank of Nigeria (FMBN), Real Estate Developers Association of Nigeria (REDAN) and a pan-African finance institution, Shelter Afrique have joined forces to create a $2 billion affordable housing fund.
This is all you need to know about the plan to improve access to credit facility and reducing development costs for low-income housing:
1. The money, will be disbursed at $200 million yearly to real estate developers, to help in financing the construction of a targeted 10,000 homes over the next 10 years.
2. Activities to be generated from the construction works are expected to create more than 150,000 jobs.
3. The Federal Government would waive an initial 10 per cent payment on mortgages below N5 million or $15,700, being administered by the FMBN. This is targeted at future homeowners planning to take out mortgages in the low-to-mid price range.
4. The injection of the $2 billion fund is also to keep mortgage rates in affordable housing schemes at well under the average 23 per cent, with a target of 9.99 per cent and payable over 20 years.
5. Under this arrangement, prospective buyers are required to make an initial deposit of 10 per cent of the house value to qualify for these home loans; 70 per cent of the mortgages are expected to go to houses priced between N2.5m ($7, 900) and N4.5m ($20,000).
6. The scheme would be financed through the Sovereign Wealth Fund, Federal Government bonds and Bank of New York, and work as a public-private partnership (PPP).
7. It is also expected to promote the development of primary mortgage institutions, which tend to have a narrow banking licence and are generally reliant on wholesale funding, making them more vulnerable in times of financial or economic crisis.
These changes will come as welcome news to many Nigerians, especially half of the population living on less than $1 a day. Although this intervention is low by standards in more developed economies, but it puts Nigeria roughly in line with many other large African markets.
That’s your clue, real estate developers!