Following the consolidation and recapitalization of the banking sector in 2005 which produced 25 ‘strong’ banks, many of the banks established mortgage institutions that seemingly offered primary mortgage services to Nigerians.
Expectedly, this move crowded the small space occupied by the mortgage sector in the financial system.
Moved also by the boom in the stock market, coupled with a buoyant economy that led to the boom in the real estate sector between 2007 and the last quarter of 2008, these banks set up real estate companies that developed houses for the property market.
For whatever reasons, but apparently to ease access to homes, all of these mortgage institutions went to the mill and churned out mortgage (home) products. Today, there are as many mortgage products as there are primary mortgage institutions multiplied by at least five. At the last count, there were about 91 operational mortgage institutions at different locations in Nigeria offering one form of mortgage service or another.
First City Monument Bank’s (FCMB) My Home, former Bank PHB’s House Owners Advantage, Union Homes’ Home-At-Home Scheme (HATT), SpringMortgage’s First Home, Resort Savings and Loans’ RIMPLAN, Intercontinental Homes’ Home Plan, Cornerstone Mortgages’ Landlords Classic, and Personal Trust Savings and Loans’ HOMEBAC are just a few examples of mortgage products that entered the mortgage market at various times aimed at enabling prospective homeowners to access their dream homes.
We are concerned that the proliferation of these products has not translated into an increase in homeownership. Though the proliferation in itself is a positive development, it is lamentable that it is yet to trickle down to the point of highest need.
In spite of all pretensions, these products are hard to come by, and this difficulty is traceable to difficult operating environment, low awareness and knowledge level, high interest rate, and low capital base of the mortgage institutions, including the Federal Mortgage Bank of Nigeria, the apex mortgage bank in the country.
As at 2007, the apex bank had paid-up capital of about N2.5 billion and a staggering liability of N49.5 billion, or $17,000,877 and $336,600,000, respectively. This was at variance with what obtained in Malaysia, Hong Kong, Mexico (2008) and South Africa (2008), which had paid-up capital of $40,350,978, $257,871,861, $342,235,042, $80,421,000, respectively, with far less liabilities.
We share the views of industry operators that mortgage products can make impact on housing only when there is government intervention. We believe strongly in private sector-driven economy. However, we advocate government intervention by way of mortgage sector reform through consolidation and recapitalization.
We want to see mortgage products that enable first time home buyers to buy homes on terms that are agreeable, serviceable, bearable and friendly to the borrower and profitable to the lender.
This, in our opinion, can only happen when government, through the Central Bank which regulates the operations of these mortgage institutions, replicates what it has just done with the commercial banks. Only this can separate real mortgage institutions capable of offering real mortgage services from rent and ‘Esusu’ collectors.
