Nigerians have been finding it difficult to access mortgage facilities for buying or building their own properties for several reasons. Apart from the fact that collaterals for getting such mortgages are far fetched, regulatory bodies have not deemed it right to moderate it for the benefit of the low income earners.
Also, mortgage facility can only work when a percentage of one’s income can pay the mortgage. So that tells one the kind of house he can afford. So if, for instance, one earns N20,000 a month as a low income earner, in a year he will earn N240,000. The maximum he can contribute is 30 per cent of that income to housing. If he is going to contribute 10 per cent of N240,000, then we are talking of N72,000 a year.
That is the lowest for a person who is on N20,000 a month. Now, if he is going to contribute N72,000 a year, you can imagine what he can afford. That will be a percentage of the interest he is paying and he also needs to pay the capital back. So we can start to do the calculation to see the kind of house he can afford. Therefore, if, for instance, his mortgage is 5 per cent of the property he is acquiring to own, then if N72,000 is 5 per cent, it means his property would not worth more than 20 times of N72,000. So he cannot afford to buy a house that is more than N1.5 million. So what kind of house can he get with N1.5 million. Such person probably can only afford a room where he is going to share a toilet and kitchen with other tenants. It is called communal housing in the US. And some of these communal houses can only become two bedrooms, three bedrooms and four bedrooms for larger families. So this is how you build a mortgage system. It has to be tailored to the income of the person.
In the views of Mr. Ladipo Lewis, Chairman, national Institute of Architects (NIA), Lagos chapter, the picture painted above is the worst case scenario. He said, “I am sure most people earn more than this. But imagine if it were a little bit better, then such things can work but as I have said, government does not have all the money to build houses. In fact, governments run into deficits when they do such things and if you look at what happened in the Soviet Union, that type of largess affected them.
“If you look at today, countries like Venezuela did it. Now they are reversing the policy where the government used its money to build houses for the people and practically gave the houses to them for free. Now those properties have appreciated in value, the owners want to sell them because they can’t afford to live in them anymore. So what we are looking at is because it is an economic system, you can’t bypass it; you need to work at it to create it.
“And when you create it, it creates revenue. The truth is this, if we actually develop the infrastructure and an enabling environment, people who collect interest rates at 1 per cent, 2 per cent abroad would come to Nigeria and be able to provide affordable housing for the poor. If we do that, if we create that enabling environment, then the investment would come in, then cost of housing would drop. There would be an abundance of it but we also have to watch it. Do you know why?
“When we create that enabling environment, we can also create a bubble and when the bubble bursts, it would also be bad for the economy because if there is too much investment in housing, you overbuild and the price would crash. That is what happened in 2008 that affected the whole world.
There was too much investment in real estate and it was manipulated, debts were being accrued and there was no security backing them. You just have to sign an agreement and move into a house and start to pay the mortgage.
“A lot of that affected development. It created a burble. So one has to be careful about that. So it has to be something that is structured and monitored. There were zero down payment packages created in America and investment in real estate was being seen as the most viable. Then these debts were bundled and sold to other people who did not look at it that these things were not backed with any security. When you do a mortgage, the security is the property but the engine is the person who lives in it. Income is what you are dependent on. If you recover the house, it is worthless if there is nobody to pay the mortgage for it,” he concluded.

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