Affordability factor, demand slide spur investment interest in rent-to-own housing scheme
Slow activities in the economy, inability of many home seekers to buy or build their own homes and the attendant drop in demand for housing are major factors driving current investment interest in rent-to-own housing development and delivery, housing market close watchers have said.
Until lately, rent-to-own was not popular in this part of the world unlike the Western world where it is commonplace mainly because they have a well-developed mortgage system coupled with a functional legal system that aids foreclosure laws and discourages payment default.
Due to falling demand and/or lack of effective demand arising from declining purchasing power, many developers who have a large stock of housing are to offering rent-to-own option and one of such developers is Lagos State government which says it has built over 10,000 housing units for its mortgage scheme.
This special homeownership scheme, according to the state’s officials, is to accommodate the interest of people who cannot afford a mortgage now but, if given more time, would be able to and, according to Akinwunmi Ambode , the state governor, the scheme also aims to address housing deficit in the state.
Lagos with a housing deficit of about two million units, has large and growing population estimated at 18 million among whom are a large army of civil servants and informal sector workers who cannot afford the cost of houses in the state even at the current slide in both demand and price.
Ambode pointed out however, that it was unnecessary for a bachelor or spinster to own a three-bedroom flat, stressing that it was better for those in this category to get studio apartments and upgrade to more spacious accommodations when they were married and started having children.
The state government explains that the rent-to-own scheme was targeting teachers and junior public servants who could not, at this point, keep a mortgage because they had not worked for that long to acquire the kind of savings that was necessary.
“We have run the mortgage scheme for some time and we have seen that there are some people who cannot yet afford a mortgage but if we give them more time, we think they can. So, we are opening the door of accessibility further by starting this new scheme which we think will bring them in to benefit”, the governor said.
He explained that beneficiaries of this new initiative were expected to pay rent for a period after which they would be invited to take an offer to buy the houses, adding, “during that period, the scheme would have saved some of their rent for them as their equity to pay for mortgage and from there they migrate to become mortgage holders”.
Meanwhile, the managers of the Lagos Home Ownership Mortgage Scheme (LagosHOMS) have dismissed as untrue and unfounded, insinuations in some quarters that the mortgage scheme was having problems with subscribers some of who are alleged to be unable to pay the charge.
Kojo Sagoe, the executive secretary of the Lagos Mortgage Board—managers of LagosHOMS—told BusinessDay in an interview that the scheme did not have any client who had missed mortgage payment for three consecutive months.
“A key element of every mortgage relationship is communication. If a client is financially constrained at any payment period and communicates with us, it is our duty to sit down with such client and fashion out ways he or she can meet up with his or her financial obligation”, he explained.
“It will be unfair for us to quickly tag such a client as a defaulter. A client can only be said to have defaulted when such client fails to pay the monthly contribution for three consecutive months, then we can commence the foreclosure process”, he added.
CHUKA UROKO