Cheap houses coming as building firms adopt dry construction

Property developers in Nigeria have taken to dry construction as an alternative method of bridging the national housing gap. This is in an effort to by-pass high interest rates, which hover between 20 and 22 percent on mortgage loans (considered among the highest in the world) and which have constrained estate developers from delivering requisite housing for Nigerians.

Dry construction entails the use of wooden materials, including gypsum board, plywood, or wallboard, in construction, without the application of plaster or mortar. It is cheaper and makes home ownership affordable to a larger percentage of the population, experts say.

The growing housing deficit in Nigeria is currently estimated at over 17 million housing units, while a higher number of Nigerians are said to be living in either substandard or sub-human accommodations. It is the desire of the average Nigerian to own a house but the prevailing interest rates on mortgage facilities have precluded them from doing so.

To this end, many industry watchers are canvassing that builders be given access to pension funds to bring down the cost of building.

“In reality, interest rates are a bit on the high side and the economy has a major role to play on this. For example, the monetary policy by the Central Bank of Nigeria (CBN) has impacted on all sectors of the economy, including real estate”, Ben Akaneme, managing director, GT Homes (mortgage bankers) told BusinessDay in a telephone interview.

“The rate of borrowing has to be linked also to the rate of doing business in the country, which is relatively high,” he added.

Abimbola Olayinka, managing director, Resort Savings, who observed that the interest rate could go as high as 28 percent for estate developers, depending on the risks involved, said the rate could be reduced if the right structures were put in place.

There is the need for mortgage banks to have access to at least 50 percent of the pension fund, as this will go a long way in aiding mortgage institutions, he said, adding that there is also the need for an intervention fund by the federal government, as well as mortgage refinancing.

Supporting the claim, Ronald Ashkin, technical director, Growth and Employment in States (GEMS) who acknowledged the high lending rates also blamed them on the high risks of doing business in the country.

He however urged developers to employ alternative construction methods, such as dry construction, which delivers housing at reduced costs and within a shorter period, when compared to conventional building methods.

Ashkin observed that this would stimulate the supply chain to move faster, and consequently reduce the current housing deficit.

“These alternative building methods are cheaper. An example is the case of using bricks instead of concrete blocks, which is cheaper and affords developers the opportunity to deliver houses within a shorter period” he said.

He maintained that mortgage banks would develop with time and that lending rates would come down when competition in the sector increases.

Ibidire Adetunji-Lams, developer Freshland Estates, said the lending rates are extremely high, when compared to other parts of the world, and this has limited the efforts of developers at providing housing solutions, as they find it difficult to service loans at such rates.

He said the tendency of mortgage banks to only grant loans to established developers whom they perceived would be able to pay back, defeated the essence of the institution.

The experts fear that if this trend continues, the likeihood of most mid-income earners becoming home owners in the near future will remain a pipe dream.