FMBN’s drive to boost affordable housing, make NHF worker-friendly

Given the chequered history of the Federal Mortgage Bank of Nigeria (FMBN), the country’s apex mortgage institution, and the urgent need for sustained growth in the housing sector, the drive by the bank to bridge the housing demand-supply gap by boosting affordable housing delivery and making the National Housing Fund (NHF) accessible and worker-friendly; the introduction of the rent-to-own homeownership scheme, among others, are positive developments that are not only rewriting the bank’s story, but also benefiting Nigerian people and economy, writes CHUKA UROKO, Property Editor

The Federal Mortgage Bank of Nigeria (FMBN), the foremost mortgage institution in the country, was established as a child of circumstance aimed to provide the mortgage needs and solve the housing problems of the citizens. Over time, it has had its ups and downs, reflecting the various economic cycles the country has gone through.
However, the bank has demonstrated commitment to promoting safe, decent and affordable housing delivery for Nigerian workers, especially those who are in the low and medium income brackets and face serious challenges raising capital to build or purchase their own homes.
In the past 16 months, the bank, under the leadership of Ahmed Dangiwa as managing director, has retooled and enhanced its existing housing programmes to fix identified gaps that have militated against speed, efficiency, and impact. And, in response to the changing times, it has also created new innovative products that are designed to better tackle the peculiar housing challenges that Nigerian workers face in today’s economy.
This is a good thing for the country’s housing development. More so, given the chequered history of the country’s foremost mortgage institution and the urgent need for sustained growth in the housing sector. Sustaining these reforms at FMBN will help unleash the potential of the bank to deepen mortgage penetration and drive mass social housing in line with its mandate. It will also, over time, contribute in significant measure to reducing the worrying and embarrassingly high national housing deficit which the World Bank estimates at 17 million units, but housing experts put at 22 million units.
There are, indeed, scores of programmes that demonstrate the new management’s commitment to affordable housing delivery. One notable example is the historic revision of equity contribution for accessing mortgage loans from the National Housing Fund (NHF) – a contributory social savings scheme designed to mobilize long-term funds from Nigerian workers, banks, insurance companies and the federal government to advance concessionary loans to contributors.
This action has not only eliminated equity contribution for the lower band of housing loans but also effected a massive reduction in the amount of money that workers who contribute to the fund are required to bring up before they can get a housing loan.
Specifically, FMBN’s downward review of the decades-old unrealistic and difficult to achieve equity requirement has now made it possible for low income workers who contribute to the housing fund for a period of six months to get loans of up to N5million to own their homes without having to make any down-payment.
Before now, it was mandatory for them to contribute at least ten percent of the housing loan amount before their application would be considered. The implication was that a middle-income civil servant, say on grade level eight, who needed a N5 million loan to buy or build his house was expected to put down, at least, N500,000, which is a tall order for a typical Nigerian civil servant.
By eliminating this requirement, FMBN has raised hope for millions of Nigerian workers in this category by removing a major financial obstacle which prevented them from actualizing their dream of living in their own homes.
Also included in the revised housing loan guidelines are the reduction of equity contributions for housing loans of up to N10 million and N15 million from 20 percent to 10 percent.
The review of the loan guidelines has now made the NHF housing loan window a programme that is aligned to the reality of the financial struggles that workers face as they try to match living expenses with stagnant low wages whose value is weakened by rising prices of food items, living cost and others.
Another equally significant move by the management of FMBN to make housing more affordable is the introduction of the Rent-to-Own scheme. The housing product provides an easy and convenient payment plan towards homeownership for Nigerian workers. Specifically, the scheme makes it possible for eligible workers who contribute to the NHF to move into FMBN homes as tenants, pay for and own the properties through monthly or yearly rent payments.
The rent to own scheme is a significant effort by the FMBN to boost affordable housing delivery for low- and medium-income earners in two major ways. First, it eliminates both the burden of workers having to suffer and save up large amounts of money required to build their homes or present as equity contribution for housing loans from mortgage banks. The second reason is that it also provides a friendly payment structure that allows workers the convenience to spread the cost of the homes over long periods of up to thirty years at single digit interest rate of only 9 percent.
It is good to know that the FMBN management plans to start the rent-to-own scheme on a pilot basis with about 3,000 houses across the nation. It is the right step to prove the practical viability of this innovative product before taking it to scale.
Recently, FMBN announced yet another promising housing development collaboration with the leading unions of Nigerian workers. The labour unions include the Nigeria Labor Congress, Trade Union Congress and the Nigeria Employers’ Consultative Association.
The FMBN unveiled the programme tagged ‘National Affordable Housing Delivery Programme for Nigerian Workers’ as a product of strategic collaboration between the mortgage institution and the labour unions towards addressing the housing requirement of workers currently estimated at 3,750,000 housing units. It also stated that the pilot phase of the programme aims to deliver 2,800 housing units in 14 sites across the country. This includes 200 houses in each of the six zones in addition to Lagos and Abuja.
According to the bank, key features of the housing programme are the emphasis on affordability and the focus on low and middle-income classes of workers. Planned house-types, therefore, include fully finished semi-detached bungalows and blocks of flats of one-bedroom, two-bedrooms, and three bedrooms.
The strategic partnership with labour unions in the project design, the research-based and industry-wide expert consultations as well as the emphasis on deploying innovative methods to build houses that are not only affordable but decent and safe make this initiative one of the few signature collaborations that have the necessary ingredients for success.
This can be explained in a couple of ways. First, by making labor leaders part of the housing initiative from the start and seeking their inputs into the design and modeling of the planned houses, the project has a stronger chance of reversing the disturbing trend of building houses that workers cannot afford.
The second implication is that by accepting the inputs of seasoned industry experts who have experience and knowledge of global trends in the provision and technologies that deliver social housing in the design of the model houses to be deployed, the chances of project failure have been greatly reduced. This is largely because the models are based on designs that have already been tested and found to be successful in other climes.
It is note-worthy and commendable that the FMBN management in its efforts to reposition the bank on the path of greater impact is putting, at the core of its housing projects, affordability, accessibility and the interest of the low-income Nigerian worker.
This is clear from the downward review of the equity requirements for accessing the NHF loan programme to the introduction of the Rent-to-Own home ownership scheme right down to the planned National Affordable Housing Delivery Programme.
By hinging its reform on these premises, the current management of is laying foundation for social housing and championing a new era of practical and realistic affordable housing that is specifically tailored towards meeting the housing challenges of the low- and medium-income earner in Nigeria.