Housing sector optimistic as World Bank, REDAN set to float mutual guarantee fund
The World Bank and Real Estate Development Association of Nigeria (REDAN) have concluded arrangements for the setting up of Mutual Credit Guarantee Scheme (MCGS) as part of efforts at “fast-tracking housing delivery in the country.
To this end, the partners are expected to roll out five-year project plan that will enable up to 50 developers to participate in the mutual fund to be raised for effective take-off of the mutual credit guarantee scheme which is aimed at pooling and sharing risk that would enable the financial market to work for mostly smaller construction firms.
To achieve the feat, interested firms are to make sufficient contribution as a disincentive to willful default, limiting possible moral hazard effects on borrowers.
Michael Wong from the World Bank harped on Standardisation of processes and products in housing and guaranteed fund scheme for real estate developers in Nigeria at a REDAN/World Bank workshop in Abuja recently, explaining that the guarantee pools would operate on a given size and sequenced to ensure peer pressure as only 25-40 percent of outstanding guarantee will be issued to members of one pool.
Through the guaranteed fund, 50 percent contribution is to be made by participating developers (members) matched by 50 percent to be provided by GEM, Wong said, adding that REDAN is to set up a quality team while a committee consisting of participants, participating commercial banks and construction associations will act as an oversight of the risk covering facility.
To ensure effective take-off of the scheme, He assured that World Bank/GEM would field financial experts to develop detailed design operation manual and legal agreement.
In his presentation, Afolabi Imoukhuede, World Bank/GEM Consultant on housing delivery, assured that the role of GEM/PIU was in job creation and reduction in cost of housing delivery.
“We have decided to look into the problem of finance and the main problem there is off-takers. That’s what the financial institutions are not happy about. They see us as somebody who brings business plan but cannot guarantee the demand side.
“We will be working on that; we know people want to build; all we have to do is to work together, get our information right and then we are in business. This loan guarantee scheme is just a stimulus which will finish in 2018; we will be looking at something bigger where we will not need any aid or financial support; we will just be like an aeroplane and we will be flying by ourselves,” Afolabi said.
In his remarks, Bode Afolayan, REDAN President, disclosed that his association had successfully signed Memorandum of Understanding (MoU) with Lafarge Cement and Portland Paint as part of efforts to reduce the capital outlay in housing delivery.
Akintoye Adeoye, REDAN Vice President, who spoke on ‘Refocusing REDAN for Increase in Housing Delivery’ stressed the need for Federal Mortgage Bank of Nigeria (FMBN) to resume Estate Development Loan (EDL) which was suspended following the high burden of non-performing loans owed by some estate developers.
He also called on the Infrastructure Bank to provide credit for estate development while the Money Deposit Bank is to provide construction finance based on imperatives in the housing sector.
Some of the stakeholders who spoke at the meeting, stressed the need for the revival of the moribund steel company in a bid to reduce the cost of building materials, as well as high cost of land titling and acquisition; payment of compensation to reduce the cost of houses.
KEHINDE AKINTOLA