Low-cost housing: New mortgage platform widens affordability net

Discourse on the Nigerian property market almost always centres on affordability, which explains the high vacancy rate estimated to be in the region of 20-30 percent in a country with 17 million housing units demand-supply gap.

For a combination of reasons including greed and low purchasing power of over 70 percent of Nigeria’s 160 million people, most property developers and investors build for the high-end market where only castles and mansions affordable by the rich in society are put on the market.

The few who build for the low-end market where demand is quite high complain of low patronage, low turnover and low margin, all because mortgage which helps buyers in this market  to own homes is literally non-existent and/or unaffordable at 20-22 percent (commercial) interest rate.

Interestingly, however, some real estate stakeholders have intervened with mortgage platforms which have widened the affordability net by accommodating the interest of low-income earners to enable them realise their dream of owning homes without overshooting their income, thereby offering hope for both the low-income home buyers and low-cost housing developers.

One of such mortgage platforms is being provided by Pison Housing Company, a real estate and housing finance advisory firm acting as mortgage loan originator and strategic developer.

According to officials of this company, this scheme, which is developed to provide homes for engaged professionals, civil servants and entrepreneurs with stable source of income, offers various convenient payment schemes for individuals who can meet specific primary requirements.

The mortgage plan schedule, they explain, can accommodate income earners between the N1.2 million and N9 million annual margin, adding that with a down equity contribution of 20 percent, intending homeowners can subscribe for up to 80 percent of their desired property ranging from N2 million to N15 million with an interest rate of 17 percent per annum on the amount borrowed with a tenor of three to seven years.

The scheme, however, demands the title document of the property as the collateral while principal repayment is scheduled for monthly, quarterly, half-yearly or yearly depending on the plan subscribed for.

The juicy part of the offer is that subscribers can split their balance into a periodic contribution while construction is in progress, thus affording them the opportunity to live in their homes while payment continues.

The opportunity also extends to developers who are willing to build for low-income earners within the said house price bracket. However, just like individuals, some basic requirements must be met such as building plan approvals and land title, but the projects must have reached advanced stage before such funds can be granted.

BusinessDay had reported in this section of the paper that Abbey Building Society plc, one of Nigeria’s old generation primary mortgage banks (PMBs), was also offering first-time home buyers similar mortgage platform to enable them own homes at the Teju Royal Garden Estate in Lagos.

The bank, which is also financing the development of 1,000 affordable housing units comprising 1, 2 & 3-bedroom semi-detached bungalows at the estate situated along Lagos-Badagry Expressway, is offering those wishing to buy from this estate 17 percent fixed interest rate mortgage repayable in seven-10 years.