What NMRC has to offer low income earners, affordable housing

With its launch recently by the Federal Government, the Nigerian Mortgage Refinance Corporation (NMRC) has come to stay as an integral part of the country’s financial system, with special focus on housing finance and/or the mortgage system.

NMRC was established with the primary aim of resolving access to affordable housing finance and, more importantly, as a focal point for creating an enabling environment for housing finance by playing a strong developmental role in supporting the improvement of land and legal framework and housing development and construction.

The company, which sits as a financial intermediary between the Nigerian capital market and financial institutions that provide mortgage loans to average working Nigerian citizens, is the new hope for low-income earners who currently cannot afford the cost of a mortgage loan.

The expectation is that the successful implementation of this project would significantly increase the ability of the working Nigerian to buy a home by supporting the current housing demand with access to affordable finance through mortgage lending banks, while developers have to meet this cash demand for housing by building homes of real value and not of speculative value.

In her speech at the launching of the company, Ngozi Okonjo-Iweala, the minister of finance, announced that out of the $300 million interest-free loan from the World Bank, $25 million would be used for the establishment of a mortgage guarantee facility for lower-income borrowers, while another $25 million would be used to support the Federal Mortgage Bank of Nigeria (FMBN) to enable it to strengthen its programme on mass housing and also to pass on some of it to microfinance institutions to also enable them to on-lend to low-income people who want to carry out renovation work on their homes.

NMRC will provide mortgage-lending institutions with access to long-term finance at an affordable interest rate, thereby enabling mortgages to be issued by these institutions to Nigerians at longer tenors and affordable rates. This will afford average working Nigerian citizens an opportunity to buy a home and conveniently pay for it.

Estate developers’ reason for not delivering affordable housing has always been centred on land and the cost of its acquisition. Other reasons are lack of effective demand from the low-income buyers who are the target of such developments, which significantly narrows the profit margin.

With the establishment of NMRC, land may not be a major impediment to affordable housing development anymore because some of the states which have been selected as pilot scheme for the implementation of the refinance company are being encouraged to lower their cost of land and remove the encumbrances to its acquisition.

In his keynote address at the launch of the company, President Goodluck Jonathan listed four key enabling steps necessary for the company. These include the implementation of a computerised land registration system that would make it easier for citizens to receive certified titles, ownership and occupancy, verify certificates and transfer mortgages.

The second step is the reduction of land registration costs to users to as low as 3 percent, while the state governors should consider delegating Governor’s Consent to speed up land registration processes, just as he said there should be streamlining of foreclosure processes in case of default.

“The effort of the World Bank through the $300 million loan is expected to be supplemented by the private investors who will develop mass and good quality housing and creatively create homeownership options,” the president said, observing that as the housing market develops, there would be the need to ensure that it sustainably reaches the low-income groups.