How To Deepen Mortgage Market In Nigeria

In respect of its Rights Issue and Initial Public Offer, Resort Savings & Loans Plc, last week, held Completion Board Meeting in Lagos, after which Managing Director, Abimbola Olayinka, spoke to KAYLA GRAGE on the need to deepen the nation’s mortgage sector by creating more options for ‘home seekers. Excerpts:

How To Deepen Mortgage Market In Nigeria










WHAT significance does this completion board meeting hold for Resort Savings and Loans?
This particular event is to bring all the stakeholders together. Basically, we are coming out to the market to raise about N3.5 billion, because we have authorised share capital of N10 billion.
The essence is that we want to be the most capitalized mortgage bank in this country.
Secondly, we want to bring wealth to existing and new investors because we are doing a Rights Issue (in the form of one for three shares) and Initial Public Offer (IPO) for new investors to come and enjoy the benefit from RSL.
Mortgage is quite a new concept in this part of the world and it is gradually gaining ground. We strongly believe that this is the right time to invest in a mortgage sector and then you would be able to enjoy some perpetuity stream of good cash flow basically because you are dealing with a sector funding housing development.
Right now, there’s a housing deficit of 16 to 17 million in the market and we really want to take full advantage of that.
Real Estate appears not to be having the best outing at the Stock market despite the huge potentials of the sector…
No, I don’t agree with that. RSL is the most traded stock in the mortgage subsector of the capital market right now; I don’t believe that investors do not want to invest in the mortgage sector. Basically, it’s for those who only understand the mortgage market; it’s a long-term business and you can see from our projections that in a few years, we are going to generate some good dividends and good earnings. There is also the high possibility of having capital appreciation in the stock right now.
What do you hope to do with the funds from the Rights Issue And IPO?
There are four vehicles or projects where we are going to put the money. One of them is the Nigeria Mortgage and Financing Company initiated by the Mortgage Banking Association of Nigeria and now being co-funded by the Ministry of Finance and the Central Bank of Nigeria. We are investing in that company with about N400 million, and we are committing to that.
Apart from that, we intend to upgrade our IT infrastructure; we are already deploying e-payment channels all over, including ATM card but we are going to the next level we really want to update IT infrastructure in terms of networking. Also, we intend to open some cash offices and banks in specific locations to fund estate development in specific locations all over the country.
But first, we want to create mortgages and you can only create mortgages using long-term funds, equity is one of the keys you can use to do that.
An average Nigerian build house for five to six years. But the whole concept changed overtime such that, instead of saving and building for over five or 6 years, you can move into a house now, stop paying your rent and enjoy good facility; you can also enjoy capital appreciation on the property from the first day you purchased it.
We have to create awareness but the majority are within the average in terms of earning capacity. What they need is just a decent home. We are not looking at building houses of N50 million, N100million…no! Just look at the range of N10 million, N20 million, that’s our target market and there’s quite a number of people who can afford to pay decent mortgages towards owning a home.
We strongly believe that if you create the right awareness, they will come in with their savings over two to three years; after that, they can book mortgages.
Can you take us through your operations, the modus operandi, through which people can have access to these mortgages; is the process really as simple as you say?
Anybody can work into any of our branches and employee can provide our range of products that we have — from the national mortgage fund, to resort investment, mortgage plan and other packages.
It depends on what you want. We also have a large list of properties that you can purchase, so you can walk in and pick. We also have a very vibrant Estate department, both for managing and identifying properties you want, and you tell us the location and we can find the property. With that, we can create mortgages for you after you would have banked with us for, at least, six months to one year.
How does Nigerian laws on property and land use really affect mortgages?
The Land Use Act affects the mortgage sector because it’s a monster. It’s a monster because it’s a rigid law that has given all the power to the governor to do a lot of things on the land.
Basically, a land should be traded on the stock market as shares. We believe that, that’s the way it should be. All you need is to get your certificate of occupancy (C/O). After getting it, if you want to transfer your land from Mr. A to Mr. B, you don’t have to go for a governor’s consent.
We should just have a proper land registry that would be able to transact the land and sell the stocks.
But getting Certificate of Occupancy is very cumbersome; isn’t it?
We know, that’s just the first step; just make sure the land is tradable. The second step is for the Governor and those on the state authorities to avoid treating the land as something that cannot be given out.
They (governors) should treat the land as something that can be accessed and should make it available. Ultimately, the price of the houses would be affordable and then the cost of the mortgages also would be available to the average man on the street.
The National Housing Fund, as it were, has its own issues, as contributors complain of not being able to access housing loans; what really are the problems?
Well, there are issues in everything. The bottom line is that the National Housing Fund, you know, is on a subsidy scheme and it is also based on the contribution being made. The contribution, 2.5 percent of our basic pay, is very small.
The Federal Mortgage Bank of Nigeria can only give what they have. So, we need to deepen the contribution. The more Nigerians that go into it, the more contributions there are, the more funds that would be available to us as mortgage donor.
Are you canvassing an increase of the 2.5 percent statutory monthly contribution or that efforts should be made to deepen the market by bringing in more people into the scheme?
Both should be done. The number of people contributing to the fund is on the low side.
Do you see corruption in the scheme?
No. I don’t think so. The key thing is that people want to be convinced that it is actually real. So, a lot of people are still holding back, staying on the fence saying are you sure?” More daily marketing should be done.
When we go out marketing everyday, a lot of people say, ‘ are you sure we are going to get this loan?’ Process the loan and you see we are getting disbursement.
Some contributors don’t really have a choice of opting out…
But if you come to RSL, we will process a loan for you. No matter how much you’ve contributed the maximum you can borrow is N15 million subject to your ability to repay the loan; that is, your cash flow and not more than one-third of earnings, should be used in repaying the loan.
It is the bank that is carrying the risk on you because we are obtaining the fund from the FMBN that is holding the contribution of every one of us.
Basically, RSL is one of the mortgage banks that are accredited by the FMBN to partake in the National Housing Fund. Basically, once we feel comfortable with the customer and we feel he has a good cash flow and has the ability to pay the loan, we source the fund from the FMBN at four percent for on-lending to customer at six percent.
What other major issues do you see in Nigeria’s housing scheme(s)?
There are real issues in housing in Nigeria: The first one is cost of land. Cost of land is on the high side. Also, the cost of getting title to the land is also on the high side. Then, you now talk of cost of the building materials.
Basically, the first thing I said is the C/O. You should be able to treat it in such a way that when I’m transferring stocks within two to three percent, it will be the only cost.
But If I want to get my C/O now, it will cost me x amount of Naira, which shouldn’t be; it should be something that is affordable.
Lagos State is already working on that, they’ve broken down all the various locations in Lagos State to various land tenement rate. The per-square metre of various lands in various locations in Lagos State is on different levels in terms of when you want to do your mortgage, because the price you pay in Ikoyi should be different from the price in Ajegunle. They’ve done that, but we still believe that more should be done. By RSL Boss culled from TheGuardian

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