Across The Atlantic
Under the Prime Minister ship of the controversial former British Prime Minister, Margaret Thatcher, she influenced the House of Commons to pass the Housing Act of 1980 which gave five million council house tenants in England and Wales the right to purchase their houses from the local authority.
This came to define what was later known as Thatcherism as it made the mortgage system extremely popular and sturdily entrenched in the UK.
A new industry which is now valued at over a trillion pounds was born and workers especially in the Middle Class looked forward to buying their homes and hopefully having somewhere to call their own when they retired from active service.
This mortgage system idea spread like wildfire all across Europe and created a strong sense of individualism which house ownership symbolizes.
Local Nigerian Reality
Despite the long-standing influence of the UK on Nigeria via colonialism, neo-colonialism, education, trade etc, the ‘Giant of Africa’ has the unique peculiarity of running a cash and carry system as opposed to a credit system which defines the modus operandi of our erstwhile colonial masters.
It is not unusual for ‘Nigerian Big Boys’ to purchase choice homes by paying fully for them in cash even abroad.
The cash system due to the prohibitive nature of real estate greatly excludes a substantial number of the Middle Class who retire without their personal homes.
I had an interaction with a pensioner who doubles as a family friend of mine. He felt so bad that after spending over three decades in the civil service, he couldn’t afford to build a house either in Lagos or in his native Delta. He questioned the system of surreptitious state-sanctioned impoverishment as his landlord was an internet fraudster popularly called yahoo boys – talk about the bizarre lopsided reward system of Nigeria.
The local reality is that the mortgage system can only be backed by a credit system and not the current cash and carry system.
A ray of hope emerged when democracy returned to the country in 1999 after a 16-year military year interregnum. Many Multinationals flooded into the country to take advantage of the numerous opportunities the country offered via civil rule. This led to the revival of the hitherto dead Middle Class made so by the Structural Adjustment Program of the then General Ibrahim Badamosi Babangida. Many Nigerian employees were paid in foreign currency which made them financially comfortable and naturally, there was the desire to own houses, especially in estates rapidly springing up in many areas of the country.
Some of the real estate companies now began to offer mortgage services to entice these newly money-minted classes and hence the system was successfully transplanted from the West.
An Expert’s View
Dr. Kolade Adepoju, MD/CEO of Riel Homes bared his mind on strategies for a successful mortgage system in Nigeria.
He said that home ownership for all in Nigeria wasn’t realistic largely because of the poor purchasing power of the majority of Nigerian workers.
He said: “Sincerely if I must say it is not realistic because most Nigerian workers are not earning enough to even cater and sort for their current needs for feeding most of them will even have children in school. it is not really realistic. For that to happen there has to be an intervention; there has to be a lot of partnerships to bring that to the past. The public and the private partnership - a lot on the part of the government probably part of their pension benefit. They could infuse the housing into it then they know that even though they will be taking a particular percentage from their salary as they are earning before they retire or something. But saying that with the current resources they get they will be owning a home to retire to is not realistic...even in the past when the economy was even better than this, we all know how many even retire, they either retire into an uncompleted house or they retire to a type of life that is not encouraging. They end up renting their homes. I will reiterate that it is not realistic.”
He went on to call for the Federal Government to create a special bank for real estate financing given its capital-intensive nature and the inherent gain in it to curb corrupt tendencies among most Nigerian employees who want to guard against possible homelessness in the twilight of their lives.
He said: “This is one of the best things the government can do because they are not paying adequate attention to real estate. First of all, I will have to say that the real estate situation in Nigeria now should be a sort of an emergency and we should also know anybody that does not have a good accommodation is prone to any evil devices. I do say if they can tackle the housing problem in Nigeria as of today it is going to solve a good percentage of insurgency in the country. We all know that most of all the people doing all these things are living in the bushes and I don't think that there is anybody that will have good accommodation and will decide to start saying he wants to live in the bush. That is something that we really need to look into. So if we have a bank created solely for real estate it is going to affect a lot of things, it is going to affect the quality of living, and the economy because a lot of people will now bring money in because for example let's say I have a project of 10billion if I bring 1 billion in I can get maybe like 6 or 7 billion or 5 billion from this bank with a single interest I will be encouraged you know to say let me invest my money and let me get more money from this people since I will pay it because a lot of people will need housing. Housing is one thing that can never go out of fashion...I believe this is something that the current administration under the leadership of President Bola Tinubu should look into and do something about urgently.
The naira was devalued and with Nigerian being an import-dependent mono-economy will inadvertently lead to a gargantuan hike in the prices of goods and services locally from which the real estate sector isn’t exempted from. In view of President Tinubu’s campaign promise of a mortgage system for Nigerians, his critics contend that his floating or devaluation of the naira depending on the linguistic shibboleth that you want to use, that promise seems threatened.
Dr. Adepoju however said that there is no cause for alarm despite the devaluation when he said: “Well, a mortgage system whether the naira is devalued or not if it is effective and the right people that need it gets it as the devaluation of naira may not really touch it as much. This is why I am saying that the mortgage system is when I build my house you don't do a mortgage for cement or iron you understand, you do it for a house that is already built...so it is the cost of the house that is built that the mortgage is paid for and they will spread the remaining balance. For example, as a developer, I build a house let's say in Ikoyi, and the mortgage people want to buy the house for some people. They pay me for the cost of the house they will not ask me how much did you buy the cement. So, I think the current devaluation of the naira should not be a problem”.
He reaffirmed his belief in the viability of the mortgage system when he said: “If the mortgage system is worked on effectively and implemented well, it should not be a problem. The truth of the matter is that the rising cost of goods and services is not peculiar to Nigeria alone. The only problem we have in Nigeria is that the regulatory body has arbitrary powers and so anybody can just wake up and say he or she wants to increase prices which should not be. Things are expensive globally. Nigeria is probably the cheapest place to buy fuel. I was in Ghana and they pay up to 700 naira per litre of fuel. I was in Europe - France and when I checked it was 1000 naira per litre when you convert it so it is not that the cost of things is not up in other places but the difference between us and them is that there are regulatory bodies and also there is a sort of subsidy to make it easy for people living there.”
Dr. Kolade Addepoju spoke on the possibility of homelessness as an inevitable fallout of mortgage defaults citing California – America’s wealthiest State which boasts of Silicon Valley, Hollywood, Stanford University, a thriving wine industry, etc as a Locus Classicus of Charles Dickens ‘A tale of two cities as prosperity and homelessness are scandalously resident side-by-side.
He said: “The case of California you spoke about is that California is not a cheap place to live in number one and also, we are talking about mortgage default. Many people lost their jobs and we should not shy away from the fact that we are in economic recession; it is a global thing so many people that could afford their mortgage could not afford it anymore and the law of mortgage is that when you default they retrieve it so what I will say it is happening in Nigeria too here. Ikoyi has the largest number of houses that are not inhabited by anyone and it is because people cannot afford it so if you want to talk about mortgage you have to start thinking about affordable housing that is what we have to start talking about. Even the housing you are providing can the people afford it? if I want to say I want to tackle the housing deficit in Nigeria I will not say I am building housing units in Ikoyi. Even though yes I could for some sort of people but most people that will buy from me in Ikoyi will not be the first house they are buying they are probably living somewhere else and want to increase their status or quality of life so affordable housing should be considered when it comes to this for eg someone living in California that takes a 3 or 4 bedroom duplex and is paying 2000 or 3000 dollars every month compared to someone that is paying 500 or 300 dollars every month the money it will take to pay for like 20 yrs for the 2000 dollars or let's say for a year you will use it to pay for the 3 years or 5 years if you are paying like 200 or 300 dollars every month. So we have to think about affordable housing, first, we have to think about a decent house before we think about luxury”.
He concluded by advising prospective mortgagees to do their due diligence before committing their hard-earned funds to take a mortgage.
He went on to further say:
“If you build your house according to the master plan and you do the necessary research there is nobody that will crazy enough to say he wants to come and demolish your house. So, I think most of the time we also need to talk to our people that don't just cut corners do things appropriately and in the right way so that you know the government cannot wake up and demolish so many houses under the guise of wanting to restore the master plan. The master plan has been there so if you want to use it by the time you are getting your approval you should know that this is not according to the master plan or is within the master plan. If it is not within the master plan you should not pay for it. There was the instance of a guy that built a huge estate on the road very lovely place the young guy came from the US .it was selling for 130 million in Lekki the guy bought it and eventually they told them they are going to demolish the house. Now anybody that hears will say the government is demolishing it without compensation but you won't know that the person that built the house built it on the road. I think for that we should try and educate and orientate the people more and if you want to buy a house from a developer also do your due diligence and you should ensure it is on the master plan and also relying on a very good real estate developer a company that is reliable and has integrity will also save you a lot because there are much due diligence you will not do because you are not a real estate person that those companies will have done because they will want to protect their name they will not do anything that will affect their customers.”
Way Forward
The Bola Ahmed Tinubu-led administration should fulfill its mortgage for Nigerians campaign promises and invest heavily in mass housing and pro-people policies so as to encourage most members of the Middle Class to become homeowners.
The prospect of home ownership at retirement would invariably reduce the hydra-headed monster of corruption which is worse than a cancer that has eaten deep into the fabric of the Nigerian Society.
Real Estate Experts should be engaged to draft a policy for home ownership by most Nigerians for part of the dividends of democracy to be devolved to the people.
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