Effect of World Bank Loan for Mortgage Refinancing in the Real Estate Industry

The dream to own a house for low to middle-income earners in Nigeria is simply just that; a dream! The term affordable housing only exists in theory because private developers who invest huge sums of money into the industry do so with the aim of reaping in profits since there are no adequate government funds or loans to subsidize costs and what is supposed to be affordable becomes expensive. From all angles, one of the major issues affecting the growth of the industry is the lack of long-term affordable mortgage for the average Nigerian.

President Jonathan at the launch of the NMRC

The announcement of the $300 million World Bank Loan approved for mortgage refinancing in the country is supposed to engineer the much awaited reform but it has however been met with mixed feelings by real estate players. Those who are against this initiative are of the school of thought that rather than set up a Mortgage Refinance Company (MRC), the Federal Mortgage Bank of Nigeria (FMBN), should be made to be more effective and result-oriented.

Funds and resources should be channelled towards the provision of necessary infrastructure important to driving the new mortgage policy and the current bottle-necks experienced during the process of obtaining a mortgage loan under the National Housing Fund (NHF) Scheme can be soft-pedalled on.

Others however believe the mortgage industry has been unable to meet up with expectations as a result of dealing with the legal issues arising from foreclosure bottlenecks and lack of access to long-term funding. This in turn affects turnover rate and the country’s construction sector.

According to operators, the inability of the Primary Mortgage Banks (PMBs) to refinance mortgages is a major challenge to the operation of the sector, putting into perspective the current challenges and harsh operating environment real estate developers are already faced with such as high cost of doing business, funding challenges, undue government interference and many more.

An initiative like this can change all of these and improve operations within the sector greatly but for this to become a reality, the funds must be properly disbursed and managed. The dream of an average Nigerian family to have an affordable decent home can become a reality but government must engage in innovative solutions such as the issuing of low interest loans and tax-free bonds to developers as incentives.

This they can pass on to homeowners or renters in the form of lower mortgage payment or below market rental rate. This system has worked very well in the United States using the Public Private Partnership agreements and hopefully with the right policies, supervision and implementation of the mortgage refinancing funds, the same can happen in Nigeria. 

With the funds being pumped into mortgage refinancing, the dream of an average Nigerian having a decent, well-constructed, affordable home is not far-fetched and In the near future, the Nigerian real estate market will become such a major economic driver, providing millions of jobs to the labour force, surpassing the oil & gas sector as the major contributor to this nation’s GDP. The key is in however having all the parties involved in implementation and disbursing doing their jobs and seeing to it that the funds get to the people who need them.

NMRC was launched on January 16, 2014 by President Goodluck Jonathan. The expected implementation timeline is mid year 2014. 

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