Expectations are high that Nigeria’s mortgage market which has, for too long, suffered slow growth, will experience a boom when the Nigerian Mortgage Refinance Company (NMRC), a private sector-led secondary mortgage market, starts refinancing more mortgages.
The company, which launched 10,000 mortgages last year with an initial target of creating 200,000 mortgages, disclosed recently its plan to refinance one million mortgages over the next five years, a decision analysts say is ambitious and capable of turning around the mortgage system positively.
The projected mortgage deals expected in two major segments of the property market will see the newly established company refinance about 400,000 to 450,000 mortgages for one segment of the market and a proportionally larger number at the low income market.
This is in line with the vision of the refinance company which seeks to increase liquidity in the mortgage system, leading to affordable housing finance. It also aims to be a focal point for creating an enabling environment for housing finance by providing long-term funds to be given at low interest rate.
“NMRC is expected to pull down lending rates for housing from the current spread of 20 to 23 percent to the low double digits or, at least, to a high single digit”, Ngozi Okonjo Iweala, Minister of Finance, informed at the launch of the company in Abuja.
The minister added, “this company is being set up to help lower the funding cost of mortgages and promote the affordability and availability of good housing to working Nigerians by providing mortgage lending banks increased access to liquidity and longer term funds in the market”.
Charles Inyangete, NMRC’s CEO, says the company will speed up refinancing process once the housing stock is increased, pointing out that they are facing the challenge of limited housing stock in the country.
The CEO who spoke in an interview with BusinessDay recently, stressed that “if we have an acceleration of building stock and more affordable homes coming into the market, we will also accelerate refinancing so that we can achieve much higher numbers than our projection”.
Inyangete revealed that the refinance company also aimed to raise funds from the capital market in Q1 2015 to enable it refinance more mortgages, explaining that the funds realised from the market would be used to refinance the portfolio of primary mortgage banks (PMBs) to enable them issue new mortgages to prospective home-buyers.
According to him, the mortgage sector has immense potential and, if fully tapped, could contribute as much as 3 percent to the Gross Domestic Product (GDP) with a trillion naira market value.
The CEO said the role of the company also consisted in creating an enabling environment where mortgage operators could thrive, disclosing that, as part of its mandate, the company was planning to reform the existing legal structures such as foreclosure laws in a bid to promote the mortgage sector.
“We recently drafted a foreclosure law and we intend to put it through the pilot states for adoption. When they do, we would then have created a mortgage approach that allows applicants to fast-track a mortgage registration process as well as a titling process running concurrently,” he said.
According to him, the major challenges facing NMRC included high interest rate, high cost of building and low awareness/acceptance of the company’s value proposition to the property market.
“With a lack of understanding of what we do comes resentment and outright negative perception. Our major challenge is to ensure that the perception of the institution is not misplaced and the misunderstanding out there is eliminated for people to judge us on a proper premise,” he added.
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