The Pension Reform Act 2014 has provision for house ownership. Section 89(2) of the Act provides that “Notwithstanding the provision of sub-section (1)(c) of this section, a Pension Fund Administrator may, subject to guidelines issued by the Commission, apply a percentage of the pension assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by the holder of Retirement Savings Account”. The release of the much awaited guidelines in the last days of September 2022 heralded the positive swing in the market.
From my review, a good combination of these guidelines and the existing National Housing Fund Scheme of the Federal Mortgage Bank of Nigeria (FMBN) will create a very good boost in the affordable housing sector; supply and demand sides alike.
Talking about eligibility, the Guidelines cover pension contributor’s in active employment, either as a salaried employee or as a self-employed person, main pension contributors or micro pension contributors. The parties involved are the applicant, the Pension Fund Administrators(PFAs) and the housing unit providers. Interested applicants who must be RSA holders must meet the following conditions:
Have an offer letter for the property duly signed by the property owner/developer and verified by the Mortgage Lender. This requires some collaborative execution otherwise no developer or property seller will be waiting for the long process to get paid if the property ca be sold otherwise.
The RSA of the applicant shall have both the employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years);
A Contributor under the Micro Pension Plan (MPP) is also eligible, provided he/she has made contributions for at least 60 months (five years) prior to the date of his/her application. Since micro pension scheme started in 2019, the earliest MPP beneficiary will come in in 2024.
RSA Holders that have less than three years to retire are not eligible.
Married couples, who are RSA holders, are eligible to make a joint application, subject to individual satisfying the eligibility requirements;
RSA holders, if registered before 1st July 2019, must have their records updated through the RSA data recapture exercise; and
Application for equity contribution for residential mortgage shall be in person and not by proxy.
Maximum Withdrawal Percentage: The maximum amount to be withdrawn shall be 25% of the total mandatory RSA balance as at the date of application, irrespective of the value of equity contribution required by the mortgage lender. Where 25% of a contributor’s RSA balance is not sufficient for payment as equity contribution, RSA holders may utilize the contingency portion of their voluntary contributions (if any).
Critical observation is majorly along the lines of the absence of turnaround times and timelines for confirmations, reviews and release of funds. I trust that as potential beneficiaries starts to engage the PFAs, things like turnaround time and co will become clearer and better determined.
I am particularly glad that financial experts working with Developers and the relevant institutions like FMBN, Family Homes Fund(FHF), Nigeria Mortgage Refinance Commission (NMRC), e.t.c are already exploring the possibilities. Initiatives like the yet to be established Mortgage Warehouse, review of our foreclosure laws across the remaining states of the Federation that are yet to take it serious among a lot of other initiatives that are already on or been pushed will help ensure we have the hydra-headed solution our affordable housing need requires at this critical stage. We just need to start testing the waters so as to quickly move past the rough edges usually encountered when running a new scheme and enter autopilot mode.
The potential of having over N3trillion being the 25% of the over N14trillion Naira under pension management now injected into housing is huge. No doubt, this is a very good and welcome development in the built industry. Twelve (12) months from now, we should be doing an industry review of where all these have lead us.
Till then, fingers crossed.
Engr. ‘Debo Adejana
MD/CEO, Realty Point Limited
Founder; School of Estate & Business
Chairman, REDAN South West Zone