Filed in Real Estate by on June 6, 2011

Developers, Shelter Afrique in N155bn deal to build 155,000 houses
Monday, 6 Jun 2011

Developers, Shelter Afrique in N155bn deal to build 155,000 houses

The troubled housing sector is set for rejuvenation following ongoing discussions between the Real Estate Developers Association of Nigeria and the Nairobi-based Shelter Afrique on a $1bn deal to construct 155,000 housing units nationwide, EMEKA EZEKIEL writes The Real Estate Developers Association of Nigeria has begun discussions with the pan-African housing finance development organisation, Shelter Afrique, for a $1bn (N155bn) finance deal that will lead to the construction of 155,000 housing units in the country.

The National President, REDAN, Chief Olabode Afolayan, who confirmed the development in Abuja on Friday, said that under the first phase of the deal, about N7.7bn ($50m) would be disbursed to 12 leading estate developers in the country.

Shelter Afrique was established in 1982 by African governments, the African Development Bank, Africa-Reinsurance and CDC with the mandate of mobilising resources for housing development on the continent.

The company came into existence against the background of the acute housing shortages prevalent in most African countries and the urgent need for African governments to pool resources to tackle the problems by mobilising capital from which loan and equity resources can be made available to national housing development institutions on the continent for approved schemes.

Since it commenced operational activities in 1985, Shelter Afrique has developed a robust portfolio of projects and activities, acquired substantial operational experience and established itself as a credible housing finance institution.

The company’s activities have been funded mainly from equity resources and medium term borrowings of $50m and $20m, respectively.

However, Afolayan said the deal, which is expected to be finalised before the end of this month, was part of efforts by realtors in the country to provide affordable housing for low and medium income earners in Nigeria.

He said, “We are finalising discussions with Shelter Afrique for a housing finance deal of about $1bn. Under the pilot scheme, about 12 lead developers will receive about $50m each. The money will be used to develop about 155,000 housing units for low and medium income earners in Nigeria.

“Cheap mortgage is critical for the delivery of decent and affordable housing in Nigeria. However, it is very unfortunate that the Federal Government has not been able to recapitalise the Federal Mortgage Bank of Nigeria to enable it provide cheap mortgage for on-lending to Primary Mortgage Institutions. Even the PMIs are currently under-capitalised and therefore cannot meet the mortgage requirements of Nigerians, especially the low income earners.”

“The role of the PMIs should be to create mortgages as a stop-gap, warehouse them and then sell to the secondary mortgage market. But because they don’t have enough working capital, which currently hovers around N100m, they have not been able to maximally drive the growth and development of the housing sector,” Afolayan added.

With a deficit of 16 million housing units, Nigeria currently needs about N45tn to overcome the deficit. But given the high interest rate charged by banks on commercial loans, experts believe that availability of cheap mortgages is one of the surest ways of addressing the lingering housing problem in the country.

It was in a bid to provide cheap mortgages for Nigerians that the Federal Government established the Federal Mortgage Bank of Nigeria in 1956 to provide cheap mortgages for Nigerians. Statistics obtained by our correspondent from the bank in Abuja, showed that as at December 31, 2010, it had collected N64.8bn from depositors to the National Housing Fund scheme.

Out of this amount, N17.6bn has been approved for disbursement as estate development loan to 32 real estate developers for the construction of 6,214 housing units in the Federal Capital Territory.

Similarly, the total loan approved under the NHF scheme currently stands at N115bn, out of which N61.5bn has been disbursed to estate developers and Primary Mortgage Institutions.

According to the Managing Director, FMBN, Mr. Gimba Ya’u Kumo, the bank has so far approved N2.6bn as loan for 1,011 beneficiaries through the FCT Administration-owned Aso Savings & Loans Plc to purchase houses.

He said, “The FMBN, in 2007, issued the first tranche of a mortgage-backed bond of N26bn to provide single-digit, 15-year mortgage loans to Nigerians to purchase 9,525 housing units sold in the FCT. With respect to Aso Savings & Loans Limited, the FMBN has refinanced 8,358 mortgage loans it created to the tune of N23.4bn, which represents 90 per cent of the tranche size.

“The FMBN is currently working out modalities for the issuance of the second tranche of mortgage-backed bond to refinance additional 6,533 mortgages worth N17bn under similar affordable loan conditions.”

As part of deliberate efforts to reduce the cost of housing construction across the country, the REDAN president disclosed that the association had entered into an agreement with Ashaka Cement Plc to provide cement to realtors at a reduced price.

He said, “Few days ago, REDAN sealed a deal with the management of Ashaka Cement Plc to sell cement to REDAN members at a discounted price. We have concluded the agreement that will give every member cement at a discounted price in addition to credit facilities and a commitment to deliver the cement to the building sites.

“This initiative is in line with the presidential directive to bring down the cost of cement, which in turn, will reduce the cost of building and make houses more affordable for Nigerians.”


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