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In the African settling the elders have a proverb that literally translates – occasionally, one must stop to appraise where he is coming from to be able to plan and facilitate progress towards his final destination.

As Nigeria clocks 48 years of age after independence, it is important that one of the key sectors of the economy is appraised to determine how it has fared.

This write up therefore sets out to examine the housing industry and allied issues, the current problems, setbacks, challenges, and tries to ascertain why the country is at the point we currently have found our selves.

The write up will also proffer suggestions for the way forward particularly as it concerns meeting the aspirations of Nigerians where housing is concerned.

One of the major challenges of the housing sector in Nigeria is the absence of a dynamic real estate mortgage industry.  The debut of the Nigeria Building Society in 1956 marked the commencement of the mortgage banking system in the country.  This later metamorphosed into the Federal Mortgage Bank of Nigeria in 1977, by virtue of Decree 7 of 1977.

The Federal Mortgage Bank of Nigeria enjoyed only limited success, and to further enable the growth of the industry two more decrees were promulgated – the Mortgage Institutions Decree No. 53 of 1989 and the National Housing Fund Decree No. 3 of 1992.

The result of these 2 decrees was the emergence of over 300 mortgage banks.  However with the poor economy and lack of focus on the part of the banks, they all disappeared almost as fast as they appeared on the financial scene.

There is today, however,  a resurgence of these mortgage firms, but any of the operators will tell you that the so called “mortgage loans” are in actuality commercial loans couched as mortgages.

The absence of these banks and the weak base of existing ones has resulted in the fact that prospective purchasers of real estate have to invariably fork out 100% of the purchase price of a property to conclude a transaction.   Any support from the commercial banks is usually in the form of short term advances repayable within 90 – 120 days.  However this has improved with the recapitalization, so that loans to buy properties are now available with tenures sometimes as long as 10 years.

With minimum average real estate values / prices at N5,000,000.00 (Five million) and a minimum wage of N12,000.00 (Twelve thousand Naira) only, it is not difficult to see why home ownership is an up hill task in the nation.

The inability to access long term funds for real estate development has not only stunted the growth of that sector but has also made the cost and price of real estate prohibitive.  Nigeria remains one of the few countries in the world where rents are prepaid years in advance. These are all a function of the absence of a real estate finance system.

Till date, Nigeria cannot boast of an accurate population census figure.  All figures and attempts at ascertaining our true number has always been mired in controversy.  Following from this is the fact that we do not have an accurate / approximate census of property and its distribution nationwide. For example, how many blocks of flats of 3 bedrooms exist in Bauchi State? Lagos, Owerri, Kano?  How many detached houses, bungalows or blocks of flats have been developed over the past 15 years in Port Harcourt?

These seemingly, innocuous information are quite significant in the attempt to achieve effective housing of Nigerians.

If the nation had an accurate population and property census, with percentage distribution of age groups, then it would facilitate the formulation of policies to encourage the development of particular types of real estate to accommodate the citizenry.

According to the National Population Commission statistics, in 1999, there were a total of 2,500,000 males in the urban areas of Nigeria within the age group of 25 – 34 years.  Based on our social set up this is about the time that most of these males finally leave home to get married, and start a family.  Ordinarily these class of people should be moving into 2 & 3 bedroom flats.  With adequate statistics, it is possible to project the  number of new developments that should be undertaken on a state by state basis to accommodate this age group.

Recently the Managing Director of the Kenya Housing Fund, stated at a seminar that in the next few years the country would need a total of 750,000 housing nuts, ostensibly of various types, for its citizens.  Interestingly apart from having these figures, plans had been formulated to ensure the construction of 150,000 units annually to meet this demand.

As at today, Lagos, for example is said to have population of 10 million to 15 million depending on whom / where your information is coming from.  With any of these figures, less than 10% of this population are adequately housed, bearing in mind the availability of facilities and infrastructure.  Only about 10% (provisional figures from the Federal Office of Statistics 1997) of the population have proper toilet facilities i.e. water closets. In terms of water supply, less than 25% of the population have access to pipe borne water.  The rest of the population make do with boreholes, wells, streams and ponds.  (1997 Federal Office of Statistics).

Provision of asphalted roads, with drainage is at an abysmal level whilst electricity to most homes is still epileptic with the vast majority making do with alternative supply by way of electricity generating plants.

This scenario is replicated in all the states of the Federation.

The lack of adequate planning or preferably the strict enforcement of town planning regulations has not also helped the housing industry over the last 48 years.  Up until the Civil war and shortly after, there was still a fair adherence to town planning regulations.  Since then and maybe coinciding with  the beginning of the oil boom, it has been a different story.  One only needs to take an aerial view of any Nigerian city, to see the level of disheartening cacophony of development and the confusion that it has bred.

Over the years obtaining a building approval has become the exception rather than the norm.  In Lagos for example, at a point in time the need to raise money over shadowed the need to have a planned and healthy environment.  The Town and Country Planning Edict of 1986 which was amended by the Town and Country Planning (Amendment) Edit of 1995, provided that if a landlord or developer changed the use of his / her property without proper approval they shall be liable to payment of annual contravention charges.  It also provided for the payment of N5,000.00 or imprisonment for development without first obtaining planning approval.

As one of the newspaper commentaries puts it, “…the situation has encouraged landlords to continue to convert their property to commercial use, make all the money in the process and use an infinitesimal part of it to pay the annual fines.”

In majority of the cases approved plans where obtained just for formality.  Hardly are the developments reflective of what has been put on paper.  The developments are at variance with the approved drawings and this is with the active connivance of the monitoring authorities.

Commercial buildings are tucked into residential areas, with their attendant huge demands for services, i.e. electricity, telephone, water, parking space etc.  All these tend to put pressure on the neighbourhood and further distorts and changes their character.

The foregoing explains why a lot of our cities are in the State in which they are. Traffic prone, congested and generally almost unmanageable.

The Land Use Decree  No. 6 of 1977 has been clearly itemized as one of the main issues that has slowed down housing development in Nigeria.  A lot has been said about the provisions of its various sections and the need to change these section to remove the bottlenecks, that inhabit access to land, land development and ownership.

The fact that all the state land is vested in the Governor, mean that all transactions on real estate must receive his consent.  The law also provides the power of acquisition with minimal compensation and these in effect has made real estate investments risky.

In the same vein and being wary of these provisions, the financial institutions are very cautious with real estate financing and the use of real estate to collate-rise facilities.  This is primarily as a result of the problems of realization of these assets in the event of a default.

Quite similar to the challenges of the Land Use Decree No. 7 of 1977 on real estate are also the various statutes governing Landlord and tenant relationship.

Today, the general consensus is that these laws have since outlived there usefulness and should be reviewed to reflect trends in our socio-economic environment.  It is well known that the statues are so lopsided in favour of the tenant and with the slow pace of the justice system, real estate owners, and usually at the mercy of the tenants or occupiers. This in itself has served as a major disincentive to developments and has caused prospective investors to consider alternative forms of investment other than real estate.

Another characteristic of the housing industry in Nigeria is the focus on the high income / high end properties.

In the past 10 years or so in Lagos for example, both the government and private developers have engaged in huge property developments.

However 85% of these developments have all been of the upper class / luxury types with prices ranging from N15 million to sometimes over N100 million.  Not much attention has been paid to the low class developments that can be sold in the range of N1,500,000.00 – N4,000,000.00.

This however, raises the question of whether it is possible to deliver a suitable development at this figure and still leave some profit for the developer, taking into consideration land values, cost of materials, finishing and labour.

The truth is that construction costs remain high in Nigeria, and it goes without saying that a lot more must be done by the relevant professionals and bodies especially Nigerian Building and Road Research Institute (NBRRI) to research into cheaper more cost effective means of housing delivery and with particular reference to our environment.

Despite the foregoing which does not look as if Nigeria has achieved much, there is still a lot of celebrate in the housing industry.

However, to accentuate progress in this sector, it is important that within the next 5 years, a number of new policies are not only formulated but fully implemented.

The emergence of a dynamic mortgage finance industry is of utmost importance.  The government should as much as possible create the enabling environment for same.  A secondary market where these debt securities can be traded should equally be founded to enable long term funding of real estate developments and access to credit.

A proper analysis of the 2006 population and property census will assist planners predict demand patterns and also forecast real estate needs years ahead.  The essence of this will be that policies may then be formulated to encourage developments of certain types of real estate.  In the final analysis, the citizenry will be properly accommodated.

As a follow up to the foregoing, the government should provide the enabling environment for real estate development.  Emphasis should be laid on opening up the suburbs, by the provision of infrastructural facilities, i.e. roads, water, drainage, electricity, security etc. At the same time, a policy could be introduced where developers could be given tax breaks as well as other incentives, i.e. money subsidies, guaranteed rents etc. All these will help hasten development and close the current huge gap between demand and supply of housing.

Town Planning regulations must be strictly adhered to.  There should be no concessions of whatever kind in approving developments. This is the only guarantee that services and facilities provided in layouts / neighbourhood will not be over taxed or stretched.  This is the only guarantee that these estates will maintain their character years down  the road and the quality of life of the residents will not suffer.

It is also important that greater research be undertaken to source cheaper building materials locally, considering the abundance of resources Nigeria is blessed with.  These cheaper materials will considerably lower the cost of housing delivery to the citizenry.

Labour should also be better trained.  This is where our technical schools come in.  Greater emphasis should be placed on the practical aspects of the training.

The Land tenure laws as well as Landlord and tenant laws need to be extensively.  The good news is that there are new statutes currently before the National Assembly and their passage hopefully within the next 6 – 9 months will not only open a new vista to the legal side of proper acquisitions and ownership, but also in the relationship between Landlords, tenants and other players including the financial institutions in the real estate industry.

In conclusion, the state of housing and real estate sector in Nigeria still leaves a lot to be desired.  There is ample room for improvement from all sides.  The various suggestions that have been proferred, if implemented within the next 5 years will take  the housing industry to new heights.

It is hoped that the relevant authorities will take note and come up with appropriate policies to facilitate the implementation of same.

(Article written in 2008 by Emeka Eleh)

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