The mortgage company is a key part of the government’s economic transformation programme and aims to re-energize the housing sector as well as deliver effective mortgage financing to Nigerians.
“There’s the Mortgage Refinance Company which is being launched and there is also the supply side initiative because the challenge with mortgage in Nigeria is, beyond the financing, there is a supply constraint which also needs to be unblocked,” Niyi Adeleye, Head Real Estate Finance West Africa, Stanbic IBTC Capital told CNBC Africa.
The country currently has a deficit of 17 million housing units and needs one million units per annum for the next 17 years to meet this demand. The Mortgage Refinance Company is expected to create over 200,000 mortgages over the next five years at affordable interest rates and will begin in 14 pilot states and the state governors have agreed to fast track land titles.
“The mortgage refinance focuses on creating a window, a liquidity window for financial institutions to refinance the long term exposure that they can go back into the market and create new mortgages with the expectation that there’ll be greater incentives for banks to create mortgages,”
Banks in the country currently do not create mortgages because financing is generally short term and the mortgage liquidity company is trying to fill this gap, however the supply side still plays a major part.
“For a developer the most important thing is, the government has to factor what are the funding alternatives that developers can access to improve the supply of housing stocks into market by virtue of technology or by virtue technical capacity which I believe the government really needs to look into critically,” Damola Akindolire, General Manager Alphamaed Property Development Company told CNBC Africa.
Mustafa Chike-Obi, the Managing Director for Asset Management Corporation of Nigeria (AMCON) recently said that the housing market needs N10 trillion annually for the next five years. However, with the launch of this new company, interest rates are expected to come down to about 13 per cent.
“The company is supposed to create sustainable droppings in mortgage rates. The thing is that if you have a liquidity window that financial institutions can’t access and this is both banks and PMI’s, the liquidity premium that they normally add to mortgages which would be 10, 15, 20 years long, will be shortened or eliminated. The expectation is that over time, that would translate to a drop in mortgage rates,” Adeleye said.