Nosediving Disposable Income, An Underlying Factor In Nigeria’s Housing Deficit —— LBIC MD, Lawal

Mr. Oluwatobi Lawal is the Managing Director/CEO, Lagos Building Investment Company PLC. In this interview with MOSES ADENIYI, he gives perspectives to the housing deficit in Nigeria and the role of the mortgage system in the Housing Industry. According to him, a grand factor of the deepening profile of housing deficit in the Country is that of the nosediving records of the disposable income of Nigerians and the corresponding loss of purchasing power. Among other issues of significance, he commented on the contributions of the LBIC in bridging the gaps of housing deficit emphatically in Lagos, in line with the THEMES Agenda of the Babajide Sanwo-Olu led administration, which gives premium importance to affordable housing as one of the driving pillars of the policy thrust of the Government. In his submissions, the people must learn to trust their government, particularly for an administration that is driving its course of development with open hands of transparency. Excerpts:

The subject of housing deficit in Nigerian has been observed to be pronounced, and the mortgage system in the Country is defined to be at the infantile level of records; the duo is believed to be subjects of concern in the housing industry, what is your perspective on this?

The truth of the matter boils down to the subject of affordability. Practically, if you are taking a mortgage, I’m not too sure there is any mortgage institution that will give 100 per cent to any desirable applicant. You are going to have to make some kinds of contributions which is according to how most mortgage provisions are structured. For instance, we (LBIC) deal with the very retail end of mortgage and we always request between 15 to 30 per cent contributions for whatever value of house a prospective buyer intends buying. Also, we are specifically given to bridging the gap in the process of acquiring properties in Lagos. We are Lagos based and one of our promoters is the Lagos State Government. The essence of our establishment is to make affordable housing available to all desirable Lagosians who reside in the State. The license we have obtained is to operate within Lagos and we have been happy about this. Since the beginning of this administration, Mr. Governor (Babajide Sanwo-Olu) has given all stakeholders in the built industry the mandate to key into the THEMES agenda which bears resounding relevance on housing. We are not really building, but we provide the mortgage; though it is an investment company where the Lagos State Government has some vested interests and we have so many landed properties. We are holding them in trust for the State. Contractors are involved in the construction of these buildings. However, given the fact that government resources are very limited with the demands for several projects to execute, we have directed our strategies in a way to assist the Government’s housing agenda towards collaborating with the private sector by way of bringing them on board. In this arrangement, we use the land as equity and they get involved in the constructions for comfortable and affordable housing schemes.   However, nationally, the problem has always been that of capacity. This is because the purchasing power of many Nigerians is really nosediving, unlike what obtains before. With present situations of inflation and the fall in the value of the Naira, things have turned sore regarding the disposable income of the average Nigerians. While it is well established that the housing deficit in Nigeria is pronounced, it will be discovered that with the records of these gaps, there are houses everywhere, but there are nobody to buy them. We should therefore ask ourselves the question why? The issue that comes to place here, is the disposable income. People do not have enough savings to buy those houses and even to make personal contributions to afford mortgage. So, the Government still needs to do a lot of intervention in the housing industry, in probably making provisions for zero contributions and that is what the Lagos State Government is trying to do in a product called “Rent-to-Own,” targeted to remove the clause where you have to make contributions of 30 to 40 per cent. I think with what the Lagos State Government is doing in that regard, we would be able to achieve a lot in terms of provision of housing. So, this can be adopted nationwide. I think the Federal Government should adopt the same template because it is well known that the disposable income of the majority of Nigerians is very low.

References have been made to the urban and physical character of Lagos as a challenge to a Smart City agenda, given the importance of mortgage to achieving a Smart City dream, how do you perceive this?

For mortgage, we are primarily established for financial intervention. I think matters relating to the urban and physical character bears more relevance on experts in the construction industry. Our own part comes in, the moment they have delivered the houses. In this chain, our role is to finance the mortgage in terms of acquisition of those houses.  So, there must first be houses to be delivered and of course people who need them must be ready to take them. That is where our mortgage service comes in, and I can assure that for lots of people who come around for mortgage requests, as long as you meet our credit criteria, we give it to you. In recent times, we have done a lot. Presently, we have done properties worth over 500 million in terms of mortgage programmes for provision of houses to Lagos State Civil servants and residents.

Governor Sanwo-Olu has been emphatic on the instrumentality of Public Private Partnership (PPP) in achieving the housing agenda of the Government, can you expound on some of the modalities of these arrangements?

That is exactly where we are working very strategically presently, and we are doing really very well in this regard. We have about 2,000 houses across different parts of the State, centered on this collaborative arrangement with the private sector. There is a 340 units scheme in the heart of Surulere called Obele. Towards Festac axis, in Amuwo-Odofin, we are doing another 320 housing units for Lagosians. There is another one going on at Ogba, by Pen Cinema, which is about 56 units in collaboration with the Private sector. There is also another one on-going at Abesan in Iyana Ipana. Our housing delivery under Public Private Partnership arrangement, expands across the State and I hope in another one year and. basically before the end of this administration, all would have been sorted out for the general public to see.

The National Housing Fund has been confronted with challenges restricting its expansion, what do you see to this?

The National Housing Fund have their own credit criteria too, but what we have discovered is that most of the so called people who are supposed to assess the fund do not really qualify for it. Firstly, may be in terms of repayment, because the provision is meant to be 33.3 per cent of the salaries of the stakeholders for the repayment.  There are a lot of policies and rules guiding the disbursement of the fund. Secondly, it would be discovered that the Federal Mortgage Bank is actually the manager of the fund, and most of the responsibilities are placed on the plan where those people are assessing the fund from. It is seen as if the money is lent to the Mortgage Bank. A lot of efforts put into it does not necessarily correspond to the results. We have been engaging the stakeholders to let them know some of these issues. Having said that however, I think it is part of what we are advising the State to do. For the large size of Lagos in terms of the volume of work force, there is nothing wrong if the State also has its own housing fund where people who are residents can voluntarily be contributors to the fund. So, with such fund available, this will bring down the cost of housing delivery and even the cost of mortgage because it is like the co-funding idea where people gather money together, buy landed properties and do the construction together and afterwards they share them among themselves. In most co-funding template, there is no room for profit making because the owners are the ones constructing it. If a similar template can be adopted for a Lagos State housing fund, which is part of our advise to the State Government, this will serve as one of the ways to ensure affordable housing are made available for residents of the State based on such system of voluntary contributions. On this note, the Government may just have to dedicate certain amount as the seed fund, and every party will contribute. With that, the contributors can assess it. The money can be given to big stakeholders or contractors to construct the houses and the contributors will hence be given the houses. When private operators construct houses; because they are business entities, they would of course,  want to make profit. So, with the kind of margin they place on the cost from the construction to the final stage, the price comes at unimaginable high rate. But with the contributory fund arrangement, that can go a long way in solving these challenge.

Apart from the  fall in the purchasing power of Nigerians noted to be affecting the mortgage system, what other factors pose challenges to mortgage institutions in the Country?

There is the issue of documentation which most lawyers will call ‘subsequent transaction’ and ‘the foreclosure law,’ which is so essential for you to have a successful mortgage system. For documentation, the time it takes to process land titles is an issue that demands attention. I know the Government is trying. There are one or two issues the Government is making efforts to resolve and I hope they will resolve them quickly towards reducing the timing for people to acquire title document for their land or whatever it is. Another is the subject of subsequent transaction which bears relevance also to the Government. Efforts must be made to speed-up the process and harmonise the charges. There must be a kind of synergy among all the Government agencies that are related to the built industry. It can take a super market dimension where whoever wants to do mortgage, registers conveyance or obtain title, ab initio, will know every government fees that are payable; make such payments and at a goal have the deal done within a reasonable time frame. The last is for the mortgage banks in terms of documentation to streamline the requests for documents. For us in LBIC, the documents we request is minimal in comparison to other mortgage organisations, particularly if the property is from the Government, such as from the Ministry of Housing. As long as there is a letter coming from these channels to this effect, we move into action and conclude on your transaction.

On the issue of harmonising efforts, it has been discovered that there are myriad of uncoordinated activities in the Real Estate sector, how do you think these stakeholders with emphasis on the Private operators, can coordinate efforts to vitalise the mortgage system in Nigeria?

The issue has always been on communication. The stakeholders have to organise themselves together and present resolution papers to the Government in particular. For instance, the Government has done something fantastic recently on the issue of regulating the operations of the Estate Agents and other stakeholders in such a way that the citizens will not be defrauded. There have been cases in the past where developers would collect money from prospective buyers who are interested in properties, particularly those paying for off-planning and such construction will last indefinitely; and the developer may end-up eloping. So, the Government in its proactive reaction took the decisive step because citizens cannot just be denied of their life savings. That is the chemistry behind establishing the Lagos State Real Estate Regulatory Authority (LASRERA) to monitor the activities of Developers, Estate Agents, Contractors and other stakeholders. In reaction, some people had risen to challenge the Government in court; but these are the same people the Government is trying to protect. So in this part of the world, I think we should do more of communication and people should trust their government. It is important for people to trust their government, particularly this present administration which is doing every thing possible with decisive efforts. You will discover that most of these decisions, regulations and programmes are open. Even at the State House of Assembly, whenever new bills are introduced,  public hearings are instituted to ensure the people are carried along in fashioning what the law should look like. We should give kudos to the Government and that is why I am saying people should trust their government, particularly this administration, which is doing everything transparently. With these, we would be able to resolve these problems.

– New Direct