Mr. Olabanjo Obaleye is the CEO, Infinity Trust Mortgage Bank, a flourishing private sector-led initiative that has created mortgages in excess of N20bn. In this interview with Francis Kadiri, Obaleye discusses the problems and progress made in housing provision, five years after UN Habitat raised the alarm that Nigeria has 17 million housing deficit. He also calls for the recapitalisation of the Federal Mortgage Bank of Nigeria to enable it fulfill its role to low income earners. Excerpts:
Five years ago, the UN Habitat said Nigeria has 17 million housing deficit. Has the situation changed, and how has private sector mortgage service providers tried to address the problem?
For many years, we dangled the issue of the 17 million housing deficit in Nigeria. You will agree with me that we don’t have data in this country, so most of the statistics figures we give out at times are not backed up by empirical evidence. However, we cannot dispute the fact that Nigeria has housing shortages.
In discussing the problem, we fail to consider all houses because only houses that meet international standards are considered, the livable houses are not usually considered. When I say livable houses, I mean functional houses in which people still live, even though it falls short of world class standard. But people can still live in it and wake up to face their daily tasks without problems. Note that by livable houses, I don’t refer to the sort of shelter provided under the bridges or in terrible slums. In any case, the point is that there are still housing shortages in the country.
Remember also that the statistics reeled out five years ago by the UN Habitat also predicted that the 17 million housing shortfall will increase by about three per cent annually. This means that even if we have been building, the statistics has been on the rise, except we are conscious to build vigorously such that we beat the annual increase in population of home seekers.
One major area we need to look at is the need for government involvement, especially land titling. From the Land Use Act, lands belong to the states, not the federal government. This law makes it difficult to get a universal policy that will address all the states of the federation
How is the mortgage business in Nigeria and how did ITMB cope during the recession?
ITMB continued to flourish even during the recession because we understand the business well enough to cart its course. Once you understand a business and you are able to moderate your activities in various economic climates, you would have no problem. I hope you know that even during recession, people continued to buy homes.
In terms of returns on investment, if you look at the mortgage industry, you will see that ITMB has continued to improve on its performances, we have been doing very well. But if you look at the financial industry as a whole, the sector is not doing well at all. This means that an organisation can do well in the midst of a sector that is generally adjudged as failing. The particular company must understand the trade and must be able to make correct investment decisions even in times of economic downturn.
Can you be more explicit about what you mean by correct investment decisions that made you flourish in a time when others were going down?
One thing you must acknowledge is that unlike in the commercial banking sector where banks are moved by profits, the mortgage industry leaders are not propelled by profit but by the passion to provide houses for people. The mortgage sector is considered highly risky because if you have issues with mortgage and go to court, the case may last for up to five years during which the money will be tied down. As a result of the risks, investors are not usually keen on investing in mortgage sector. Despite these challenges, we have the passion for the industry and we are able to make decisions that go well.
What is the industry and what progress should Nigerians expect?
Many new initiatives are coming up in the housing industry and we are laying solid structures for efficient housing sector operations in Nigeria. One major achievement is in the area of funding. Before this time, lack of funds for housing provision was a major challenge, but that has now changed even though there is still need for improvement. This does not mean that we have all the money we need to build all the houses Nigerians need, but I mean that the problem of funding is not as pronounced as it was some years ago.
Apart from funding, mortgage and housing sector is also troubled with legacy challenges of high interest rate amid brief periods of loans repayment. What ground breaking goals have you been able to score, following the declaration by UN Habitat that Nigeria suffers deficit of 17 million houses?
Before now, as a mortgage bank, we gave out mortgage loans with three to five years repayment period, but we now dole out loans with repayment period of up to 20 years. This goal is scored solely by the private sector, not in collaboration with government or the National Housing Fund (NHF). I am sure you have been watching the industry and you will agree that great progress has been made from what used to be.
Apart from long time loan repayment period, another major goal that has been scored is the reduction in interest rate. So, the challenge of funding is being seriously overcome by the organised private sector.
The Nigerian Mortgage Refinance Company (NMRC) should be commended for the effort and success it has recorded in this area. NMRC is a private sector initiative and we can now refinance our loans. This means if I have N1bn or N5bn worth of mortgages, and I need more money, I can get more money from NMRC and provide more mortgages. This is how NMRC is being used to address the legacy problem of funding in Nigeria.
One major area we need to look at is the need for government involvement especially land titling. From the Land Use Act, lands belong to the states, not the federal government. This law makes it difficult to get a universal policy that will address all the states of the federation. So to get land for large scale estates built to provide social housing, state governments have very crucial roles to play because they must exercise the political will needed to provide affordable lands on which houses will be built, also at affordable cost. Only state governments that are passionate about providing low income housing will key into the process of making it affordable.
If the cost of obtaining land is high, and if the time of obtaining it is also long, no serious progress can be made. State governments must play their roles to make provision of social housing possible for indigenes.
Some states have taken initiatives to address this.
The economy is hard and not all workers are able to save to meet minimum mortgage requirement. How can people in this category, artisans for example, realise their home ownership aspirations?
I want to inform you that by the first quarter of next year, Mortgage Guarantee Companies are coming up on board to greatly address the need for home financing for people who have no money to pay the minimum amount of money that is required to get mortgage financing. The mortgage guarantee companies will play the crucial role of reducing the equity requirement for obtaining mortgages.
The current practice is that you can’t have one hundred percent mortgage, you must at least have saved some money be able to get mortgage to balance the money required to buy your property. For example , if you want to buy a house of N20m, it is expected of you to have at least N4m while we can give you up to N16 million.
What will begin to happen by first quarter of next year is that even if you don’t have the N4m required, the mortgage guarantee companies will guarantee the beneficiary’s equity. By so doing, a penniless home seeker can own a house under the condition that he can meet the monthly rentals as at when due.
So, we are trying to demystify the erroneous conception that only millionaire can own a home. If you earn a monthly income of N50,000 and can afford to pay N20,000 or N30,000 from it on monthly basis, you will be able to have your own home. That is how successful the sector has become and we will see this next year.
Policy issues have been solved and so the system is really beginning to work. When the system was faulty, it seriously affected operations, now good policies are in place and they are addressing the challenges.
How many mortgages has ITMB created since inception?
Between May and September 2018, ITMB has created no less than N800million worth of mortgages and the company has mortgage assets worth over N4bn. There is no year that we don’t have repayment of about a billion naira. So, if you add up those repayments, you would see that we have created mortgages in excess of N20 billion.
How well do you think the FG’s structures of mortgages are faring, I mean the FMBN and NMRC?
FMBN and NMRC are similar but different organisations, their structures are also different. NMRC is private sector driven while FMBN is government. In the last one year, I mean since the current management came on board, the activities of FMBN have been fantastic. They have turned around the organisation. The processes are now streamlined and services are faster, shorter more
impactful.
There is great need for Federal Government to recapitalise FMBN to enable it do more on the social front. When you study the pyramid of the housing gap, about seventy percent of it is on the lower cadre, those who cannot afford commercial mortgage rates. They need more funding in that area and FMBN must be sufficiently capitalised to meet its responsibility of providing support needed for social housing.
