Nigeria has announced measures targeting future homeowners taking out mortgages in the low-to-mid price range.
The country announced a waiver from an initial 10% payment on mortgages below $15,700 administered by the state-owned Federal Mortgage Bank of Nigeria (FMBN).
The average cost of a mortgage is $18,000, with interest rates at around 19% as of September, according to the Centre for Affordable Housing in Africa.
The initiative comes after the creation of the government’s Family Homes Fund in September. The mandate of the $1.57Bn fund is to keep mortgage rates for affordable housing at well under the average 23%, targeting 9.99% payable over 20 years.
With prospective buyers required to put down an initial deposit of 10% to qualify for these home loans, 70% of the mortgages are expected to go to houses priced between $7900 and $20,000.
The scheme, financed by the Sovereign Wealth Fund, federal government bonds and Bank of New York, is set to work as a public-private partnership. It is also expected to promote the development of primary mortgage institutions.
These changes will come as welcome news to many Nigerians, with half of the population living on less than $1 a day. Furthermore, the minimum wage is currently around $60 per month, making home ownership an unattainable fete for those in the low- to middle-income wage bracket.
According to World Bank data, mortgage penetration rate stands at about 0.6% of GDP, which although low by standards in more developed economies, puts Nigeria roughly in line with many other large African markets.
In order to begin filling the country’s existing deficit of 17m housing units projected by the World Bank and to meet the increase in demand, the government will need to support the construction of 170,000 units per year over the next decade.
To address the demand for housing, the FMBN signed a memorandum of understanding in January with the Real Estate Developers Association of Nigeria (REDAN) and pan-African finance institution Shelter Afrique to establish a $2Bn affordable housing fund.
The money will help to finance the construction of a targeted 10,000 homes annually over the next decade by distributing $200m per year to developers. In addition, the signatories of the MoU expect the construction work generated by the funding to create more than 150,000 jobs.