| Mortgage financing: Zenith Bank,
others, pick up the gauntlet
By EMEKA OKOROANYANWU
Thursday, November 30, 2006
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•Ovia
Photo: Sun News Publishing |
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Federal Capital Territory Minister, Mallam Nasir el-Rufai,
told the nation recently that over $260 billion (N30 trillion)
is needed to provide 16 million houses needed in Nigeria.
He was of the view that housing financing remained a sector
with more capacity than others to generate sustainable growth
to as much as 40 per cent of the country’s Gross Domestic
Product (GDP) from the present 0.5 per cent.
Housing development has been an intractable problem in Nigeria
with majority of the population unable to meet their housing
needs. Government on its part has been paying lip service
to the issue of housing especially as it affects those at
the low end of income generation. This leaves the private
sector as the only option to housing provision.
Many mortgage institutions have emerged to provide financing
for housing development. Private developers have equally come
up to fill the gap created by government’s inactivity
in the mortgage sector.
In recent time, banks and other financial institutions have
made forays into the housing sector. Such banks as Union Bank,
UBA and recently Zenith Bank have established subsidiaries
and desks to tap from the virgin housing sector. While Union
Bank’s Union Homes has been playing in the mortgage
field for a long time now, the newly created Zenith Bank Mortgage
desk is a beehive of activities now with prospective house
owners besieging the desk for loans. The attraction for Zenith
customers is the $10 million (N1.3 billion) facility provided
by the United States Agency for International Development
(USAID). With the scheme packaged by Zenith Bank in conjunction
with the United States government, low and medium income earners
can access the mortgage facility to enable them fulfil their
dreams of owning their own houses.
Designed by the United States government to encourage banks
in developing economies to facilitate mortgage loans to low
and middle income earners, the scheme would make the funds
available through Zenith Bank to beneficiaries with a combined
gross income per annum not exceeding N8 million ($62,000)
each, for mortgage development. The US agency is to directly
supervise the scheme.
According to the terms of the facility, a maximum of N10 million
and a minimum of N2 million would be given to beneficiaries
with a pay back time of between three and 12 years. This could
be done instalmentally either monthly, quarterly, half yearly
or annually. The scheme is primarily targeted at economically
engaged Nigerians residing in Abuja, Lagos, Port Harcourt
and Kano.
To qualify, applicants would need to provide completed mortgage
application forms, offer letter from the landlord or agent,
a copy of title document of the property to be purchased as
well as reference letter from their current employers indicating
annual salary and existing loans if any. In addition, they
would also be required to provide copy of international passport,
copy of letter of employment, pay slip for the last six months,
copy of bank statement for the last six months and sworn affidavit
declaring that combined household income is N8 million of
$62,000 and below.
The scheme, primarily targeted at paid employees resident
in Nigeria, who have been in their current employment for
no fewer than three years, would be run through the true risk
sharing programme called Development Credit Authority (CDA)
while the US government has pledged to write off 50 per cent
of any loss resulting from any loan disbursement.
Observers said this would come as welcome relief to many Nigerians
who even when they have steady jobs sill find it almost impossible
to save enough to build or buy their own homes. They have
noted that in addition to helping solve the problems of working
Nigerians, the scheme will also go a long way to boost the
government’s effort to provide housing for all.
According to housing experts, Nigeria in spite of being the
most urbanized with the highest population in black sub-Saharan
Africa of an estimated 130 million people, has failed to match
the phenomenal rise in population with a corresponding growth
in housing development. Urban centres, while they represent
less than 10 per cent of the land area of the country, roughly
about 30 per cent of the total population with a growth rate
almost 5 times higher than the rural growth rate.
Analysts commended the Zenith Bank/USAID initiative, saying
that making available credit to those with steady income is
a commendable development that will not only raise the standard
of living but also help to alleviate poverty.
Perhaps in recognition of the importance of the scheme, launched
in Abuja recently, dignitaries including the United States
Ambassador to Nigeria, John Campbell, the Minister of Finance,
Mrs. Esther Nenadi, Minister of Housing and Urban Development,
Olusegun Mimiko and the Central Bank Governor, Professor Charles
Soludo, were around to witness the event.
The launch followed an agreement signed in Abuja on September
12, 2006 by Managing Director of Zenith Bank, Mr. Jim Ovia
and Mr. Patrick Fleuret Director, United States Agency for
International Development (USAID).
Others dignitaries in attendance were the Managing Drector
of Federal Mortgage Bank of Nigeria, Yakubu Tanimu, Executive
Director of Small and Medium Enterprises Development Agency
of Nigeria (SMEDAN), Mrs. Modupe Adelaja, and others.
Ovia, who led the team of other management staff of the bank
at the event, expressed appreciation at the choice of Zenith
Bank by the US government for pioneering the scheme in Nigeria,
saying it was a mark of confidence on the bank.
With the Zenith Bank effort and others from the banking and
finance industry, the problem of housing finance in the country
is being tackled even though the country 0has been variously
estimated to have a housing deficit of between 12 to 16 million
housing units. This equates to a financing requirement of
about N30 trillion at a conservative rate of N2.5 million
per unit of housing.
At present, total bank loans to the housing sector is estimated
at less than one per cent compared to up to about 22 per cent
in the Middle East and 59 per cent in South East Asia.
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