By Simeon Mpamugoh
Managing Director, Rt Shemlash Co Ltd, Mr. Remi Adedokun, has identified high interest rate on mortgage as the blight against declining patronage of mortgage banking in Nigeria.
Adedokun, who is a real estate developer, in an exclusive interview with Daily Sun said, “if Central Bank of Nigeria (CBN) can intervene and reduce the interest on mortgage to single digit rate, such that anybody that has a job can access it, it will go a long way and you will see that everybody would want to buy a property and build a house.” He speaks more on this and sundry issues.
Excerpts:
Assessment of real estate business in Nigeria
Real estate business in Nigeria is interestingly good. Most people think it is religious and too simplistic to say so. It is not because there is no enterprise without God. The business is fantastic if God is behind it, especially in view of high risks associated with it. And to the glory of God, our company, Rt Shemlash Co Limited, has had a smooth journey so far and I believe it has been with God’s grace. We came into the business because we realised that it was difficult to meet housing problems in Nigeria. The company was set up not only to expect return on investment but also in the process of doing that ensure that people have value for their money; a befitting home they can call their own without 100 per cent demand payment. In fact, we help our clients with payment plan to encourage them have a home of their own. With a little deposit both parties agreed to, and a payment plan, we believe that every Nigerian can own a house.
There are a lot of shylock landlords out there who are taking people for granted. Some would wake up one morning with three months quit notice to tenants. These are some of the challenges our company wants to eradicate. When you own a house, you are saved from many embarrassments from landlords. There are a lot of people who had worked in various organisations for five to 20 years without a house of their own; we have some bank supports that can give mortgage to them. We encourage them to come and leverage on the portfolio to own a house of their own with a payment and the banks are behind them. We aim at ensuring that if not everybody but majority of the citizens have a place they can call their own.
Sustainable economic solution to the sector
Basically, most people think when they don’t have enough money they cannot own a house. Government can help the private sector drive the housing programme by formulating economic policy that assists Nigerians through the banks such that everybody can own a house even though not everybody can own one. In Europe, anybody can buy a property provided you have a job. It is not as difficult as it is in Nigeria. It is programmed in such a way that even a sweeper can own a property. It is unfortunate that in Nigeria, unless you work in a blue-chip company or oil-producing firm, you cannot have sufficient money to pay for a house or buy a property. Even the banks would not oblige you a mortgage because they would look at your income vis-à-vis payments.
The CBN can intervene and reduce the interest on mortgage, which is the only reason most people don’t patronise mortgage banking in Nigeria. If the interest rate can come down to single digit rate, such that anybody who has a job can access it at that rate, it will go a long way and you will see that everybody would want to buy a property to build a house because the interest would not be hard on the person. Even someone who earns N50,000 per month can plan on how to buy a property. The apex bank should ensure payment tenure is extended. Most banks don’t give mortgage for more than five to 15 years. In Europe, it is 50 years and if we have extended payment tenure, the man who earns N50,000 may decide to be paying N10,000 every month.
The situation has given way to Rent-to-Own programme, a situation where one is given a house he wants to buy for say 20 years and at N10 million, to be paid for 20 years. The money would be divided by 20 years and whatever is the value would be paid through the years without interest. The only charge is the processing fee for the first year. At the end of the day, what would have been paid for, is the value and the fee collected. It makes it convenient. And everybody wants to be part of it. The challenge has been lack of fund to implement and it is only the government that can do it. Lagos State has started implementing it and if federal and other states governments can join, in no time every Nigerian would own a house.
Controversy about housing deficit
It is obvious there is housing deficit in Nigeria but putting a figure to it is what nobody can accurately tell because we meet several people on regular basis and they give different figures. Some would say it is 17 million while others would tell you it is 100 million but that is not the important issue. The most vital thing we need to know is that housing deficit is here with us, which has to be addressed. Rt Shemlash has decided to take it up because government has refused to help us and that has challenged our journey into the business. We have built quite a number of estates in the country. Our first estate is Lavender Court. There is also Lavender Court Phase II, Yaba, Lagos. We have also done four others within the axis including Ikeja GRA and Omole Phase I. Last year, we finished another one called Amazing Grace Estate, and presently we are working on yet another one at Awuse Estate, Opebi, Ikeja. In all, we have been able to complete nine various estates in Lagos with each of them having an average of 16 buildings.
Ban on imported building materials
Banning the importation of building materials would not be in the country’s best interest. I know the essence of the ban is for us to patronise our locally made building materials but there are incidences of collapsed building everywhere. Most of them are due to local materials, especially iron rods. If you take, for instance, some of our local iron rods to the lab for testing, you would find out that they don’t pass the bending test and when they are used to build, the cement mixes with it, after some time, it eats up the iron and once the iron breaks inside the pillar, it is a problem. So, why are we patronising the locally made materials that would put us in problems? Why don’t we allow people to bring in the ones they can and allow those who want to patronise the locally made ones to do so? There are different classes of building – high end, middle class and low end. In high end building, the finishing materials like water closet (WC) and some doors are not made in Nigeria. A house selling, for instance, for N200 million in Ikoyi cannot be built with locally made doors. In Nigeria where there is high rate of kidnapping and armed robbery, everybody wants security. When one is buying a property, his first consideration is security. Some would look out for bulletproof doors and how many of them do we make in Nigeria? A high end building needs something sophisticated and it can only come through import. As much as I agree that we must patronise our locally made building materials, I do not think we should ban imported ones.
Scorecard on financial institutions’ lending for real estate development
They have not helped the sector in a meaningful way. As a matter of fact, they are very skeptical lending for real estate development. I understand their fears. You must have ready made off-takers before they can lend money to any developer but where do you get the off-takers? Most of them that want to buy don’t have the money. They are still relying on mortgage to do one thing or another.
And the banks would not give mortgage on uncompleted buildings, so, the project must be completed before the banks avail them mortgage. So, when we don’t have off-takers, the financial institution would not help, and how do you make it then? Even giving money to mortgage banks to buy houses is a tall order from financial institutions. And a lot of people don’t even like to take mortgage because they are going to pay with their lives.