PROPERTY TRANSACTION GUIDE

How N200bn stimulus package can rescue housing industry - REDAN
By Akinpelu Dada

Punch, Monday 4th July 2010

The troubled real estate industry may soon experience a lift if the Federal Government and the Central Bank of Nigeria accept the proposal of the operators to bail it out of its current problems.

The problems facing the housing construction industry in Nigeria include dearth of capital for development, absence of a virile mortgage system, inability of target subscribers to come up with the needed funds to make purchases and escalating cost of building materials, among others.

The recession in the global economy has slowed down the rate at which new houses are being picked up by target buyers. The situation is further compounded by the credit crunch in the banking sector as a result of the clampdown on bank debtors to pay up and the refusal of banks to lend to the sector.

As a result of these, the Real Estate Developers Association of Nigeria had some weeks back urged the government and the CBN to consider bailing out the industry to save it from imminent collapse.

However, members of the association, who met in Lagos on Thursday at the 2010 Annual General Meeting of REDAN, unveiled the details of the bail-out package that they felt would go a long way in galvanising the industry.

The association, which is an umbrella of most real estate construction firms and professionals, urged the Federal Government and CBN to immediately approve and release N200bn economic stimulus package for the housing sector.

Such a package, it said, must be given as loans to genuine developers on soft terms instead of them sourcing money from the open market for housing development, and should be managed by REDAN.

The President of REDAN, Chief Olabode Afolayan, pointed out that the global financial meltdown and the prevailing financial system crises had impacted negatively on banks, which could not sufficiently address housing financing needs, hence the need for a bail-out of the building industry as was being done for other sectors of the economy.

Afolayan said, "What we have done is to articulate actions and from there, it was clear that there is need to inject funds into the system. In injecting funds into the system, we discovered that there is a lot of crisis and there is no way we can make any impact without first resolving the crisis. By so doing, we discovered that there is need for a bail-out.

"Take for example, people who got the Estate Developers‘ Loan from the Federal Mortgage Bank of Nigeria . A lot of them are being chased around now. Although they have completed the houses but because of an incomplete transaction circle, their accounts have not been credited. Because of this, interests keep on piling and piling."

The REDAN president further said, "Somebody got N800m to construct 250 units of houses. After building these houses, they amount to N1bn; today, what he owes is N1.7bn. This is so because of the interest elements arising from incomplete transaction circle cropping up from the agencies not coming up for assignments, legal mortgages and all the rest. How do you want him to pay expect you bail him out and banks do this from time to time.

"Banks do interest waiver and that is what we are negotiating with the FMBN and other developmental banks providing the funding. We are agitating for it and we are confident that the present government will adjust it."

He also said that it had become virtually impossible for developers to secure funds for housing construction, noting that the government must make it a priority to restore flow of funds to the real estate sector.

A reliable and steady flow of credit to the housing sector, according to him, is essential to economy recovery given the multiplier effects associated with mass housing development generally.

Afolayan also appealed to members of the National Assembly to expedite action on the Land Reform Bill, amendment of the FMBN Act, NHF Act and others bills before them before the end of the current legislature.

On the Public-Private Partnership initiative of the association, Afolayan said that a joint committee of the association and the Federal Ministry of Land, Housing and Urban Development set up last year had developed a blueprint and prototype models to fast-track housing delivery proposals by members and also aid the achievement of set targets across the nation.

He described PPP in housing delivery as the ideal thing to achieve mass housing devoid of bureaucratic procedures associated with access to land and finance.

At the Presidential Dinner and REDAN Award Ceremony that was rounded up the AGM, Punch Nigeria Limited was specially commended for the stimulating and educative reportage of the real estate industry by its publication, The PUNCH, which bagged an award of excellence for real estate reporting.

Other award winners were Lagos, Katsina, Jigawa, Gombe, Kwara, Ondo, Cross River and Enugu state governments; FMBN, Skye Bank Plc, Obajana Cement Company Plc, Bi-Courtney Limited and Sparklight Property Development Company Limited.