The Nigeria Housing Sector Roland Igbinoba MD/CEO, FHA Mortgage Bank, Nigeria Nigeria Development...
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Transcript of The Nigeria Housing Sector Roland Igbinoba MD/CEO, FHA Mortgage Bank, Nigeria Nigeria Development...
The Nigeria Housing Sector
Roland IgbinobaMD/CEO, FHA Mortgage Bank, Nigeria
Nigeria Development and Finance Forum May, 2014
Washington DC. USA
“….. every single individual on earth has the potential and the right to live a decent life”
- Prof Yunus Mohammed, Nobel Laureate
“Africa’s growth acceleration resulted from more than a resource boom. Arguably more important were government actions to end political conflicts, improve macroeconomic conditions, and create better business climates, which enabled growth to accelerate broadly across countries and sectors.”
McKinsey (2010) Lions on the move: The progress and potential of African economies
In 2013 foreign direct investment (FDI) flows to Africa increased by 5% to 50 billion dollars in 2012, even though global FDI fell by 18%.The African market creates opportunities for overseas investors to diversify portfolios and participate in the emerging market boom. 6 out of 10 of the world’s fastest growing economies are currently in Africa, with the continent having enjoyed a 6.6 per cent growth in GDP in 2012.
Once described by The Economist as the “Hopeless Continent”, Africa, one way or another has managed to survive the steepest contractions in global economic activity since the 1930s, and has been rebounding quickly since the last decade.African GDP has outpaced world growth since the start of the last decade commodity boom in 2001, recording 6% in mid-decade. Despite slowing sharply in 2009, as global growth stayed positive at about 2% and the down turn has clearly been “V-shaped”.
The favorable outlook for the region is based on modest inflation, steadier exchange rates, and a smaller debt burden owing primarily to the debt write –offs in most countries between 2006 and 2007.
The Story of Africa - From Grass to Grace
Increasing Urbanization…...But, tiny mortgage market
Source: UN-Habitat (2005) Financing Urban Shelter. Global Report on Human Settlements.
Affordability in Africa
According to the World Bank, only 3% of the population in Africa has an income sufficient to support a mortgage
36.5% of Africa’s population earn less than US$ 2,00 per day. This is the international poverty line.
24% earn US$2 - $4 per day
9% earn US $4 - $10 per day
10.8% earn US$10 - $20 per day
18.8% earn above US$20 per day
In part, this has to do with low levels of affordability for mortgage finance
In most cases, subsidies don’t bridge affordability to buy a new house. In others, they cause new affordability challenges.
Slide Source: Center for Affordable Housing Finance, 2012
Background
Like other emerging economies such as India, Brazil, Malaysia the increase in construction activities in Nigeria is driven by economic expansion, growing population and urbanization of major cities. Growing demand levels especially with respect to housing and a deficit of about 17 million units continues to characterize and shape developments within the sector.
The Nigeria’s real estate and housing sector is currently undergoing a transition phase following several industry reforms and initiatives originating from both public and private sector stakeholders. Real estate contributed to 3.80% to GDP in Q1 2013 and improved in Q2 2013 to 5.23%; this improvement was driven by significant investment in the lower segment by individuals and some corporate investment in high end properties.
Owing to the newly rebased GDP for Nigeria, the real estate sector now contributes 8.01% to GDP. This further entrenches the investment potential that exists in the sector, notwithstanding the myriad of challenges.
The Nigeria Housing Sector
Regulators
Federal
FMH&UD FHA
CBN FMBN
StatesHousing
Cooperation's
Private Sector
Professional
Institutions
e.g. NIESV, NIQS, NIA, NIOB, NITP
Associations
e.g. REDAN, MBAN,
HoFPAN
Fairly Regulated
Hospitality & Tourism
Industrial Commercial- Office, Retail
Residential -Owner
Occupation, Rental
Real Estate Sub-Sectors
Persianas Group are developers of the first international-standard retail mall in West Africa aimed at supporting the growth strategy in the rapidly expanding underserved retail market. The Group has the following properties in its portfolio which comprises of Palms Shopping Mall, Lagos; Polo Park in Enugu State, Kwara Mall ( under construction ) in Kwara State and Ibadan mall ( under construction) in Oyo State.
Actis has invested $100 in the development of the Ikeja City Mall. The private equity firm has raised $278m for further investments in African real estate market with key emphasis on retail and office development fueled by growing middle class.
Artee Group owners of the Spar Shopping mall and Park & Shop, is planning to open 100 shopping outlets in Nigeria, in the next six years. The outlets will have between 400-500 shops located within the outlets.
IFC and IFC-ALAC ( Latin American and Caribbean) is investing $124million with in Persianas Group, which is structured as $74 million in equity provided by IFC-ALAC fund and $50 million in debt provided by IFC;
Africa Capital Alliance is presently executing Joint venture project with Mansard to deliver an ultra-modern mall in Victoria island
Commercial/Retail Sectors
Number of A-grade Shopping Malls
Jo'burg
Kampala
Lagos
Nairobi
Accra
0 10 20 30 40 50 60 70 80
74
1
2
2
1
Population (mn)
3
4
15
2
4
Compelling
statistics
• Ikeja City Mall has 4 million people within 8km radius – entire Johannesburg $1,500 per month household expenditure - $18k per annum.
• Potentials to generate PE returns of 25% IRR, and 2.5-3.0 exit in 5 yrs.
Source: Actis
Potential in the Retail Sector
The Nigeria Housing Market
DEMAND Vs. SUPPLY
14
Upper Class
Lower Upper Class
Upper- Middle Class
Lower Middle Class
Budget Class
Lower Class- Very Poor Social Housing
HMF and Rental Housing
Housing Microfinance (HMF)
HMF & Mortgages
Outright Cash/Mortgages
Mortgages
30%
20.00%
1.21%
28.79%
3.68%
16.32%
Income Pyramid Vs Affordability
There is a housing crisis in Nigeria
Do you see why?
Two sides of Nigerian cities: strong growth, clear demand, but poor housing
LAGOS
ABUJA
Situation Analysis in Nigeria
Nigeria Housing Market
More than 80% of Nigerians live in rented housing
compared with South Africa 19% and 22% in Ghana
The national housing deficit has grown from 7million in 1991 and
estimated at 17 million units
The World Bank has estimated that the cost of
bridging Nigeria’s 17 million housing deficit is
N59.5 trillion
The low and medium income families represent 65% of Nigeria population which also represent
about 85% of the housing demand for the nation who
represent the crucial mass of the demand
Mortgage Banking Sector Reforms
Objectives of The Mortgage Banking Sector Reforms
Aimed at repositioning and strengthening the PMBs as vehicles for housing and home ownership delivery
Instill confidence in the mortgage sector
Fostering the emergence of well capitalized PMBs
Promoting a robust mortgage finance system through market support initiatives.
Plans to capitalize its operation to about N100 billion by the end of the second half of 2014; N40 billion and N10 billion put together by the World Bank and other investors would be supported by Tier 2 capital raised by NMRC through the issuance of a N50 billion bond in the capital market.
Recently launched by on 16th of January,2014. the company has the principal objective of addressing the long-term funding constraints hindering the growth of the primary mortgage market, and reducing the funding cost of residential mortgages and availability of housing to working Nigerians.
The company is private sector-driven company with the public sector interest and purpose geared towards improving the critical housing sector by bridging the funding cost of residential mortgages and promoting the availability and affordability of housing by increasing liquidity in the mortgage market.
With an initial rollout support plan from 14 pilot states in Nigeria and the federal capital territory, it is envisaged that the company will be strongly identified as a company with national coverage to achieve its mission of providing affordable and accessible mortgage finance in Nigeria.
Nigeria Mortgage Refinance Company (NMRC)
The Mortgage Banking Sector- Post Recapitalization
Better capitalized and stronger mortgage institutions
Increased liquidity to increase lending and improve access to mortgages through the NMRC
Improved capacity, professionalism and technical expertise
Standardized Loan origination processes across mortgage banks
Mortgage Banks
Housing Sector
Affordability Gap
High Constructi
on Cost
Infrastructure
Challenges
Funding Constraint
s
Low access to
Mortgages
Regulatory Challenges
Challenges OR Opportunities?
Any Hope?According to the World Bank, only 3% of the population in Africa has an income sufficient to support a mortgage
36.5% of Africa’s population earn less than US$ 2,00 per day. This is the international poverty line.
18.8% earn above US$20 per day1. Bring mortgages down-market (and
make houses cheaper).
2. Grow & develop housing
microfinance.
3. Finance rental housing
Source: Center for Affordable Housing Finance in Africa / AfDB Report on the middle class
9% earn US$4 - $10 per day
10.8% earn US$10 - $20 per day
24% earn US$2 - $4 per day
4. Target subsidies carefully
5. Build solid data / information platforms to sharpen & target investments and incentives
6. Pursue policy interventions along
the value chain
Thank you
Roland IgbinobaMD/CEO, FHA Mortgage Bank, Nigeria
Nigeria Development and Finance Forum May, 2014
Washington DC. USA