29 TH – 30 TH March 2012

1. ROLE OF FEDERAL HOUSING AUTHORITY IN NIGERIA REAL ESTATE PRESENTED TO HOUSING & CONSTRUCTION ROUNDTABLE SESSION, NIIF 2012 - LAGOS Arc Terver GEMADE fnia, fnim, fabs Managing Director / CEO, Federal Housing Authority 29TH – 30TH March 2012

2. ABSTRACT This paper will attempt a brief overview of the Real Estate market in Nigeria and the contribution of the Federal Housing Authority (FHA) to the market, how it is currently interfacing with the Federal Mortgage Bank of Nigeria (FMBN) and its relationship to other players in the market. Particular focus will be on how the Federal Housing Authority is opening up the field for the private sector players to partner with the government for a robust housing industry in Nigeria. It is pertinent to state here that the Federal Housing Authority created under the Second National Development Plan in 1973 to coordinate, drive and execute Government Housing Agenda to the low, medium and high income groups has over years pursued this mandate despite the huge challenges and the wide gap that still exists between housing needs and supply. During these years, over 37,000 housing units have been delivered cutting across every state of the federation.

3. INTRODUCTION However, as in most countries of the world, the bulk of housing provision remains outside the public sector. It has been reported that a large percentage of rental housing units in Nigeria which provide accommodation for majority of city-dwellers belong to the informal private sector (Salau, 1992). In Nigeria today, public housing accounts for only 10% compared to nations like Singapore where public housing is put at 90%. This contrasts with other areas of social policy such as education and health, where governments have applied a much more comprehensive and universal approach. As at 2007, the housing sector contributed only 0.38% to Nigeria’s GDP in contrast to other emerging economies such as: South Africa, Philippines, Malaysia and others all averaging 40% and above. In the same period, mortgage loans contributed 0.12% to Nigeria’s GDP compared to 63% in USA, 64% in UK, 55% in Germany, 20% in South Africa, 5% in India and 3% in Ghana.

4. A country’s level of investment in housing contributes significantly to its growth. On the other hand, rapid growth rate in housing contributes to the level of physical development a nation attains. A country is said to be developed when it has a strong and stable economy associated with quality physical infrastructure such as: buildings, roads, bridges, water, electricity, sewage and waste disposal system, communication networks etc.

5. REAL ESTATE IN NIGERIA The National Bureau of Statistics’ 2011 and Q1-Q2, 2012 GDP for Nigeria breaks down the economy into two broad output groups comprising Oil and Non-oil sectors and states that ‘The non-oil sector was driven by growth in activities recorded in the building & construction sector, while oil sector output decreased’. The report further analysed the performance of the major industries in the non-oil sector in the second quarter of 2012 and their contribution to the Nigerian economy. Page 8 of the said report analysed the contribution of Real Estate Sector thus “The sector is characterized by two major classes of properties: the low end and the high end. While the low end includes places of low development which are driven by investments from individuals and few corporate bodies mostly in the form of residential buildings, the high end comprises of those areas where aggressive and high valued investment into real estate properties are made.

6. REAL ESTATE IN NIGERIA The situation at the high end areas is nearing a zero demand situation given the credit liquidity constraint witnessed in the Nigerian economy during the period. However, investment from individuals and some corporate entities still trickle into the low end of the sector. The growth recorded in the sector stood at 10.87 percent in the second quarter of 2012 compared with 10.48 percent in corresponding period of 2011”. The Nigerian real estate sector is still grossly underdeveloped due to limited or non-existent institutional framework.

7. REAL ESTATE IN NIGERIA: INVESTMENT BOOSTERS The following comments are significant drivers expected to boost and encourage investment in the real estate sector: While provision of houses through the creation of mortgages is taken for granted in developed countries, it remains a major challenge in developing countries, especially in sub-Saharan Africa including Nigeria. Nigeria’s real estate sector and mortgage financing are still in the infancy stages with tremendous potentials. In the same vein, with the improvement of the mortgage market, which will further enhance the purchasing capacity of this population, particularly at the lower income bracket, the recovery of investment can further be assured within target periods.

8. REAL ESTATE IN NIGERIA: INVESTMENT BOOSTERS Home ownership rate in Nigeria is put at 2% of work force and personal home ownership is highly cherished by most Nigerian families. Economic growth and an emerging middle class. The country’s democratic dispensation has witnessed a number of reform programmes aimed at encouraging private sector investments which is becoming better structured. These reforms have created a considerable opportunity in the real estate sector.

9. SUSTAINABLE affordable HOUSING DELIVERY methods /targets

10. TABLE OF PARTNERSHIP (Completed & On-going)

11. Recently Approved Partnerships – On-going

12. Recently Approved Partnerships - On-going cont’d

13. Recent Direct Construction Projects

14. FHA PARTNERSHIP SCHEMES FHA / TANGENT

15. KEY NEXT STEPS • Land reforms to ease access • Review of relevant legislations • Establishment of housing development standards regulatory body • Enforcement of national building code • Review of national housing policy • Review of national housing fund • Creation of housing infrastructure development / maintenance fund • Government to consciously provide construction finance for social housing

16. Creating enabling environment for development of building materials industry • Development of alternative building materials • Establishment of housing co-operatives nationwide • Establishment of a robust mortgage finance industry • Development of site & services schemes • Use of public / private or public / public partnerships in housing delivery • Provision of rental and social housing • The Ministry to enforce it’s regulatory role on property d evelopments to ensure quality of building materials and building.

17. Imperatives for Government Funding • Critical need for intervention of government at all levels spear headed by the Federal Government to bridge the affordability gap in housing. • Special intervention fund of N300 billion proposed in view of obvious merits, National housing provision and its multiplier effect in achieving sustainable development, poverty reduction and representing a viable strategy for government to achieve Millennium Development Goals (MDG). • Part of funding is to serve as infrastructure subsidy for social housing. This can boost the Nations housing stock by more than 100,000 units. • This intervention will further create more jobs (i.e up to 28 jobs for a single unit of housing on the average) and may create more than 2,800,000 jobs (professionals, skilled and unskilled artisans) with attendant multiplier effect.

18. INVESTMENT OPPORTUNITIES • Opportunities for Local and International Investors are available in the following areas: • Establishment of small and medium scale industries particularly for the production of building materials; • Development of affordable housing schemes • Provision of housing related infrastructure  • Housing Finance and Mortgage • Exploration of minerals for building materials production • Technology

19. INVESTMENT OPPORTUNITIES • Capacity Building and Skills • Estate Management • Facilities Management • Commercial Facilities Development • Trade in building materials

20. PROSPECTS FOR REAL ESTATE IN NIGERIA These must include a regime of relaxed and enhanced access to land for housing development that excludes possibilities of land speculation. The machinery for accelerated processing of application for land title must be put in place in all states in order to attain to security of tenure and promote housing development. The legislature must be carried along and their understanding obtained of the need for funds to be appropriated for infrastructure on housing layouts to stimulate housing delivery. On the other hand planning of our housing estates must be made infrastructure-effective, which suggests replanning and redistribution methods of housing types across our estates. Access to land and finance can also be enhanced through cooperative arrangements whereby members of a cooperative pool resources together to obtain large parcels of land and gain access to cheaper sources of development finance.

21. PROSPECTS FOR REAL ESTATE IN NIGERIA CON’D In order to boost the supply of houses, our mortgage finance system must be put on a sound footing and Government is already committedly working towards ensuring a sustainable mortgage system through the current recapitalisation and restructuring of the Federal Mortgage Bank to effectively function as the apex financial institution. More private enterprises and individuals should be encouraged to contribute to and have access to the NHF in order to boost affordability of housing by all and lead to more private sector participation on low end of the real estate sector. There is now an ever-urgent need to bring down the cost of housing through more efficient and cost-effective designs, and the development of local alternatives to most of the imported high cost building materials and components. On the other hand local production of building materials is necessary to bring down the costs and this can be achieved through mass production or by small-scale cottage industries. Massive training of our artisans is needed to produce quality housing stock that will be enduring and maintenance-efficient for sustainable housing delivery.

22. PROSPECTS FOR REAL ESTATE IN NIGERIA CON’D Huge prospects also exist in housing provision for players in the real estate sector and the delivery of this housing in view of need and supply can be encapsulated and packaged into appropriate delivery vehicles used to secure an effective implementation of the Nation’s Housing Policy. Site and Services scheme: As a step towards providing access to land and infrastructure and to boost housing starts, land should be planned, surveyed, and divided into plots provided with all the infrastructure necessary to support decent housing. This can be provided not only by Government but private developers should be encouraged to go into it. Such schemes have been developed by a few developers and cooperatives and should not only be encouraged but be in fact part and parcel of our housing delivery process. Housing Cooperatives: Individuals should be encouraged to organise themselves into cooperatives specially designed to provide access to land and finance which are the two main constraining components in the housing delivery process. These cooperatives have been proved to be a delivery vehicle that works and lessons should be learned from successful models like the Urban Housing Cooperative and the Nigerian Army Post Housing Scheme.

23. PROSPECTS FOR REAL ESTATE IN NIGERIA CON’D The vision of the recently inaugurated National Committee on Housing Cooperatives includes becoming the dominant mode of housing delivery for low and medium income households. In view of the high ranking housing as a life necessity, individuals should take advantage of this delivery vehicle and launch towards home ownership. Public/Private Partnerships: The new National Housing Policy provides for housing delivery to be dominantly private sector driven, and Government has therefore de-emphasised its direct involvement in direct housing construction. Government has instead embarked on alliances with the private developers to develop housing estates through Public/Private Partnerships (PPP). Government contributes the component of land with secure tenure and facilitates access to development finance while the private developer organises the actual production of the houses. The financial benefits accrue to both partners in the overall interest of the housing delivery process.

24. PROSPECTS FOR REAL ESTATE IN NIGERIA CON’D Private developers are now encouraged to take up parcels of land made available by Government to develop housing estates for sale to the public at profit. However, profit must be down played in estate development if we are to realise our objectives of housing Nigerians. In view of this land should be made readily available to genuine investors while discouraging land speculation, which is a bane of our housing delivery. Private developers, not surprisingly, are only interested in luxury housing and development for the high income, but should be encouraged to embark on mass housing which provides for a form of cross-subsidy between the low income and high-income disposal prices. After all it is God-given injunction that the strong must be encouraged to bear the burden of the weak.

25. CONCLUSION • The housing sector in Nigeria is yet to be adequately developed and creates opportunity for investors in the areas enumerated above. A country with a population of 167million people, 60% of whom are homeless or in sub standard homes and a housing deficit of above 16 million translating to about N100 trillion in investment portfolio, Nigeria provides a great market for intending investors. • Also, the improvement of the mortgage market, which will further enhance the purchasing capacity of this population, particularly at the lower income bracket, the recovery of investment can further be assured within target periods.

26. THANK YOU for your ATTENTION • For Further Inquiries, Please contact: • Tel: +2347098807906; +2347098808518 • e-mail: info@fha.gov.ng • Website:www.fha.gov.ng