How to increase housing supply as access to finance, FDIs wane

As the access to housing finance becomes uneasy to developers and foreign direct investments (FDIs) are drying up due to rising insecurity and the Covid-19 induced downturn in the global economy lingers, experts point to other ways to increase housing supply and reduce the deficit.

Potential sources of funding for housing, including deposit money banks (DMBs), private equity, pension funds administrators (PFAs), which have over N12 trillion assets under management, are unwilling to invest in the sector despite the huge opportunities.

“With over N12.2 trillion of Assets Under Management, which makes it an excellent candidate for improving liquidity in the housing sector, PFAs don’t invest due to regulatory restraints by PENCOM,” explained Ify Umunakwe-Okeke, CEO, Lexon Capital, UK.

Umunakwe-Okeke who spoke on ‘Housing Finance in Post Covid-19 Era: Lessons and Opportunities for Emerging Markets’ at the ongoing Abuja International Housing Conference, added that PFAs don’t invest in housing because they seek a better return on investment.

The same reason, she said, explains why private equity funds avoid investment in housing.

Chudi Ubosi had, at a separate occasion, explained that, though it is permissible for them to invest in asset-backed securities, including REITs, mortgage, bonds, and mortgage-backed securities, PFAs shy away from real estate investment because the assets are not liquid.

Umunakwe added that in real estate, there is inadequate transparency, multiple taxations and poor valuation standards, although estate surveyors and valuers would discountenance this assumption.

She said that in the absence of these funding sources, housing developers could increase supply through multiple ways such as Public-Private Partnerships (PPP) which includes affordable housing in exchange for land allocation, establishing and implementing monetary and fiscal policies to stimulate rapid economic recovery.

Other ways are lower interest rates for developers and purchasers, easier access to construction funding on less restrictive terms, a housing fund targeted at developers that will help bridge the liquidity gap, and encouraging local manufacturing of building materials, fixtures and fittings.

Increasing the earnings of salaried workers in the public sector and getting people on the housing ladder earlier, plus revitalising technical schools to boost the supply of skilled and semi-skilled labour force are also ways to reduce the housing deficit, according to Umunakwe-Okeke.

She also recommended adopting the financing options available to prospective homeowners, especially first home buyers, in the UK

The first of such options is the Mortgage Guarantee Scheme which helps to increase the supply of mortgages for borrowers who have just a 5 percent deposit. Another is the Help-to-Buy option with the government lending buyers up to 20 percent of the purchase price of a new build home.

Buyers, according to her, could also go for Shared Ownership Schemes; First Homes Scheme which helps first-time buyers and key workers to buy their homes at a discount of at least 30 percent; Right-to-Buy, which is a government scheme set up to help eligible council tenants buy their rented home at a discount, and Stamp Duty waivers or deferred payments.

There is, however, good news coming from Shelter Afrique, a pan Africa housing finance organization, which says it is poised to support large and affordable housing schemes through the issuance of a $250 billion bond.

Andrew Chimphondah, the CEO of the company, who disclosed this in his presentation at the conference, added that the organization has a role to play in attending to affordable housing delivery and urban development in Africa, Nigeria inclusive.

Chimphomdah assured that the organization would be releasing a range of financing facilities to support the delivery of affordable housing and also to stimulate demand.

Source: Business Day

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