Corporate Developers Should Be Able To Access FMBN Funds – Elem | Independent Newspapers Limited
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Corporate Developers Should Be Able To Access FMBN Funds – Elem

Corporate Developers
Posted: Sep 26, 2016 at 8:34 pm   /   by   /   comments (1)

Sunny Elem, is a developer and Managing Director of Wealthteam Properties Limited, with properties scattered across the country. In this interview, he spoke with NKASIOBI OLUIKPE on challenges facing the real estate sector, the Federal Mortgage Bank of Nigeria, and several others. Excerpts:  

As an investor in the real estate, how would you assess the property market?

It’s booming! Recession has always been the best time to invest in real estate sector. One reason is because supply outweighs demand, thereby forcing prices down. Another reason is that because of inflation and the steady decline of the Naira against other major currencies, especially the US dollar, many people use real estate properties to store up their wealth, as it were. If you buy right now, when the cycle is completed, the return in investment will be well worth the risk and time.

One of the major put-offs to real estate developers is the land registration process. How do you think government can improve on this?

The first and most important step is to repeal Land Use Act degree. This bureaucratic and costly land administration by states’ land registry offices, add to the cost of building construction in Nigeria.

The World Bank Ease of Doing Business report ranks Nigeria 173rd of 178 countries as property registration procedure involves an average of 14 procedural steps, 82 days and cost 22 per cent of the property value.

In advanced and well organized climes, there is usually a centralized system to process the land registration. The current bureaucratic bottleneck where you have to deal with different ministries and departments makes it very discouraging for any well meaning and serious developer.

During the Bola Tinubu’s administration, the sequence in the process was much easier for a land owner. Then once you have the land, you can approach the State with your Building Plan, submit all the necessary documents and make all the necessary payments. If the Plan is approved, you can then proceed with the construction without the Certificate of Occupancy (C of O). But now, the reverse is the case.

The law now is that you must get your C of O first before the Building Plan can be approved. What that means is that if you have an accommodation problem, for instance, you can’t rush to buy a land and obtain approval to build a house, you’ve to wait for months and even years.

How do you think the recent hike in cement price is going to affect the sector?

The truth is that it is not only cement price that is hiked, but virtually all building materials. Even before the hike in cement price, the cost of other building materials have gone up. You know majority of these products are imported. When you factor in the Naira slide as stated earlier, you will understand what I mean.

Added to this, the foreign exchange to import these products is not readily available. Most of the importers of these building materials have to source foreign exchange from the Black Market. Obviously, it is going to have negative consequences in terms of construction cost and rents increases.

The Federal Mortgage Bank of Nigeria (FMBN) recently got the EFCC to go after developers badly indebted to it. Why do you think developers collect money and don’t refund back to the FMBN?

It’s the system we find ourselves in! Every typical Nigerian thinks that any money from the government or a bank is part of a ‘national cake’ from which he or she must chunk out his own share, hence not meant to be paid back. Especially as they see those in authority loot the treasury and get away with it.

Additionally, since there is no system to place a lien on the property, so that the developer wouldn’t be able to sell without reverting back to the FMBN, they are having a free day. If such a system were to be in place, the FMBN does not need to use the EFCC to recover the huge debts, instead all they need to do, is simply approach a court for an order to resell the property to recover the debt.

With complaints of paucity of funds by property developers, how do you think the FMBN can be made viable?

In an interview, recently granted by the Managing Director of FMBN, Ahmed Abdulsalam, he stated and I quote:

“The major focus of the Policy on Housing and Urban Development is to evolve sustainable liquidity for the housing finance sector to ensure that all Nigerians own or have decent, safe and sanitary housing accommodation at affordable cost. Therefore FMBN is mandated to raise the quality and quantity of funds, in particular, from the capital market, to meet the mortgage-financing needs of Nigerians. The bank is to evolve into a viable secondary mortgage institution with the capacity to become an active player in the capital market”.

I don’t think that the present set up where only individuals can contribute to that fund and access it will lead to the FMBN mandate as enumerated above by the managing director. Corporate developers should be able to access the fund too. The awareness is not there; the FMBN should advertise like any other bank and educate the masses. You can prove me wrong, but go to the streets and ask 10 people about FMBN, four out of the 10 will agree they have heard about it. And honestly, only one out of the four actually know how it works.

How about the Nigeria Mortgage Refinance Company (NMRC)? Has it actually made any significant impact since inception two years ago?

Any significant impact is yet to be seen.

Some are contemplating alternative sources of funding (foreign loans) for real estate developments. What do you see as the pros and cons of this suggestion?

That should be a welcome development for those that have the source and means to access such funds. It will also impact positively on our ailing economy. But the biggest fear is that of repatriation of the funds when the repayment is due.

What I mean, for instance, is assuming you got $1M at N415 per dollar exchange rate and in 5 or 10 years time the repayment will be due, the exchange jumps to N600 per dollar, as it has happened in recent times, what will the guy do? I know someone presently in that predicament.

Over-pricing of property has been criticized as being responsible for excessive supply stock without a matching demand, in the midst of about 20 million housing deficit. What went wrong and how do you get developers to come down on their prices?

What went wrong was that we have so many land speculators. In many cases, you see that the cost of acquiring the land becomes higher than the building itself. Additionally, paucity of funds, lack of capacity, land disputes that take years to resolve, all contribute to over-pricing.

Your latest development is the Quantumlife Towers in Asaba, Delta State. What is it about the Towers that should make home seekers turn their searchlights on it?

Quantumlife Towers is a modern estate situated along the Benin-Asaba Expressway. It is just 15 minutes drive to Onitsha Niger Bridge. It is built with very beautiful landscapes that any home seeker desirous of good value for his /her money, will find irresistible. Added to this, is the high return on investment. Already, we have investors from Onitsha, Awka, Port Harcourt and Lagos coming in.

Comments (1)

  • Sabbir Hossain Sep 26, 2016 at 8:35 pm Sabbir Hossain

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