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Joint venture of FMBN, REDAN, Shelter Afrique targets supply of 10,000 houses yearly
The Federal Mortgage bank of Nigeria (FMBN) has sealed a deal with the Real Estate Developers Association of Nigeria (REDAN) and pan-African finance institution Shelter Afrique to establish a $2bn affordable housing facility.
The fund which will come in tranches of $200m per year to accredited developers will be used to drive the provision of about 10,000 homes every year for the next 10 years.
Richard Esri, acting managing director of FMBN explained in an interview that the MoU signed in January has started yielding noting that “We agreed that we needed to bring in Shelter Afrique to work in partnership with REDAN to make available some funds over the next 10 years by providing REDAN members with the necessary construction finance that is required to drive the national housing model”.
Business Hilights recalls that earlier last month, the federal government announced it would waive an initial 10% payment on mortgages below N5m ($15,700) administered by the state-owned Federal Mortgage Bank of Nigeria (FMBN), targeting future homeowners taking out mortgages in the low-to-mid price range. The average cost of a mortgage is $18,000, with interest rates at around 19% as of September, according to the Centre for Affordable Housing in Africa.
The federal government policy direction is basking on the creation of the government’s Family Homes Fund in September last year. The mandate of the N500bn ($1.57bn) fund is to keep mortgage rates for affordable housing at well under the average 23%, targeting 9.99% payable over 20 years.
According to the deal, prospective buyers are required to put down an initial deposit of 10% to qualify for these home loans, 70% of the mortgages are expected to go to houses priced between N2.5m ($7900) and N4.5m ($20,000).
The bulk of the fund is expected from Sovereign Wealth Fund, federal government bonds and Bank of New York, the scheme will work as a public-private partnership. It is also expected to promote the development of primary mortgage institutions, which tend to have a narrow banking licence and are generally reliant on wholesale funding, making them more vulnerable in times of financial or economic crisis.