By Seun Adebola
I often wonder how probable it is for Nigerian middle class and low-income earners to buy a house. Each time I do, I end up dropping my pen because it never seems to add up. The housing finance system, inadequate financial support, high price of land, building materials, and the challenges are just endless.
Now, there’s a reason Maslow placed physiological needs at the base of the hierarchy of needs pyramid; they are the physical requirements for human survival. The right to housing is recognized in a number of international human rights instruments as part of the right to adequate standard of living.
With a “relatively low home ownership rate of 25%,” Nigeria has the lowest home ownership rate compared with its contemporaries. According to statistics, even Benin Republic enjoys a much better home ownership rate of 63%; Indonesia 84%; Kenya 73%; South Africa 56%; Libya 41%; Singapore 90% and the United States 70%.
Trapped by the housing crisis, Nigeria has a deficit of 17million. Yes, you heard right, 17 million!!! The current economic turmoil has worsened this situation in the short term, further slowing down new construction. Many mortgage banks unwilling to take the risk of lending to first-time buyers. Interestingly, the affordability crisis is not just for home ownership, rents have also been rising.
So to the real issues and question at hand. How can the middle class own a home?
What is middle class, anyway? A class of people is the middle of a social hierarchy. Whether you’re considered a middle class most commonly depends on your income. While these challenges are real, below are some of the options available for middle class and low-income earners.
Get a Good Mortgage Rate
According to the Nairametrics, Commercial Banks in Nigeria charge between 13% and 29% for prime lending rates while maximum lending rates ranged between 19.9% and 30%.
However, you can source for the best mortgage rates with affordable home equity contribution for middle and low-income earners. Understanding how mortgage works is very crucial to avoiding difficulties due to reduced income or increased rates amongst other challenges. Also, remember to choose your amortisation period wisely.
Build Your House
Building your own house is the most common way of owning a house in Nigeria as there is a growing opportunity for Nigerians to build a home for themselves. Though this has a lot of advantages, it’s also not without some disadvantages.
There are two major approaches; Do-it-yourself (DIY) method or Design-and-Build method.
DIY
- Buy a plan from an architect
- Purchase all the materials
- Get a contractor to provide labour – bricklayers, plumbers, casuals and electricians –basically to direct the construction activity to completion.
Design-and-Build
- Approach a developer or construction company.
- The developer has a team in place that will consist of professionals – contractors, sub-contractors, architects, and quantity surveyors – each with defined roles.
Oh, while building, don’t forget to include the ‘other room’.
Federal Mortgage Bank of Nigeria via NHF
National Housing Fund (NHF) is a Federal Government scheme, which entitles all Nigerians above the age of 21 years in paid employment to a low interest, government funded loan.
Members of the scheme contribute 2.5% of their monthly salary to the fund through Federal Mortgage Bank of Nigeria. The maximum amount obtainable under the NHF is N15 million. The borrowed capital is repayable over a maximum of 30 years at the rate of 6% interest.
How to apply:
- Open a savings account with a registered Primary Mortgage Institution (PMI)
- Contribution to the fund for at least six months prior
- Have satisfactory evidence of regular flow of income to guarantee the loan
- Submit photocopies of valid title documents (e.g. C of O)
- Approved survey/site plans
- Approved building plans
- Priced bill of Quantities where applicable
- Valuation report prepared by a firm of registered surveyors and valuers where applicable
- Letter of consent to mortgage to your chosen PMI
- Apply on a prescribed mortgage loan application form
- Offer Letter/Acceptance and Allocation letter (In case of government projects)
- In case of a registered self-employed applicant, a copy of Articles and Memorandum of Association and a copy of Certificate of Incorporation as evidence of employment status must be submitted.
The equity contribution is based on the loan portion of the mortgage finance.
- N15,000,000 – 30%
- N10,000,000 – 20%
- N5,000,000 – 10%
Lagos State Rent-to-own Housing Scheme
Lagos state recently unveiled the rental housing policies, which is targeted at low and medium income earners in both formal and informal sectors. Under this agreement, individuals are required to pay 5% of the housing fee as commitment and clear up the balance over a period of 10 years.
However, tenants can live on the property while paying towards the ownership of the property.
Eligibility
- Applicants must be primarily resident in Lagos state.
- Applicants must submit a copy of their Lagos State Resident Registration Card.
- Applicants must be over 21 years of age and first-time buyer.
- Applicants must be tax compliant and 33% of his/her earnings must cover monthly
