1. Property registration is expensive:
Land titles are prone to political interference because of the vast powers of governors over state land allocation. Bottlenecks inevitably arise in the property transfer system due to Nigeria’s federal structure.
Another hindrance is that 65% to 70% of land is still held under customary title. Even in areas where title deeds are more common, there can be difficulties in clarifying who actually holds title to the land. This title uncertainty often means endless challenges in court.
Nigeria is among the worst globally when it comes to registering property, according to the World Bank’s Doing Business 2020 report, which ranks it at 183rd out of 190 countries. In Lagos, the registration process can last an average of 105 days, taking an average of 12 procedures, and costing about 11.1% of the value of the property. Neighboring Ghana only requires 5 procedures, 33 days and 6.1% of the property value.
The cost of registering property in Nigeria is about 70% higher than the average for Sub-Saharan Africa and almost three times the OECD average. In South Africa, similar land registrations are completed in much shorter times and cost only 8% of the property value.
2. Housing construction handicapped by high costs:
according to Director general of the World Trade Organization Ngozi Okonjo-Iweala
"Building a house is very expensive in Nigeria. A three-bedroom house, for example, will cost about US$50,000, compared to US$36,000 in South Africa and US$26,000 in India".
The cost of construction is high for three reasons: high costs of building materials, high skilled labour costs, and costs associated with poor roads and sewerage systems.
About 75% of dwellings in Nigeria’s urban areas are built of concrete. Cement prices in Nigeria are about 30-40% higher than in neighboring countries and world market prices. The lack of public infrastructure adds as much as 30% to the total costs of the development.
3. Few can access mortgage finance:
Only about 5% of the 13.7 million housing units in Nigeria are financed with a mortgage, and the mortgage debt to GDP ratio is only about 1%, and mortgage loans account to less than 1% of commercial banks’ total assets (specialist mortgage banks accounted for about 57% share of the market, according to the Central Bank of Nigeria.
Only 2% of Nigerians over 15 years old have a loan from a financial institution, and a meagre 0.6% have an outstanding loan for home purchase.
Loans for home construction are more common, although still minuscule, at 1.7% overall, according to World Bank’s Global Financial Inclusion (Global Findex) Database. Though the government set financial inclusion as a key pillar of its ‘Financial System Strategy 2020’, the challenges are huge, including low literacy, high interest rates, rising inflation, and high poverty.
The Federal Mortgage Bank of Nigeria (FMBN) manages a National Housing Fund financed mostly by contributions from public sector workers. In 2016, the FMBN introduced a scheme offering a housing loan up to NGN15 million (US$39,100) to all interested Nigerians. However, before one can qualify, the borrower must make monthly contributions over a period of six months and make a downpayment of 15% of the value of the property.
In summary Michael Chu’di Ejekam
Director of Nigerian Real Estate at Actis, a London-based private equity firm says“The ecosystem for residential investment development still remains relatively broken. The lack of affordable mortgages is a major challenge, a major deterrent, a major hindrance to the development of residential properties in this market."
Daily Realtor Blog 