AFFORDABLE HOUSING FOR NIGERIANS ON LOW INCOME – SOCIAL INTERVENTION A PRESENTATION TO THE REDAN 2019 BUILDING EXPO FEMI ADEWOLE FAMILY HOMES FUNDS LTD
Key Themes The Excluded 90%; FHFL’s Focus Market Segment; Our Products Facilitating the Supply of New Housing for People on Low Income Enhancing Access to Home Finance Partnering for Success
THE EXCLUDED MANY
91% 73%
Our Obje jectives To work with partners to create: 500,000 homes which are affordable to Nigerians earning less than N100k (US$300) per month; 1,500,000 jobs.
Strategy Framework 500000 HOMES 1500000 JOBS OUR RESULTS AFFORDABLE HELP TO BUY RENTAL HSG LAND DEV. WHAT WE HOUSING FUND FUND FUND FUND AIM TO DO Home Loans Social Housing Construction Land TO ACHIEVE Finance Facility Assistance Development THEM SUSTAINABLE IMPACT CORE VALUES FINANCIALLY VIABLE RELATIONSHIPS WELL GOVERNED PEOPLE
expanding access to home financing for people on low income. We will promote an alliance with partners (Universities, PMB, NMRC, FMBN, REDAN, Coops etc) to establish a Housing Finance Innovation Lab. We must find a HOME GROWN SOLUTION!
HELP TO O W N RENTAL HOUSING FUND
HELP TO O W N HTO provides a deferred payment loan to eligible buyers on concessionary terms to help enhance affordability. Eligible Buyers are required to contribute up to 10% of the purchase price. The completion cost (90%) is funded by a conventional 50% mortgage from the existing mortgage lenders on commercial terms and 40% loan from FHF. The FHF loan requires no repayments in the first 5 years. After the first 5 years, the borrower commences repayment on the FHF loan with a starting interest rate of 3.5% per annum in the sixth year which increases in steps to just over 13% per annum by year 15. In order to own the home outright, both loans have to be fully repaid by the end of year 20. Buyers Equity 1 0 % FHF Contribution 4 0 % 5 0 % Mortgage Bank Contribution
Potential Impact and Targets Significant enhancement of affordability (up to 30%) for people on low income with a spin off effect of stimulating supply of new homes. For instance a N5m Complements existing home financing options (NHF, Commercial Mortgages). It can also provide a bridge for the NHF. We expect to write about 3000 loans in 2019 (pilot phase) growing up to 25000 by 2021.
Significant numbers of new urban dwellers are likely to be renters. It provides an accessible first step into housing for most people. However most of the rented housing can be expensive, poor quality unregulated and insecure; FHFL seeks to harness the significant potential rental housing has to deepen housing finance and offer large numbers of Nigerians on low income a first step on the ladder towards home ownership. We believe that effectively executed, this intervention has the most transformational effect on the housing market in the medium term. It has the potential to unleash supply and grow the housing developer market including new Technology.
- HOW IT WILL WORK FHFL RENTAL CAPITAL Construction Finance HSG FUND MARKET Construction Finance Second stage possibility for Capital Market repayed from proceeds Long term lending to AMCO operations to raise capital on the back of of sale to AMCO repayed from rental revenue. established rental stream ESTATE MGT Developer ASSET MGT CO ORGANISATION Bulk Pre-Purchase Agreement between Service Agreement with an Estate developer and AMCO offering secured Units rented to individuals with an Management Organisation exit. option to buy
- KEY ISSUES TO BE ADDRESSED Development of key Institutions with credibility in the market, particularly Housing Management Organisations to secure revenue; Landlord and Tenant Regulations. Some States now have this (e.g. Kaduna) but needs to be more widespread; Possibility of Tax Breaks and other concessions to boost yield;
It need not be, if we……. Give a bit more attention to developing housing solutions targeted at up to 90m Nigerians living on less that US$1/day. This population (equivalent to the whole of West Africa) is too large to ignore; Recognise that the cost of investing in housing that is affordable to ALL sections of the population is MUCH lower than the cost of NOT investing or half hearted approaches; Build Institutions that provide a sustainable base for housing delivery. REDAN can have a significant role to play here; Work Together…….
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