With the downturn in the financial sector creating vast scale of building materials shortage in the housing market, contributors of the National Housing Fund (NHF) are now caught in the web of rising construction costs.
Under the scheme, the Federal Mortgage Bank of Nigeria (FMBN) provides long-term loans to mortgage institutions for onward lending to developers and NHF contributors for the purpose of building, purchasing or renovating residential houses.
The participants contribute 2.5 per cent of their monthly income, which qualifies them to access all products and services, especially eligible for up to N5 million loan without down payment as equity and those seeking for loans above N5 million to N15 million will only put down 10 per cent equity.
Essentially, the current rise in building materials is one of the many challenges being faced by the NHF scheme, which was established under the NHF Act of 1992 to facilitate the mobilisation of funds for the provision of affordable housing for Nigerians.
Among challenges bedeviling the scheme are slow refund to retired workers, inadequate houses to meet the demand of low-income contributors and lack of transparency, as well as accountability in the management of the fund and the issue of monitoring and punishment of employers that fail to remit deducted contributions.
The Guardian learnt that dwindling resources in states have affected remittances of workers contributions and delay in accessing loans, while some workers both in public and private sector contributing to NHF could not qualify for any of the houses due to their merger earnings.
It was also learnt some of the private developers have abandoned sites of ongoing projects and asking for variation as a result of the increase in cost of building materials, while others are rejecting contract to build more houses for low-income earners.
In 2018, President Muhammadu Buhari, declined assent to the National Housing Fund (NHF) (Establishment) Bill, passed by the National Assembly in November 2018 to expand the size of the fund by increasing the amount of contributions, introduce additional contributors, revise the amount of mandatory investment into the fund, increase penalty for default and ensure effective financing of housing projects.
According to KPMG, rather than address the challenges, the Bill is replete with many flaws, which made it unacceptable to stakeholders who would be impacted by its operation. It departs from NHF Act 2004 by specifying monthly income” as the basics for employee contributions as against basic salary.
However, the Bill does not define “monthly income” which may as well mean “gross income”. This could be onerous for employees whose cash flow will be significantly impacted due to other deductions, such as tax and pension contributions at eight per cent of monthly emoluments, from their gross income.
There will be practical challenges in enforcing the mandatory contribution by self-employed individuals, who being an amorphous group may be difficult to track down, especially with most of them operating in the informal sector of the economy.
There is no justification for the reduction in interest rate from four per cent in the NHF Act 2004 to two per cent in the Bill, especially as two per cent is below average interest rate paid by banks on savings, and is significantly below inflation rate, which is currently above 11 per cent.
The group head, Corporate Communications of FMBN, Lawal Isa, told The Guardian that the bank introduced a non-interest rent-to-own mortgage loan product to enable Nigerians to own their homes using interest-free mortgage.
“The product uses a rent-to-own model that allows beneficiaries to move into FMBN and non-FMBN funded homes and conveniently pay towards full ownership using monthly/quarterly or yearly rentals,” he said.
Under the arrangement, FMBN retains ownership of the property until the financing term ends or at any time during the lease period that the beneficiary wishes to purchase the property.
The FMBN non-interest rent to own product is available to Nigerians, who are contributors to the NHF scheme.
It covers both FMBN and non-FMBN funded properties with a maximum price of N15million. Beneficiaries have the options to pay to own the property in monthly/quarterly or yearly rental installments over 30 years depending on their age and years in service.
The plan is to have a Rent-to-Own Option as part of Federal Government’s resolve to impact the common man in the social housing scheme expected to also generate 1.8 million jobs and deliver houses to about 1.5 million Nigerian families.
FMBN currently has over 3,190 housing units available for off-takers on a rent-t-own basis accross several locations nationwide. some of these houses are located in FMBN funded estates in 17 states and federal capital territory, such as Ondo, Adamawa, Jigawa, Ogun, Taraba, Nasarawa, Enugu, Sokoto, Abia, Kwara and Niger.
Others are Akwa Ibom, Kogi, Borno, Katsina, Kano and Kaduna. The bank has also disbursed N73 billion to 87,333 beneficiaries under the home renovation loan.
He said the bank has surmounted some of its challenges, “Our challenge is to provide affordable houses as cost of housing has gone up. Our loan is a maximum of N15 million. At present some workers would not be able to fund those houses as some developers are seeking additional funding.”
He said for FMBN to continue to meet its obligation to NHF contributors in the face of high cost of construction materials, the Federal Government needs to provide subsidy to the scheme through provision of infrastructure to reduce cost of houses.
Isa disclosed that there has been increase in NHF refund cases and over 400,000 contributors were refunded about N55 billion as at July, this year. He stated that the bank has built houses through Cooperative Housing Development Loan, Estate Development Loan and Ministerial Pilot Development Loan.
He also revealed that the bank has housing estates in almost every state of the federation, except those that failed to provide land for the scheme. About 34 states and Abuja are participating in NHF scheme.