Nigeria’s housing sector is facing a major hurdle in the form of high interest rates, which are making it difficult for people to access affordable housing. The high cost of borrowing is not only affecting demand but also supply, as developers struggle to build affordable homes.
With the situation getting worse, stakeholders are urging the government to take measures to address the issue and make housing more accessible to Nigerians.
In an exclusive interview, the Chief Executive Officer of Fame Oyster & Co., Olufemi Oyedele, said the increasing high interest rates would make borrowing more expensive, and slow down construction.
He noted, “The effect of the high-interest rate is that it is the base rate for determination of mortgage rate, commercial loan rate, and standard of living. This high interest rate will affect the cost of building materials, construction generally, and affordable housing.
“The mortgage interest rate will go up and prospective house buyers, who are trying to get a mortgage loan, will face food first and forget about housing. There will be a lot of squatters and people living in slums.”
Similarly, the Chief Executive Officer, Jofame Integrated Limited, Gideon Mfonabasi, said interest rates would lead to a decline in homeownership.
He said, “So, the very foundation of mortgage presupposes that people are not able to raise all the funds required to own a home. Housing is a basic human need and if everybody were to be able to afford what it costs to own a home, nobody would go for a mortgage.
“So, globally and Nigeria inclusive, it is clear that if people must have access to housing and affordable housing, in particular, mortgage would play a very critical role.
“Hence, if it is about affordability then what is clear is that if the interest rate is high you are going to be excluding a whole lot of people who normally would have wanted to own a home. So, affordability in housing is tied to low interest rates and that is why you see that even though a majority of Nigerians are not accessing the National Housing Fund.”
According to Mfonabasi, the right interest rate is essential to bridging the affordability gap in the housing sector.
He said, “Without the right mortgage rate we cannot be talking about affordable housing and that is the reality. So, there is a lot that the government must do to make funding available.
“It is a system that needs to be put in place and they are funding that we can access in our country to see how we can put a system in place that delivers this critical need for our country and citizens.”
Also, the Chief Executive Officer of Riel Homes, Dr Kolade Adepoju, stated that the increase in interest rate would lead to unaffordable homes for people.
He asserted, “The impact of high interest rates on mortgages and affordable housing is that if the mortgage interest is too high, it becomes unappealing and unaffordable for people. In essence, it is no longer a viable mortgage option. As a result, people will be discouraged from taking out a mortgage, and the dream of owning a home will become even more elusive.
“The primary purpose of a mortgage is to enable individuals to purchase a home and pay for it over an extended period. However, with high interest rates, this becomes unfeasible, and people may be unable to buy homes.
“Therefore, housing deficits will likely increase in the community or society, exacerbating the housing shortage and making it even more challenging for people to secure affordable housing options.”
The Monetary Policy Committee of the Central Bank of Nigeria recently increased the benchmark interest rate by 150 basis points from 24.75 per cent to 26.25 per cent.
Punch
