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Housing (adequate shelter) is recognized world-wide as one of the basic necessities of life and a pre-requisite to survival of man (Onibokun, 1983; Salau, 1990; United Nations, 1992). A house is a place which provides shelter, refuge, comfort, security and dignity. The housing industry can be a stimulus to national economy (Onibokun, 1983).Onyegiri and Okonkwo (2002) viewed housing as a physical asset of an integral part of a nation’s wealth embodied in fixed capital. The Federal Ministry of Works and Housing (2002) defined housing as “the process of providing a large number of residential buildings on a permanent basis with adequate physical infrastructure and social amenities, (services) in planned, descent, safe and sanitary neighbourhoods to meet the basic and special needs of the population”. Decent housing is one of the basic needs of every individual, the family and the community in general. The provision of housing for human habitation is considered to encompass the physical structure in addition to the immediate surrounding environment. It is among the major problems confronting both the developed and developing countries in the world (Gumel, 2000). It was further noted by (Zubairu, 2005), that in Nigeria, the population is continually increasing thus, creating the need for functional and affordable buildings and this problem gets more enormous and complex resulting to slum all over major cities in the country. It was also observed that, the development of any nation is hinged on the provision of adequate housing facilities for its citizens (Nubi, 2006).

Since housing delivery is not possible without finance, housing financing can be referred to as the process of obtaining funds or capital generally for the purpose of supporting a development and / or investment by gaining control over assets (United Nation, 1994). A housing finance system is a superstructure of laws, institutions and relationships between institutional and non-institutional units that facilitate the process of financial intermediation and capital formation in the housing sector (Olotuah, 2006). The problem of housing though universal, is significant in Nigeria. The recognition of the growing housing problems in both the rural and urban areas of Nigeria and the acceptance of the failure of the defunct 1991 National Housing Policy prompted the Federal Government of Nigeria to set up a 15- Man Committee to review existing housing policy and articulate the New National Housing Policy (NNHP) of 2002. The 2002 NNHP draft has as its primary goal of ensuring that all Nigerians own or have access to decent, safe and sanitary housing accommodation at affordable cost with secure tenure through private initiative. This draft is still making the rounds and has not yet been signed into law. Given that home ownership in Nigeria is currently put at 10% compared to 72% USA, 78% UK, 60% China, 54% Korea and 92% Singapore and outstanding mortgage loans at just 0.5% (2005) of GDP compared to 77% USA, 80% UK, 50% Hong Kong, 33% Malaysia and 61% Singapore (Financial System Strategy 2020, 2008), a lot of work needs to be done for Nigeria to approach the standards achieved in the developed world.

In Nigeria, housing is typically financed through a number of institutional sources. These include budgetary appropriations, Commercial/Merchant Banks, Insurance Companies, State Housing Corporations and the Federal Mortgage Bank of Nigeria (FMBN) and the Mortgage Institutions. These constitute the formal institutions. Informal institutions such as thrift, credit societies and money lenders who have been contributing substantially to the finance of housing construction. The Federal Mortgage Bank of Nigeria is now restricted to operate solely as a secondary mortgage institution both as an agent of the National Housing Trust Fund and as an operator in the capital market. An estate development

loan window has been created to provide loans to real estate developers, housing corporations and housing cooperatives for housing development in Nigeria (Olutuah, 2007).

The construction of building might take a longer period to complete because finance is not available. About 90% of total housing provision has traditionally been provided by the private sector (FRN 1992; Buckley 1994 and Ajanlekoko 2001). However, Ogu (1999) noted that 54% of residential accommodation is being provided by individual private property developers, 22.7 percent provided by corporate developers and 22.3 percent of residential accommodation is provided by government developers. Cooperative housing also meet the housing needs of low-income earners, who constitute the vast majority of Nigeria. This is due to their poor economic circumstances which place adequate housing out of their reach. As members they are able to participate in the affairs of the cooperative, to ensure that they are well managed (Olutuah, 2007). Unfortunately, the private sector is saddled with numerous problems which make supply always fall far short of demand and lower production quality (Nubi, 2008).

Tiabaijaken (2002) in Appiagyei and Dansoh (2011) opined that availability of adequate housing financing is the cornerstone of any effective and sustainable housing programme. Several other studies both internationally and domestically, have documented the significance of finance as the most crucial element in housing investment. On the international front (Struyk and Turner 1985; Renaud, 1986; Malpezzi (1990); Boonyabancha (2002) in Appiagyei and Dansoh (2011) established that the availability of finance determines access to other key inputs of land, labour, materials, infrastructure while on the home front as cited by Okpala and Onibokun (1986), Agboola (1987), Nubi (2002) finance is also recognised as part of housing problems.

Abdulai (2007) have argued that finance for housing is important, since it is needed from inception of project to completion, funding is required on regular basis and failure to provide it as at

when due leads to delays and an increase in cost of capital. Where this is not properly addressed, it will eventually lead to dispute, abandonment and sometimes project termination. Rather than making profit the estate developer is frustrated and liquidated (Anosike, 2004).

Due to the stringent conditions attached to borrowing from banks in Nigeria, most

developers especially low-income earners do not have access to finance for housing (Onibokun 1985; Nubi 2006 and Omirin & Nubi 2007). Therefore, individual homebuilders sought finance from informal sources such “ajo” (traditional thrift societies) or “esusu” (rotating savings and loan association), age/trade groups, traditional moneylenders, friends and family (Omirin and Nubi 2007). They were all classified as micro-credit organisations and their operations were convenient and accessible (Nubi 2006 and Omirin & Nubi 2007). They operate on the basis of third party guarantees and also relied on peer pressure to ensure prompt repayment. Also, they are unsecured and lacked the magnitude of accumulation of funds required for large investment outlays.

The foregoing portrays a picture of an inefficient, ineffective and unreliable housing finance system in the country in the face of enormous challenges of delivering adequate housing supply to the rapidly growing population. This challenge prompts the study on the availability of Housing Financing Funds for Private Estate Developers in Imo, Nigeria.


The problem of housing has become an every day discussion in all quarters of the public and private services of the developing countries of Africa. It has become increasingly glaring that most of the urban population live in dehumanising housing environment while those that have access to average housing do so at abnormal cost. According to Onibokun (1986), Nubi (1991), rent in major cities of Nigeria is about 60% of an average workers disposable income. This is far higher than the 20-30% recommended by United Nations.

Ekweme (1979), Iyagba et al (1998) explained that the rate of demand for new houses was in part predicated on the rate of formation of new houses and in part on the rate of replacement of old housing stock. With estimated population of 110million as quoted in1991 census report, Nigeria needs to produce 720,000 housing units per annum based on an estimate of 9 dwelling units a year per 1,000 of population. This is a very big challenge to the building industry.

Despite Federal Government access to factors of housing production, the country could at best expect 4.2% of the annual requirement from her. Substantial contribution is expected from other public and private sectors. It should be acknowledged that private sector developers account for 83 of urban housing (Federal Office of Statistics, Lagos 1983). Unfortunately, the private sector is saddled with numerous problems which make supply always fall far short of demand. Of these, the most limiting is Finance.

Various studies have, at different times, revealed the problems of housing production. Teufic and Ural (1978) Ogundele (1989) Agbola (1987) Okpala and Onibokun (1986) recognized finance as part of housing problems but ranked land and building materials higher. This led to intensive researches in these areas. Their findings influenced government housing policies and subsequent establishment of some relevant programmes and institutions like the Site and Service Programme and the National Institute of Road and Building Research. The drought of information and working knowledge of housing finance operation is a major problem today.

In a tight money market, housing is the first area to suffer, since neither the builder nor the consumer can readily obtain finance for housing. Actually, many builders have difficulty obtaining capital for their projects even in normal times. Two of these problems – the high interest rates that contribute to the high cost of housing and the difficulty in obtaining capital for home construction are examined more closely in this paper.

According to Onabule (1996) 245 Primary Mortgage Institutions were established under the NHP between 1991-1996. Unfortunately, only 54 are now operating, mainly in South West part of the country and Imo.

According to Abiodun (1999), National Housing Fund collected about 4 billion naira from the Mandatory Saving Scheme. Out of N300 million loan approved by FMBN, only N100million was advanced. The problem in this case is not availability of fund but stringent measures to prevent default. Hence, the housing problems persist.

            In order, therefore to make proposals on financing of real estate project in Nigeria,             questions will arise in the following areas

-      What are the existing or available funding structures?

-      Are these structures available?

-      If not, Why?

-      What alternatives means are available for financing real estate development?

-      How are the available structures being managed?

-      Is the method appropriate and effective?

-      What alternative approaches are available?

-      What are the likely challenges associated with financing of project

Against this background, the focus of this dissertation is on financing of real estate project in Nigeria with a view to understanding the financing framework practices in the Nigeria system (and likely change in strategy if more funding structures are provided).

                                                  JUSTIFICATION OF THE STUDY

Housing delivery in Nigeria is provided by either the Government or Private sector, but despite Federal Government access to factors of housing production such as land and capital, the country could at best expect 4.2% of the annual requirement (Raji, 2008). Gbadeyan (2011) in support of this position affirmed that Property development involves three major groups and they are: Consumers, the producers and providers of public infrastructure. Under the new housing policy in Nigeria, three principal actors were fully established; the private real estate developers, state government and the federal government, from these three, research has shown that most state governments do not have the fund to implement the scheme, while the private developers are still not performing according to expectation (Gbadeyan, 2011). Okupe (2000) and Gumel (2000) concluded that factors that limit the number of housing units include high cost of land, accessibility to finance, high cost of building materials, Government regulations and bye laws, cost of labour and inadequate facilities, improper distribution of funds and improper management.

Daramola (2009) established that drawback of housing delivery is hampered by the cost of urban land as well as the absence of large real estate developers with sufficient financial muscles to develop affordable houses on a large scale.

Several factors make the environment for mortgage lending difficult, including the absence of clear property and security rights; mandatory governor’s consent; high interest rates; and inadequate sources of long-term funding (FinMark , 2009)

Zubairu (2005) also mentioned that despite the fantastic, practicable and achievable structures put on ground by the governments through their agencies; the input of the private developers in mass housing delivery notwithstanding, it is sad to still observe that larger proportion of Nigerians still live substantially in slums and squalors.

It is believed that if the government allows the private sector to take over the housing market that would make the sector more productive (Buckley, 1993). Olokesusi and Okunfulure (2000) are of the view that most government housing programmes in Nigeria has been frustrated by corruption, politicization, insufficiency of technical staff and lack of infrastructure. According to Akeju (2007) the Nigerian housing market has tremendous opportunities which are waiting to be tapped and Government alone cannot fill the housing gap. He further argued that Government has no business building houses but should focus on providing favourable investment climate that will bring about the desire turn around in the housing market.

Since the aforementioned financing challenge is a reality that we cannot afford to pay lip service to due to it`s importance in the overall development of a vibrant housing sector, the logical step to take is to make a careful and in-depth analysis/study on how the housing development industry can be made to perform better with the availability of finance. This is particularly important considering the fact that

Nigeria is a developing country. It therefore justify why the study on the availability of Housing Financing Funds for Private Estate Developers in Imo, Nigeria.