Your Excellencies, Distinguished Ladies and Gentlemen.
For over two decades, I have had the privilege of serving this nation in the public sector. Indeed, now that I am a traditional ruler, I am more in the public space than when I was in government. It is instructive to state that my sphere of public service was in three of the most critical sectors towards achieving the Millennium Development Goals. These are national security, food security and of course, housing. Albeit, when I look back, I say without mincing words that “we could have done better!”
This is why summit like this one is most imperative if we are to get things right; I do know that we all see the urgency of the situation and I believe that the new administration will tackle the issues militating against adequate and affordable housing, particularly for the teaming masses.
Current trends in the housing market and providing affordable housing for the citizens through innovative financing mechanism.
The housing market in the nation is fast evolving and despite this, affordability remains limited to a certain strata of society, especially the white collar middle class employees and certain categories of public sector workers with relatively decent income. Others are small business owners and diaspora buyers. These are the current main drivers of the real estate market which delivers an average of 5000 homes annually through government direct intervention and private sector initiative.
Unfortunately, these interventions are like a drop in the ocean when it comes to addressing the housing deficit which arguably stands at around 20 million shortfalls. The implication is that those in the lower rung of the pyramid like housing demand are left to their fate. Major fallout is the fast growing volume of unregulated developments which results in sprawling slums in the suburbs and fringes where the average worker can find cheap and perhaps untitled land and struggle to build.
This presents a challenge as the assets being illegal risk demolition. Many of such properties have practically no infrastructure and also can’t be effectively incorporated in the nation’s electricity, water, transport or even security systems. Consequently, governments at all levels are unable to take advantage of such wasting assets to generate income from properties taxes and tenement towards providing more social services to the people. The biggest losses and instability to nation electricity grid occur at this level.
Worse still is the impact of long hours of commuting from further out of employment centres by residents of those communities thereby adversely impacting on their general and mental health as many spend hours travelling daily. This also impacts on their monthly emoluments as they spend a large part of their wages on transportation. At the end of the day, low productivity and life expectancy of work force impact on the national GDP.
To address these challenges, we must find innovative ways of catalyzing the housing market which is a very major contributor to national GDP and productivity. This has been a recurring line in many workshops and seminars over the years without any government belling the cat because of over reliance on weak mortgage architecture in the system.
The Lagos State Government of course pioneered a Home Ownership Mortgage Scheme which is still evolving and as Commissioner for Housing, I was able to see first-hand the lacuna and that is part of what emboldens me to make these proposals. I believe it’s time for bolder action and to do something unconventional in the short term whilst trying to fix the mortgage architecture that will develop our mortgage banking landscape, including the regulatory agencies.
Home ownership and revolution in the housing market when done on a large scale will kick start the Industrial Revolution we’ve often talked about. The feeder industries for the raw materials for home production on industrial scale, ranging from development of local capacity in iron and steel production, aluminum production from ore to finished product, local glass industry, tile production, paint industry, sanitary, electrical fixtures and fittings, doors etc are some of the biggest employers of skilled and unskilled labour off site.
Most of the products are currently imported and fast deplete our foreign exchange whilst also outsourcing employment off shore. The basic raw materials for these products are all local and it’s easy attracting investment capital into these industries as long as the numbers are attractive.
Imagine launching an audacious 1million homes per annum program, which will require at least 20 to 30 million tons of reinforcement annually. This itself, will present a fantastic investment proposition for potential investors in Ajaokuta steel factory through without government breaking sweat to look for funds. All government needs provide is a guarantee of off-take to willing investors.
Our proposition
As part of the palliatives government is proposing to cushion effects of subsidy removal an others, an audacious and ambitious housing initiative should be launched by government driven by reputable private sector players.
Under the initiative of 1 million homes a year, the government working with say 100 developers on pilot phase will issue a Bank guarantee to each for 10,000 homes each in batches of face value of 1000 unit per time.
Each of these developers for pilot phase will provide land with good title and in some case government will yield some of its land in urban areas and fringe suburbs with good road network and easy access to employment centers, like existing barracks.
In subsequent phases, government will open new layouts and build world class connecting roads and rail to access these areas in less than 2 hours as well as service them.
Depending on the set cost of homes say N10m average, the face value of each guarantee is N10 billion. The guarantee crystallizes for every 250 units delivered and upon completion of the 1000 units, the homes are aggregated and placed with an asset management entity; say ministry of finance incorporated (MOFI). They are then securitized and rolled over to performing entities to continue delivery cycle.
With these pool of assets produced in well-structured settings in preferably centers of employment and metropolis, the landscape of cities and suburbs will change and homes retailed to end users on rent to own basis with an initial 10% deposit and balance over 15 to 20 years. Imagine the impact on the well-being of citizens. The initiative will create reverse flow of capital and the industry servicing this behemoth will build capacity to compete in the export market as local demand is being satisfied as well as create highly trained work force.
Distinguished ladies and gentlemen, time for talk is over. It’s time for bold and audacious action that will transform the nation and change our trajectory. God bless our Nation!
Thank you.
[Being Text of Address by His Royal Majesty Oba Abdulwasiu Omogbolahan Lawal CON (Abisogun II) – The Oniru of Iru-land at Special Interactive Session with Political Leaders by Housing Industry Stakeholder at THE 17TH AFRICA INTERNATIONAL HOUSING SHOW, ABUJA 2023]
