Transcript The Nigeria Housing Sector

The Nigeria Housing Sector
Roland Igbinoba
MD/CEO, FHA Mortgage Bank, Nigeria
Nigeria Development and Finance Forum
May, 2014
Washington DC. USA
“….. every single individual on earth has the
potential and the right to live a decent life”
- Prof Yunus Mohammed, Nobel Laureate
“Africa’s growth acceleration resulted from more than a
resource boom. Arguably more important were government
actions to end political conflicts, improve macroeconomic
conditions, and create better business climates, which
enabled growth to accelerate broadly across countries and
sectors.”
McKinsey (2010) Lions on the move: The progress and potential of African economies
The Story of Africa - From Grass to Grace
Once described by The Economist as
the “Hopeless Continent”, Africa, one
way or another has managed to survive
the steepest contractions in global
economic activity since the 1930s, and
has been rebounding quickly since the
last decade.
African GDP has outpaced world
growth since the start of the last
decade commodity boom in 2001,
recording 6% in mid-decade. Despite
slowing sharply in 2009, as global
growth stayed positive at about 2% and
the down turn has clearly been “Vshaped”.
The favorable outlook for the region
is based on modest inflation, steadier
exchange rates, and a smaller debt
burden owing primarily to the debt
write –offs in most countries between
2006 and 2007.
In 2013 foreign direct investment
(FDI) flows to Africa increased by 5%
to 50 billion dollars in 2012, even
though global FDI fell by 18%.The
African market creates opportunities
for overseas investors to diversify
portfolios and participate in the
emerging market boom. 6 out of 10
of the world’s fastest growing
economies are currently in Africa,
with the continent having enjoyed a
6.6 per cent growth in GDP in 2012.
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Increasing Urbanization…...But, tiny mortgage market
80
20
Mortgages as a percent of GDP
2030 (es mate)
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0,07 0,07 0,16 0,21 0,39 0,5 0,5 0,5
Source: UN-Habitat (2005) Financing Urban Shelter. Global Report on Human Settlements.
1
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Source: World Bank data from Simon Walley; email correspondence from country-level prac oners; Hofinet; own analysis.
Affordability in Africa
According to the World Bank, only 3%
of the population in Africa has an
income sufficient to support a
mortgage
18.8% earn above US$20 per day
10.8% earn US$10 - $20 per day
In most cases,
subsidies don’t bridge
affordability to buy a
new house. In
others, they cause
new affordability
challenges.
9% earn US $4 - $10 per day
24% earn US$2 - $4
per day
36.5% of Africa’s population earn less
than US$ 2,00 per day. This is the
international poverty line.
Slide Source: Center for Affordable Housing Finance, 2012
In part, this has to do with low levels of affordability for mortgage finance
The Nigeria Housing Sector
Like other emerging economies such as India, Brazil, Malaysia the increase in
construction activities in Nigeria is driven by economic expansion, growing
population and urbanization of major cities. Growing demand levels especially
with respect to housing and a deficit of about 17 million units continues to
characterize and shape developments within the sector.
Background
The Nigeria’s real estate and housing sector is currently undergoing a transition
phase following several industry reforms and initiatives originating from both
public and private sector stakeholders.
Real estate contributed to 3.80% to GDP in Q1 2013 and improved in Q2 2013 to
5.23%; this improvement was driven by significant investment in the lower
segment by individuals and some corporate investment in high end properties.
Owing to the newly rebased GDP for Nigeria, the real estate sector now
contributes 8.01% to GDP. This further entrenches the investment potential that
exists in the sector, notwithstanding the myriad of challenges.
Fairly Regulated
FMH&UD
FHA
CBN
FMBN
Federal
Regulators
States
Housing
Cooperation's
Professional
Institutions
e.g. NIESV,
NIQS, NIA,
NIOB, NITP
Associations
e.g. REDAN,
MBAN, HoFPAN
Private Sector
Real Estate Sub-Sectors
CommercialOffice, Retail
Residential Owner
Occupation,
Rental
Industrial
Hospitality &
Tourism
Commercial/Retail Sectors
Persianas Group are developers of the first international-standard retail mall in West Africa aimed at
supporting the growth strategy in the rapidly expanding underserved retail market. The Group has the
following properties in its portfolio which comprises of Palms Shopping Mall, Lagos; Polo Park in Enugu
State, Kwara Mall ( under construction ) in Kwara State and Ibadan mall ( under construction) in Oyo State.
Actis has invested $100 in the development of the Ikeja City Mall. The private equity firm has raised $278m
for further investments in African real estate market with key emphasis on retail and office development
fueled by growing middle class.
Artee Group owners of the Spar Shopping mall and Park & Shop, is planning to open 100 shopping outlets
in Nigeria, in the next six years. The outlets will have between 400-500 shops located within the outlets.
IFC and IFC-ALAC ( Latin American and Caribbean) is investing $124million with in Persianas Group,
which is structured as $74 million in equity provided by IFC-ALAC fund and $50 million in debt provided by
IFC;
Africa Capital Alliance is presently executing Joint venture project with Mansard to deliver an ultra-modern
mall in Victoria island
Potential in the Retail Sector
Number of A-grade Shopping Malls
Accra
Population
(mn)
3
1
Nairobi
2
Lagos
2
Kampala
4
15
2
1
Jo'burg
0
Compelling
statistics
4
74
10
20
30
40
50
60
70
80
• Ikeja City Mall has 4 million people within 8km radius – entire Johannesburg $1,500
per month household expenditure - $18k per annum.
• Potentials to generate PE returns of 25% IRR, and 2.5-3.0 exit in 5 yrs.
Source: Actis
The Nigeria Housing Market
DEMAND Vs. SUPPLY
Income Pyramid Vs Affordability
Upper Class
Outright Cash/Mortgages
16.32%
3.68%
Lower Upper
Class
28.79%
Upper- Middle Class
1.21%
Lower Middle Class
20.00%
30%
Budget Class
Lower Class- Very Poor
Mortgages
HMF & Mortgages
Housing Microfinance (HMF)
HMF and Rental Housing
Social Housing
14
There is a housing crisis in Nigeria
Do you see why?
Two sides of Nigerian cities: strong growth, clear demand, but poor housing
LAGOS
ABUJA
Situation Analysis in Nigeria
More than 80% of Nigerians live in
rented housing compared with
South Africa 19% and 22% in Ghana
The low and medium income families
represent 65% of Nigeria population
which also represent about 85% of the
housing demand for the nation who
represent the crucial mass of the
demand
Nigeria Housing
Market
The World Bank has estimated
that the cost of bridging
Nigeria’s 17 million housing
deficit is N59.5 trillion
The national housing deficit
has grown from 7million in
1991 and estimated at 17
million units
Mortgage Banking Sector Reforms
Objectives of The Mortgage Banking Sector Reforms
Aimed at repositioning and strengthening the PMBs as vehicles for housing
and home ownership delivery
Instill confidence in the mortgage sector
Fostering the emergence of well capitalized PMBs
Promoting a robust mortgage finance system through market support
initiatives.
Nigeria Mortgage Refinance Company (NMRC)
Plans to capitalize its operation to about N100
billion by the end of the second half of 2014;
N40 billion and N10 billion put together by the
World Bank and other investors would be
supported by Tier 2 capital raised by NMRC
through the issuance of a N50 billion bond in
the capital market.
The company is private sector-driven
company with the public sector interest and
purpose geared towards improving the
critical housing sector by bridging the
funding cost of residential mortgages and
promoting the availability and affordability
of housing by increasing liquidity in the
mortgage market.
Recently launched by on 16th of January,2014.
the company has the principal objective of
addressing the long-term funding constraints
hindering the growth of the primary mortgage
market, and reducing the funding cost of
residential mortgages and availability of
housing to working Nigerians.
With an initial rollout support plan from 14
pilot states in Nigeria and the federal capital
territory, it is envisaged that the company
will be strongly identified as a company with
national coverage to achieve its mission of
providing affordable and accessible
mortgage finance in Nigeria.
The Mortgage Banking Sector- Post Recapitalization
Better capitalized and stronger mortgage
institutions
Increased liquidity to increase lending and
improve access to mortgages through the
NMRC
Mortgage Banks
Improved capacity, professionalism and
technical expertise
Standardized Loan origination processes
across mortgage banks
Challenges OR Opportunities?
Affordability
Gap
High
Construction
Cost
Regulatory
Challenges
Housing
Sector
Infrastructure
Challenges
Low access to
Mortgages
Funding
Constraints
Any Hope?
According to the World Bank, only 3% of
the population in Africa has an income
sufficient to support a mortgage
1. Bring mortgages
down-market (and
make houses
cheaper).
2. Grow & develop
housing
microfinance.
3. Finance rental
5.
Build solid data / information platforms to
sharpen & target investments and incentives
18.8% earn above US$20 per day
10.8% earn US$10 - $20 per day
9% earn US$4 - $10 per day
24% earn US$2 - $4
per day
housing
4. Target subsidies
carefully
36.5% of Africa’s population earn
less than US$ 2,00 per day. This is
the international poverty line.
Source: Center for Affordable Housing Finance in Africa / AfDB Report on the middle class
6. Pursue policy
interventions along
the value chain
Thank you
Roland Igbinoba
MD/CEO, FHA Mortgage Bank, Nigeria
Nigeria Development and Finance Forum
May, 2014
Washington DC. USA