It seems plans are under way to eliminate the past problems encountered in the estate development industry.
It is a well known fact that the slow pace of real estate development today, in the 21st century, is an embarrassment.
A country of well over 120m (and still counting!) with such vast resources has no excuse at all.
It needs to finally take the housing issue seriously and cater massively, not just for the rich and mighty, which seems to be the norm, but also for the middle class and low income earner that make up the large majority of the Nigerian populace.
The real estate crisis of the past always had to do with issues such as massive number of housing units always proposed by developers that required “gargantuan” loans, and developers’ indebtedness to financial and/or mortgage institutions, thereby creating excessive bad debts.
There is also alleged but unsubstantiated fraud allegations levelled against financial operators which includes inside abuse and unethical practices.
The FMBN and REDAN Collaboration
The welcome announcement by FMBN (Federal Mortgage Bank of Nigeria) and REDAN (Real Estate Developers Association of Nigeria) about a joint effort between the two parties to “introduce a new estate development policy to guide the activities of operators in the built environment” was announced during a press conference in Abuja, the nation’s capital on Friday March 8th, 2013.
What they are basically saying is that this new policy will address issues and crisis experienced in the past, things that contributed to the dearth of residential homes.
Specifically elaborating on the loan crisis associated with building construction for new estates, the new policy calls for developers to become more realistic in the number of units they wish to deliver.
For instance, wanting to build as many as 1000 units at a go will be frowned upon and you most probably won’t get a loan for that anyway!
Instead, real estate developers will be encouraged to break their numbers into smaller numbers, say like 150 units to 200 units at a go. This way, building developers can avoid the financial pitfalls they experience halfway or so into the building project.
The mortgage banks should definitely feel more comfortable with this new policy, and probably make them more receptive to the needs of real estate developers that are passionate about providing houses for Nigerians.
So in essence, if you “run into a hitch” financially during the course of construction and development, it won’t amount to several billions loss as is the usual case. This should check the “unnecessary level of indebtedness to mortgage institutions by operators”.
Operators will need to inculcate the habit of long term planning. So if you want to develop a housing estate with a mix of say 1500 units comprising detached houses, semi-detached homes, terraces, flats and condominiums, divide them into ten modular parts and build them in chunks of 150 units.
Technical Management Agreement between REDAN & Housing Developers
Before the association gives you the necessary documents to present to the mortgage bank for your loan, as a new estate developer you will have to enter into a “technical management agreement” with the real estate association – REDAN.
Your agreement includes allowing REDAN to pay visits to your construction site before building, and during the course of construction works.
This is to ensure that all necessary requirements are met, terms and conditions are adhered to, and quality of works is in line with acceptable standards and quality.
As stated earlier in this article, it sounds like a welcoming policy, and it should give the real estate development industry a “breath of fresh air”. We hope it works out great this time around.
I intentionally mentioned the date, place, and time, so that we can all watch with earnest expectations as this new plan unfolds, positively, no doubt.
My interest in the real estate development spans many years, but government policies, unfriendly business environment and lackadaisical attitudes of banks was always a mighty hurdle to cross.
Hopefully, this one should work, and it will, but only if approached with passionate commitment and much fervour by all parties involved.