3rd annual affordable housing africa · 3rd annual affordable housing africa bridging the gap:...

3rd Annual Affordable Housing Africa

Bridging the Gap: Housing Finance & Policy

Developing Primary and Secondary Mortgage Markets to

Provide Accessible and Affordable Housing in Nigeria

Charles Inyangete, PhD

Chief Executive Officer, Nigeria Mortgage Refinance Company (NMRC)

Bridging the Gap: Housing Finance and Policy. July 18-20, 2016

Right to Adequate Housing

The United Nations Committee on Economic, Social and Cultural Rights has underlined that the right to adequate housing should not be interpreted narrowly. Rather, it should be seen as the right to live somewhere in security, peace and dignity.

- The Right to Adequate Housing, OHCHR

Developing Primary and Secondary Mortgage Markets to Provide Accessible and Affordable Housing in Nigeria – Charles Inyangete, CEO – NMRC Bridging the Gap: Housing Finance and Policy. July 18-20, 2016

3rd Affordable Housing Africa Theme

Achieving sustainable economic development through the integration of effective policy reforms and a blend of conceptual and technological advancements


AFRICA

2016 estimated population

of 1.2bn people

Source: www.worldpopulationreview.com

Africa’s Investment Prospects

The Infrastructure Deficit In Africa

44%

19%

4%

23%

10%

Power

Transport

Irrigation

Water Supply and Sanitation

• Approximately US$75bn/annum is required to address Africa’s infrastructure deficit o US$38bn/year for new investments o US$ 37bn/year for maintenance

• Current funding gap is estimated at US$ 35bn/year • Over 60% of the current funding (US$40bn) is provided by the public sector

US$ 37bn Operation

and maintenance

US$ 38bn

Infrastructure Development

US$ 40bn

Current Spend

US$ 35bn Current

Financing Gap

Investment Required For Africa’s Infrastructure Distribution of Investments

Source: World Bank 2011 Source: World Bank 2011

The Nigeria Infrastructure Master Plan (NIIM)

The Nigeria Integrated Infrastructure Master Plan (NIIM) was approved by the Federal Executive Council on 3rd September, 2014.

Objective:

To raise Nigeria’s stock of infrastructure from 35-40% of GDP to 70% of GDP in 2043

NIIM – Projected Infrastructure Investment in Housing

The projection is that $350bn or 1% of the estimated $3tn would be invested in housing and regional development. Spread over a period of 30 years this translates to $11.67bn annually

Impact of Infrastructure on Housing Affordability

It is estimated that the cost of housing can be reduced by about 30% by providing infrastructure (Roads, Drainages, Water, Electricity etc.) 30% reduction in housing cost due to infrastructure savings will improve affordability by a factor of 1.4285 or 42.85%

Housing – Catalyst for Sustainable Economic Growth

The housing sector has the potential to catalyse sustainable economic growth, and can contribute significantly to GDP.

HOUSING INVESTMENT /FINANCE: CHALLENGE VS. OPPORTUNITY

ENABLING

INVESTMENT

ENVIRONMENT

Returns on Investments

Marketable Assets

Enabling Laws

Housing Value Chain (and Opportunities)

Africa Housing Market Absorptive Capacity

“With the exception of South Africa, Africa housing markets lack the capacity to receive big money.”

- Africa Housing Finance Year book 2015


© Copyright 2015 Nigeria Mortgage Refinance Company. The information contained herein is subject to change without notice. 15

With strong linkage to the socially relevant agenda of housing, significant institutional

support has been provided to develop Mortgage Finance

Globally, government-supported housing agencies and similar nodal agencies have played a constructive role in development of domestic residential mortgage and bond market

Several agencies have expanded their scope of activities and have accepted a larger share of the associated

credit risks

Helped eliminate barriers to securitization

Initiated more systematic issuance of MBSs

Improved access to housing finance for households

Provided liquidity to FIs

Role

Explicit Government Guarantee

Issues MBS

Purchases mortgages from Banks

Mortgage Insurance

Nigeria India Malaysia Canada Japan USA

Regulatory,

developmental

and refinancing

Refinancing Provide a stable supply

of housing finance Provide liquidity to

FIs

Has Securitization

Guarantee Programs

Source: KPMG

*

* Only issues MBSs on behalf of private financial institutions

# As part of Mortgage Credit Guarantee Company

#

Refinancing


With strong linkage to the socially relevant agenda of housing, significant institutional

support has been provided to develop Mortgage Finance

Globally, government-supported housing agencies and similar nodal agencies have played a constructive role in development of domestic residential mortgage and bond market

Several agencies have expanded their scope of activities and have accepted a larger share of the associated

credit risks

Helped eliminate barriers to securitization

Provide Liquidity to FIs Improved access to housing finance for households

Provided liquidity to FIs

Role

Explicit Government Guarantee

Issues MBS

Purchases mortgages from Banks

Mortgage Insurance

Nigeria Egypt Tanzania Jordan Brazil USA

Refinancing Refinancing Provide a stable supply

of housing finance Provide liquidity to

FIs

Source: Compiled from Various * Supported by the Central Bank

# As part of Mortgage Credit Guarantee Company

Refinancing Refinancing

*

Innovation: Key to Unlock Housing Finance


• PRODUCTS

• TARGET MARKETS

• APPROACHES • PLAYERS

INNOVATION IN HOUSING

FINANCE

MLF

Housing Affordability in Nigeria


Source: Centre for Africa Housing Finance in Africa, October 2015

NIGERIA HOUSING MARKET CHALLENGES

Source: Paper Presented at the Presidential Retreat on Housing Finance 2012 My Vision and Strategy For NMRC 2014-2016 - Prof Charles G. Inyangete - Sept., 2014

2

Mortgage Market – Key Issues

6

Short Tenor High Interest Rates

Regulatory

(Title Transfers, Governor’s Consent)

Foreclosure

(Lengthy and Complicated)

Housing Costs (High

Land and Building Costs)

Mortgage Insurance

(Lacking / Limited)

Underwriting Standards (New - NMRC)

Nigeria Housing Market Opportunities

• The Nigerian real estate sector is growing faster than the average GDP at a rate of 8.7 percent (GDP growth at 7.4 percent). BMI estimates that the real estate industry value will grow over the next 2 years, from USD 11.4 billion in 2015 to USD 16.5 billion.

• Nigeria needs US$363 billion to meet current housing deficit

-Centre for Africa Housing Finance in Africa, October 2015


Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Adapted from: Ayere, Towards a Brigther Future, October 2015

NIGERIA MORTGAGE REFINANCE COMPANY

VISION – To be the dominant housing partner in Nigeria

MISSION – … provide liquidity, accessibility, affordability, and stability to the housing market in Nigeria.


HOUSING – AFFORDABILITY IS KEY.

Household Income

Mortgage

Rate

Property Price

NMRC

1.Accessibility To Long term Finance 2.Sustainable Finance

3. Affordability ..by Connecting the Capital Market

The Nigeria Mortgage Refinance

Company Plc is a housing policy intervention

incorporating conceptual and technological

advancements for sustainable

development.

Avenues to Facilitate Affordable Housing.

Cost of housing affordability can be reduced between 20- 50 percent by;

• Unlocking land at the right location

• Reducing construction costs through value engineering and industrial approaches e.g new technology

• Increasing operations and maintenance efficiency

• Reducing financing costs for buyers

NMRC – PROMOTING AFFORDABLE HOUSING

• Land Acquisition and Compensation – New Mortgage and Foreclosure Law

• Mortgage Finance – Capital Market (Bonds / Investments etc.)

• Titling and Registration - New Mortgage and Foreclosure Law

• Construction Costs – Pension Contributory Scheme, Mortgage Guarantee, Deposit Insurance Products etc.

• Quality Assurance – Uniform Underwriting Standards

DIALOGUE ON THE CAPITAL MARKET | January 2015

Nigerian Mortgage Market | A Critical Enabler

A sustainable secondary mortgage market requires an efficient primary mortgage market.

Standardisation Legislative Reforms Performance Data

NMRC’s Uniform Underwriting

Standards for eligible mortgage loans

has now been finalized

This process will effectively convert

mortgage loans into commodities and

lower costs of due diligence It will enable investors and rating

agencies to quantify credit risk

.

The Model Mortgage and Foreclosure

Law is being finalized for passage by

Pilot States

Successful passage will fast track the

process for creating legal mortgages,

ensure timely resolution of disputes and

create an efficient foreclosure process

NMRC is initiating an IT Framework

that will link NMRC’s system directly

to the participating mortgage lending

banks’ mortgage information system

Availability of credible historical

performance data on mortgage loans

(e.g., default and prepayment) will

enhance risk assessment and pricing

of NMRC’s credit risk

“NMRC has devoted considerable time to technical activities important in managing the risks inherent in mortgage

lending and improving the enabling environment for the long-term benefit of market development and sustainability of

the mortgage market”


Nigeria’s fast expanding middle class holds huge potential for the

mortgage industry…

Growing Middle Class

Source: KPMG

Income

Nigeria Mortgage Market Overview



Mortgage Bankers Association of Nigeria (MBAN)

Nigerian Mortgage Refinance Company (NMRC)

FHA Homes (PML)

The Infrastructure

Bank

National Housing Fund (NHF)

Federal Mortgage Bank of Nigeria

(FMBN)

Primary Mortgage Lenders

Commercial Banks

Private Sector Players Government Operators/ Institutions

Private Developers • UAC Properties • UBN Property Ltd., etc

Federal Housing Authority (FHA)

State Housing Corporations

• LSDPC • OPIC, etc

Federal Ministry of Housing & Urban Development

Capital Market

Home Owners

Supervision/

Regulator

LSPDC: Lagos State Development and Property Corporation OPIC: Ogun State Property and Investment Corporation 1 7 PMLs have national authorization, 33 have qualified for the State PMLs. Source: KPMG

Providers of Finance

Secondary Market

Primary Market

Real Estate Development

Consumers

The Nigeria Mortgage Industry Structure at a Glance

Central Bank of Nigeria (CBN)

Nigeria Mortgage Sector

40 21

MORTGAGE REFINANCE MULTI-SECTORAL INTERVENTION FOR AFFORDABLE HOUSING

MORTGAGE REFINANCE

INDUSTRY REGULATORS

CAPITAL

MARKET

INSURANCE

INDUSTRY

PENSIONS

FUNDS

GOVERNMENT

PRIMARY MORTGAGE

LENDERS

NMRC - The Capital Market Tapping into Potential Growth In Housing

NMRC - The Pensions Sector

NMRC - The Insurance Sector

MORTGAGE REFINANCE AND AFFORDABLE HOUSING

Deep Primary and Secondary

Mortgage Market

Sustainable long-term finance for Mortgages

Sustained

Availability of

Affordable

Housing

NMRC CONCEPT


NMRC STRATEGIC THEMES

Encourage

mortgage

lending through

long-term

funding

Increase maturity

structure of

mortgages and

reduce mortgage

rates

Increase

efficiency of

mortgage lending

– lead role in

driving changes

and standardising

mortgage lending

Introduce a new

class of high

quality long-term

assets to investors

(pensions funds

and other investors)

Deepen Mortgage

Coverage

Increase Capital

Market Access/

Capital market

development

Activities

Ensure Operational

Effectiveness

Strategic Themes

Deepen Mortgage Coverage

Increase efficiency of mortgage lending through standardization of key lending procedures

2

Promote mortgage inclusion across different market segments and income classes

1

Increase access to mortgage facilities by home buyers

3

NMRC BONDS LISTED ON FMDQ-OTC


4

0

• FMDQ – Listings and Quotation Platform OTC Securities Exchange

Government securities, corporate bonds, commercial paper Gives global visibility through inclusion in FMDQ Bloomberg e-Bond Trading System,

transparency and price discovery Member of the African Securities Exchanges Association (ASEA) and affiliate of International

Capital Market Association (ICMA) Market size – Turnover value N104 Trillion ($520bn) in 2014 higher than the Nigeria Stock

Exchange of N1.3 Trillion ($6.5bn). In 2015 Turnover N137 Trillion ($685bn) Adopts IOSCO’s principles for financial benchmarks and documented governance standards over

NIBOR CPs quoted N80.4bn ($402m) (StanbicIBTC, WEMA Bank) Established 0.88 correlation of between crude oil price and the Naira 2016 Development Development and listing of non-interest Islamic (Sukuk) products

African Capital Markets Competitiveness

NMRC CONNECTING MORTGAGES TO THE CAPITAL MARKET


NMRC BONDS CAPITAL MARKET PROJECTIONS

2015 N8bn

2016

2019 N440bn

2017

2018

Introducing a new class of high quality long term

assets to investors

NEXT STEPS - GOING FORWARD

• Second round Equity Issue – up to N6bn ($30m) – Q3 2016

• Second tranche Bond Issue – N20bn ($100m) – Q3 2016

• Non-Interest (Sukuk) Bond – New Market target – INCLUSIVENESS


PERSISTING CHALLENGES

• High Inflation environment

• High Interest Rates and High Bond Yields

• Fixation on single-digit Mortgage Interest Rate

• Subsidy to achieve single-digit rate. Who Pays?

Developer Finance – Construction Warehouse Facility


Path to creating Mortgages

• Rent-to-Own

• Shared Equity Ownership Scheme


NMRC DRIVING INNOVATION IN DATA MANAGEMENT TECHNOLOGY - The Nigeria Mortgage Market Information Portal: is a collaboration of the Nigeria Mortgage refinance Company Plc (NMRC) , Central Bank of Nigeria, National Bureau of Statistics, Federal Mortgage Bank of Nigeria, Ministry of Power, Works and Housing and other stakeholders to address this challenge.

- The NMRC Mortgage Market System: an innovation aiming to capture online-real time mortgage data from primary mortgage institutions from point of request.

* Information asymmetry will be significantly reduced.


NIGERIA’S CAPITAL MARKET QUALITY

The Capital Market Master Plan – Four Market Quality Dimensions:

• Size

• Liquidity

• Depth

• Breadth

Critical Missing Dimension - RESILIENCE

Capital Market Resilience

CAPITAL MARKET RESILIENCE

RESILIENCE – Speed or ability of prices / rates etc to rebound after a shock.

Resilience is critical for ;

• Sustainability

• Enhancing Investor Confidence

• Signalling for managing volatility

The same applies to the larger ECONOMY

Diversification drives sustainability

The Capital Market is Key to Housing Finance


• The Capital Market provides veritable source for long term housing finance.

• Housing is a potential strong driver of economic growth

• The Nigeria Mortgage Refinance Company Plc is connecting the Nigeria Housing Industry and its stakeholders to the enormous potential of the Capital Market for sustainable housing finance economic development.

• Capital Markets must be RESILIENT to sustain affordable housing finance and economic growth

Resilient Capital Market Sustainable, Affordable Housing Finance

CAPITAL MARKET

ACCESSIBILITY &

AFFORDABILITY

SUSTAINABILITY

LIQUIDITY

Thank you

3rd annual affordable housing africa · 3rd annual affordable housing africa bridging the gap:...

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