The Chief Executive Officer of Pelican Valley Limited, Dr Babatunde Adeyemo speaks to FATTEH HAMID about the proposed mortgage system that the President, Bola Tinubu, mentioned as part of his campaign promises and other issues
In your years of experience in real estate, what is the most challenging part of the industry?
We have numerous challenges but there are major and salient ones, which if tackled, move us in the right direction. Government policies must be consistent and pragmatic to help an average real estate entrepreneur. The government needs to put the house in order and clearly define the lands under government acquisition. There are situations whereby a real estate entrepreneur will do due diligence to get their land, and at the end of the day, another government brings acquisition to that land. The entrepreneur would then have to do what had already been done by the past administration. Most governments usually abuse the Act that states that all lands belong to the government and the government can acquire over public interests. Caution needs to be applied when it comes to investors because we are partners in development with the government in reducing the housing deficit in the nation. The government should see an average real estate entrepreneur as something other than a businessman but as a partner in progress towards the country’s development.
Another major challenge is funding. We should have access to funds with low and single-digit interest rates. What we have currently can not be referred to as funding because when you get funds at double-digit interest rates, it affects the growth of the sector in the country. Real estate is capital intensive and when there’s no access to funds, you don’t have it unless you add value and buy time, unfortunately, most real estate entrepreneurs don’t have such patience.
Recently, there have been several real estate investment scams running into billions with real estate entrepreneurs duping their investors and customers, what led us here?
First, greed on the part of some of the operators. When you are greedy and want to bite off more than you can chew, you’ll end up losing all you have. Going into fraud then becomes inevitable because of the highhandedness of some of these operators. They’d build many branches around the country, which will increase infrastructural liabilities, and give them no time to monitor them all.
How can Nigerians identify a potential real estate scam?
It is easy to identify scammers nowadays but most prospects are lazy and greedy. When you see someone come up with a project and you want to jump on it, search the internet for the name of the proprietor and the project they are introducing. Look at the owner who conceptualises the idea; that way you’ll identify potential scammers. The world is now a global village and people should judiciously use it. After due diligence, you discover that the real estate entrepreneur is dubious and you still go ahead to transact with the person, probably because they are offering lands or projects at cheaper prices, it means you’re also a dubious person. Most of the scams we have seen in recent years boil down to greed on the part of the buyers and sellers.
What governmental interventions can be used to combat the surge in real estate scams?
Sincerely, it is buyer’s beware. Before you buy any land, you have to investigate. The sad truth is that the government cannot do everything for us. I’ll also like to commend the efforts of the Real Estate Developers Association of Nigeria, for pushing a bill, which has just been passed, in the National Assembly. It is an Act to establish the Real Estate Regulators Council of Nigeria. When the bill passes through the National Assembly and the President assents to it, it’ll go a long way in weeding off quacks in the real estate business. The establishment of RERCN will provide efficient, effective and transparent administration of real estate development in the country. It will also prescribe the minimum standard for the conduct of real estate business in the country. With the bill, we should be able to have significant enforcement and monitoring of the real estate business in Nigeria. It will also expose the quacks and have them face the law.
What is a mortgage?
Mortgaging is a system where the property is secured on loan by an individual, which is to be repaid in instalments. The source of mortgage can vary in different places but in Nigeria, the major source of mortgage is the federal government.
President Bola Tinubu, during his campaigns, stated that under him, the housing deficit will be tackled through the mortgage system of housing. Do you think Nigeria is ready for this?
From the look of it, the President seems to be a frank person. The removal of fuel subsidies during his inaugural address shows that he’s dogged. You see, real estate financing and the mortgage system is not what any government can eradicate overnight. The housing deficit in Nigeria is complicated and needs a lot of deep research and study to tackle. Real estate financing is an integral part of that scheme which is to provide housing for all. This integral part cannot be addressed without addressing the economic issues that we have in Nigeria. There’s the need to first address the economic challenges. The truth is that no system can prosper with a bad economy and the plan for the mortgage system will be extremely difficult to succeed with the current economic realities. Nigeria has myriad economic challenges and the government cannot face real estate alone. I believe it is a mere political statement for now. The President has to sit down and take an in-depth look into the housing issues and bring together brilliant minds to suggest the best possible ways to tackle it.
How does a mortgage system work?
As I said, the major source of funding mortgages in Nigeria is the federal government and the way it operates is through agencies. Recently, the Nigeria Mortgage Refinance Company, which is the latest effort by the Nigerian government at growing the mortgage system in Nigeria, just visited the capital market to raise some funds. Now, down to the way it works, after raising funds, they channel it through the mortgage banks, where it trickles down to the real estate companies to access the loans to build houses.
Do you see any malapropisms in the current mortgage system?
To me, this is still like the old system whereby after approving the release of money, these agencies have their people that they contract it to and before you know it, they start spending money ridiculously. At the end of the day, there won’t be results. When the government is ready, they will look for genuine real estate investors that are out there. The government will investigate the individuals they are contracting these houses to, discuss with them and remove all bureaucratic bottlenecks that would hinder them from accessing the loans. Sometimes, those people might not necessarily be the big names in the sector, the government should lay down a medium to ensure that they attract the right profile to contract these works too. It goes beyond releasing the money. Sometimes, there’s the need for an adequate monitoring system because when these projects lack monitoring, someone somewhere will not allow it to trickle down to where it ought to go and we have a repeated cycle of what we have had before. What we want in Nigeria is to make housing available for everyone and this can be achieved through the system that the President proposed before he got into power. Simple economics tells you that when there’s increased availability of a product, it brings about a massive price reduction. When we make housing available, it’ll reduce the cost. This can be achieved when the government seeks the help of experts to sit and map out a brilliant plan to rescue the sector and tackle the long issue of the housing deficit that has plagued Nigeria. At the end of the day, if the current system is not thoroughly reviewed, the government will continue to enrich some people against the general interest of Nigerians.
Do you think there can be a system where private companies mortgage readymade houses to Nigerians without the government’s involvement?
Why not? If the finances are available. However, the challenges of finance will not make this possible for many private companies. However, if the government were to be involved, then I’m certain a lot of companies will key into the system.
So, you’re saying that real estate developers in Nigeria will key into the mortgage system, provided the federal government provides funding?
With a single-digit interest rate, many of the genuine companies in Nigeria will deliver. There should be ways agreements are reached and defaulters are penalised. In the housing sector, we call it ‘Rent to Own’ and this system is easy and doable. Studio apartments, one bedroom apartments can be built. It’s not until you have a duplex or a multiple-bedroom apartment. This is also a standard practice in developed countries and can be replicated here in Nigeria, provided that the government is determined to see it come to fruition.
While past attempts to tackle the housing deficit through mortgages were not successful, what are the other practicable efforts that Tinubu’s government can adopt?
Let the President appoint a serious Minister for Housing who will assist in bringing together a team of experts that will look for individuals in the sector and has the country at heart, formulate policies that will disband the old system, which I see as a shackle stopping Nigeria from getting it right. There shouldn’t be space for bribery to come in place when contracts are shared and people who are qualified from the applicants should be the ones that get their hands on these important projects. Also, the process should be open and available to all, ridding it of all bureaucratic bottlenecks. If the old system is not scrapped and there is no adequate plan for critical monitoring, this plan for mortgaging is dead on arrival. It will not work. I just told you that the NMRC went to the capital market to raise funds and I think they are getting about N18bn. Let them get the money and let us investigate where the money had gone by the end of this administration to check for any result.
Do you think Nigerians can abuse the mortgaging system if the plan by the President becomes successful?
Nigerians are law-abiding citizens. Look at Nigerians in the diaspora, they are abiding by the rules the mortgage system binds them to. However, when Nigerians see that the government is not serious, they will be unserious as well. Also, Nigerians have given their goodwill to the President and he also has the political will to make certain things happen. The President should take advantage of this honeymoon period and not disappoint Nigerians, The goodwill he has now is like a sum of money that must be spent wisely.
What are the sustainability measures of mortgages in Nigeria?
It is to increase the liquidity in the mortgage system with lower interest rates while ensuring that the funds raised by the government through the SEC, trickles down to the right places. Essentially, the government should create a committee that primarily gives close monitoring to this project.