SOLD BY: THE CONTRIBUTION OF PRIMARY MORTGAGE INSTITUTIONS TO HOUSING PROVISION IN ABUJA
ABSTRACT
This study assesses the contribution of primary mortgage institutions to housing provision in Abuja with particular reference to Platinum mortgage Bank. The specific objectives are: To assess the role of primary mortgage institutions in mortgage financing of residential housing; to determine the mortgage facilities offered by primary mortgage institution; to examine the procedure for the award of mortgage facilities to housing Agencies; to evaluate the problem of platinum mortgage institution in financing housing mortgages. The researcher adopt the use of questionnaire, observation and personal interview to gathered relevant data from the respondents while tables, simple percentage and descriptive statistics were used for data presentation and analysis. The research reveals that online marketing business have a significant effects on real estate market in Abuja and therefore it should be encourage to cover all areas of real estate market such as estate agency, development, sales, and management of real estate property. The research has shown clearly the problem of the mortgage industry in Nigeria which include: high interest rate tagged to PMI funded loans, the cumbersome process in the NHF application, the flexibility of interest rates on loans would also be of great interest to the mortgagors and would increase their interest in mortgage facilities given the assurance by PMIs that the interest rates are negotiable which creates additional costs and thus makes them un-affordable to many Nigerians. The following recommendations are presented for deliberation by the primary mortgage institutions and the mortgage industry as a whole: PMIs should be encouraged to improve their capital base in order to empower them for greater effectiveness in financing of residential property in Abuja.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The importance of housing finance in any economy cannot be overstressed. It drives the provision of housing which is more than shelter, since it involves all the services and utilities that make a community a livable one. Housing is also one of the best indicators of a person’s standard of living mid his or her status the society. In spite of the crucial role housing plays as a basic needs, it has remained inadequate in supply in practical all human societies’ right through history. An active and buoyant housing sector is an indication of a strong programme of national development. It serves a foundation for and the first step to the future economic growth and social development. The housing sector plays a more critical role in a country’s welfare than is always recognized as it affects not only the well being of the citizens but also the performance of the sectors in the economy.
Mortgage financing represents the genuine means of housing in the world’s developed economies and is also more of a challenge in developing cuntnes. For example, United Kingdom has the largest mortgage market in Europe which is approximately 25% of the European market. In Mexico, the housing finance market is in a state of retrenchment, the macroeconomics environment has not been favorable to the development of primary mortgage market (Lea, 1996). The Mexican mortgage is highly segments with a verity of mortgage programs designed for different sectors.
In Nigeria, presently the mortgage sub sector accounts for >10% of Nigeria’s Gross Domestic Product which means that the opportunities that exist in this sector to boost the nation’s economy cannot be exaggerated. The federal mortgage bank of Nigeria puts an estimated over 10 million homes ‘as housing deficit in Nigeria; the implication of this is that with time the mortgage industry will also become large in the Nigeria capital market.
The mortgage industry in Nigeria involves few active players which are often banks subsidiaries and a collection of smaller inadequate mortgage institutions. These institutions include semi government agencies, mortgage banks and building societies. Mortgage financing has often been fingered as the most difficult constraints in the Nigerian housing sector. One of the major problem has been the inadequate supply of long term funds which represents the major in cans of providing mortgages. Thus, the system has relied on compulsory savings into National Housing Trust Fund (NTITF) scheme. As a result of this, effort has been made by the regulatory authorities in Nigeria to increase the supply of long-term funds for onward lending to prospective homeowners A few of these effort include the recent recapitalization of Primary Mortgage Institutions (PMIs) in Nigeria, the pension and financial sector reform’s and the recently promoted Mortgage Backed securities on the future of investment return in the mortgage industry. This study is therefore set to conduct a thorough research into the Nigerian mortgage sector and the contribution of primal)’ mortgage institutions to housing finance in Nigeria.
1.2 STATEMENT OF PROBLEMS
There is shortage of adequate housing facilities in Nigeria towns. Lagos, for instance, has an average of 3.8 persons per room and extreme density ranging between 5 to over 7 persons per room has been recorded (Omirin , 1998). Housing problems are exacerbated by the combination of many factors. The bulk of traditional housing available in our urban centers are mainly in dilapidate conditions and unsuitable for habitation . Secondly, more houses are needed to relieve the existing overcrowding in many Nigeria urban centers. Thirdly, natural increase demand additional dwelling units to house the increasing population. Fourthly, rural- urban migration, which has assumed great dimensions during the last three decades, has aggravated housing needs of urban centers in Nigeria. In response to the great demand for houses, unplanned, and sub- standard private housing districts continues to emerge in many towns in Nigeria. These in turn led to emergence of slums. The Association of Housing Corporations of Nigeria estimated on the basis of the 2006 population census that at least 200,000 dwelling units should be provided annually throughout the federation and that government authorities should produce at least 10,000 housing units annually.
The provisions of Decree No. 3 of 1992 are intended not onlyto improve the operational impact of the housing financial system butalso to ensure the realisation of the social economic objectives of the National Housing Policy. It hashowever, been observed thatsome of the provisions of the decree have not been sufficiently enlarged to give broad definitions to concepts such as Housing and Financing options. Other problems observed are the absence of Institutional Protection for providers of long term funds (depositors) are the lack of development of secondary markets for mortgagesencourage investors and active market conditions within the sector in the Capital Market.This project intends to assess the role of primary mortgage institutions in mortgage financing of residential property in Abuja.
1.3 AIM AND OBJECTIVES OF THE STUDY
Aim
The project aim is to assess the contribution of primary mortgage institution to the provision of housing in Abuja with a view of examine the benefit derived from platinum mortgage institution.
Objectives
To achieve the above set aim the following specific objectives shall be pursued:
- To assess the role of primary mortgage institutions in mortgage financing of residential housing.
- To determine the mortgage facilities offered by primary mortgage institution.
- To examine the procedure for the award of mortgage facilities to housing Agencies
- To evaluate the problem of platinum mortgage institution in financing housing mortgages
1.4 RESEARCH QUESTIONS
The following research questions shall guide the researcher in order to achieve the set objectives:
- What are the role of primary mortgage institution in financing residential housing
- How can mortgage facilities be determined by the primary mortgage institutions?
- What are the procedures for the award of mortgage facilities to housing agencies?
- What are the problems of platinum mortgage institution in financing housing mortgages?
1.5 RESEARCH HYPOTHESIS
H0: Primary Mortgage institution does not make significant contribution to housing provision in Abuja
H1: Primary Mortgage institution does not make significant contribution to housing provision in Abuja
1.6 SIGNIFICANCE OF THE STUDY
This research assesses the role of primary mortgage institutionsin mortgage financing of residential property in Abuja. It appraises the mortgage facilities offered by primary mortgage institutions and the contributions of mortgage bank institution in housing provision in Abuja. The result of this study will relevant to property developers, investors and government authority as it will enlighten them on the contribution of primary mortgage institutions in financing housing provision and development in Nigeria.
The result of this research will contribute to the body of knowledge in provision of mortgage financing for housing development thus, will serve as research material for interested researchers who will like to further research into the contribution of primary mortgage institutions to housing provision.
1.7 SCOPE AND LIMITATION OF THE STUDY
This project work covers entirely the role of primary mortgage institution in financing residential property in Abuja. The scope of this study is limited to the contribution of primary mortgage institutions in financing residential property in Abuja. .
Limitation
Its major limitation was the problem of getting information from the institution under study. There is always the fear of giving out information to the public as such, vital information needed was not readily available.
Time equally would not be left out; getting permission to leave school and the issue of finance cannot be ignored as much was spent in procuring materials. However, with fact and judicial use of the limited resources, reasonable analyses have been carried out in this research work.
1.8 DEFINITION OF TERMS
Mortgage: Cambridge English Dictionary define mortgage as an agreement that allows you to borrowmoney from a bank or similarorganization, especially in order to buy a house, or the amount of money itself:
Finance: Merriam Webster define finance as money or other liquid resources of a government, business, group, or individual.
Institution: Institution is a structures or mechanisms of social order, they govern the behaviour of a set of individuals within a given community. Institutions are identified with a social purpose, transcending individuals and intentions by mediating the rules that govern living behavior.
Housing: Housing refers to houses or buildings collectively; accommodation of people; planning or provision of accommodation by an authority; and related meanings. The social issue is of ensuring that members of society have a home in which to live, whether this is a house, or some other kind of dwelling, lodging, or shelter.
Primary Mortgage:The primary mortgage market is the market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market.
1.9 THE STUDY AREA
Platinum Mortgage Bank Ltd is one of Nigeria leading primary Mortgage Institutions. It was incorporated in 1992 with the Corporate Affairs Commission to provide savings, loans and homes ownership services, and licensed by the Central Bank of Nigeria and the Federal Mortgage Bank of Nigeria under the CBN Decree 24 of 1991 and FMBN Decree No. 53 of 1989 respectively to provide Mortgage Banking Services in Nigeria.
The name “Abuja” was derived from Abu Ja, a brother to MuhammaduMakau, the last Hausa ruler of Zaria. Makau had left Zaria after being defeated by the Fulani and settled in the area now known as Abuja. In 1825 his brother Abu Ja succeeded him as the 62nd King of Zaria.
The full name of Abu Ja was Abubakar (shortened to “Abu”) and the name Ja was given to him because he was light in complexion (in Hausa “Ja” means red or fair). He became known as “Abu Ja”, “Abu the fair one” (other sources claim that the name “Ja” was derived from the last name of his father which was “Jatau”). Abu Ja then built a new capital for his Kingdom and called it “Abuja.”
Abuja was mainly built in the 1980s and it officially became Nigeria’s capital on December 12, 1991, replacing Lagos. The Abuja Federal Capital Territory, while smaller than other states within Nigeria, is two and half times the size of Lagos city, the former capital. This territory was formed with the express purpose of supporting Abuja city, encircling it within a womb of nature. Abuja has an Area size of 713km2
The site for the new capital was chosen because of its central location (viewed as neutral both ethnically and religiously, where culture and religion meet), easy accessibility, pleasant climate, low population density, and the availability of land for future expansion.
Not only was a city designed, but an entire environment. Part of the provisions of the Master Plan is the development of adequate recreational and Green areas within the city. Abuja is surrounded by abundant hills, highlands, savanna grassland, and tropical rain forests.
The master plan of Abuja ad the Federal Capital Territory (FCT) was developed by international planning associates (IPA), a consortium made up of three American firms: Planning Research Corporation; Wallace, Roberts and Todd; and Arch systems, a division of the Hughes Organization.
The master plan included a regional site selection ad master plan for the new and detailed design of the Central Area, which accommodates the national government center, cultural institutions, and the Central Business districts.
Outside The central Area, residential mini-cities with populations of 150,000 to 250,000 are organized around local business and the employment centers.
More detailed design of the central areas of the capital, particularly it monumental core, was accomplished by KenzoTange, a renowned Japanese architect, along with his team of city planners at KenzoTange and Urtec Company.
The problems associated with the capital being in Lagos, such as population pressures, political and ethnic divisions, led to the search for a new capital in 1976. Abuja was selected from among 33 possible sites. Physically located in the centre of the country and viewed as neutral both ethnically and religiously, it is where culture and religion meet.
The criteria used for selection included: centrality, healthy, climate, land availability and use, water supply, multi-access possibilities, security, existence of resources, drainage, good soil, physical planning convenience and ethic accord.
The Emir of Abuja at the time, Alhaji Suleiman Barau, was asked to meet with his Emirate Council to approve contributing four of the five districts to Abuja to become the new capital. The council was divided as some districts considered it too much of a sacrifice; but at the end, they approved the request from the Federal Government.
Thus, the Abuja in Niger State contributed 80% of the land of the territory, Plateau State (now Nasarawa State) contributed 16% of the South east territory and Kwara State (Now Kogi State) contributed about 4% of the south-west territory.
According to the 1979 master plan, Abuja’s territory has to be developed in four phases on an area of about 250 square kilometers, and each phase has to be further sub-divided into districts.
The phase 1 development has almost been completed and includes the Central Business District (the three Arms Zone Presidency, National Assembly and Supreme Court), the Maitama, Wuse, Garki and Asokoro, residential and business districts.
There are also 5 districts in Phase 2, and some of them have works at various stages of completion. They are Kado, Durumi, Gudu, Utako (which infrastructural facilities have been completed) and Jabi. Phase 3 districts are Mabuchi, Katampe, Wuye and Gwarimpa. There are also 5 suburban districts, which are Nyanya, Karu, Gwagwalada, Kubwa, and Jikwoyi. Along the Airport Road there are clusters of satellite settlements, namely Lugbe, Chika, Kuchigworo and Pyakassa.
Other satellite settlements are Idu (the main industrial zone), Mpape, Karimu, Gwagwa, Dei-Dei (hosting the international Livestock market and also International Building materials market).
Construction service companies and enterprises continues at a fast pace in Abuja and new places open weekly, Phase 2, currently under development, involves the integration of the surrounding Katampe, Mabushi, Utako, Wuye, Durumi, Gudu, Jabbi, Duste and Gaduwa areas into the city. Phase 3 and 4 are also under development, however, there are works at various stages of implementation in Karmo, and Idu districts (Phase 3), and the Gwarimpa Districts, where many of the construction companies “Life Camps” are located, has already been developed.
Weather and Climate
The history of Abuja is not complete without talking about it’s wonderful weather and climate. The FCT experiences three weather conditions annually. This includes a warm, humid rainy season and a blistering dry season.
In between the two, there is a brief interlude of harmattan occasioned by the northeast trade wind, with the main feature of dust haze, intensified coldness and dryness.
The rainy season begins from April and ends in October, when daytime temperatures reach 28 °C (82.4 °F) to 30 °C (86.0 °F) and nighttime lows hover around 22 °C (71.6 °F) to 23 °C (73.4 °F). In the dry season, daytime temperatures can soar as high as 40 °C (104.0 °F) and nighttime temperatures can dip to 12 °C (53.6 °F).
Even the chilliest nights can be followed by daytime temperatures well above 30 °C (86.0 °F). The high altitudes and undulating terrain of the FCT act as a moderating influence on the weather of the territory.Rainfall in the FCT reflects the territory’s location on the windward side of the Jos Plateau and the zone of rising air masses. The annual total rainfall is in the range of 1100 mm to 1600 mm.
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