by Yinka Kolawole, with agency reports
Central Bank of Nigeria (CBN) has reaffirmed plans to preclude primary mortgage institutions (PMIs) from engaging in property development as part of the forthcoming reform of the mortgage sub-sector.

Mr. Kola Durojaiye, a Deputy Director, Other Financial Institutions Department (OFID), CBN, made the assertion during an interactive session at a Seminar on “Nigerian Real Estate Market 2011: Review and Projections” organised by PISON Housing Company recently, in Lagos.

Responding to a question posed by a participant asking what would become of property development company currently being owned by PMIs after the merger, Durojaiye declared that they would be restricted to only core mortgage financing business, in line with the new banking model unveiled by the apex bank.

He noted that CBN released new guidelines for  appraising  mortgage and real estate loans in DMBs and PMIs – effective July 1, 2010 – in which it proposed new regulatory guidelines for PMIs. Key areas addressed in the guidelines are: Documentary and appraising standards for mortgage and commercial real estate loans; New provisioning rates and time-lines for mortgage loans; Recapitalization; Stream-lining of activities in favour of core mortgage financing; Easing access to liquidity vide the NHF refinancing facility and; Better corporate governance.

It would also be recalled that a draft document released by CBN reviewing the universal banking policy, among other things, specified permissible activities for PMIs as: mortgage finance; financial advisory services for mortgage customers; and taking  savings and term deposits.

The document also barred them from: demand deposits; equity investment in property development; estate agency/facilities management; project management for a real estate development; and management of pension funds/ schemes. They are also to have a minimum shareholders funds of N5 billion, from the current N100 million.

Activities already planned by the apex bank in pursuant of the reform process, according to Femi Fabanwo, Director (OFID), CBN, are: Approval and implementation of regulatory guidelines; Recapitalization of PMIs (to be known as Primary Mortgage Banks – PMBs); Stakeholders meeting scheduled for the 2nd quarter of 2011; Routine examination of PMBs (in conjunction with NDIC) scheduled for 3rd  quarter and; Integration of PMBs into the payment system, which is on-going.

“The reforms are aimed at: Repositioning and strengthening the PMIs as vehicles for housing and home ownership delivery; Fostering the emergence of  well capitalized PMIs and; Promoting a robust mortgage finance system through market support initiatives,” he said, in a paper presented on his behalf at the PISON seminar.

Meanwhile, property developers have expressed support for the planned preclusion of PMIs from property development, asking them to focus on their primary responsibility of mortgage financing.

Their umbrella body, Real Estate Developers Association of Nigeria (REDAN), declared at a recent stakeholders conference that for housing to be made readily available and affordable, mortgage banks must be made to squarely face their fundamental task of providing mortgage services, and stay clear of businesses that could constitute distractions to their core objectives.

On the other hand, mortgage operators are seeing the move as capable of sounding the death knell for most PMIs in the country. A PMI managing director whose organisation is deeply involved in estate development, told Vanguard that the move is another indication of policy somersault bedevilling the Nigerian economy, noting that the CBN guidelines released in 2003 clearly allowed the PMIs to engage in property business.