By Yinka Kolawole

It was reported that 85 percent of Nigeria’s urban population lived in rented accommodation in 2010, devoting more than 40 percent of their income on rent.

According to UN statistics, the urban population of Nigeria constituted 48 percent of the country’s population in 2009. This indicates that 73.92 million Nigerians out of the estimated total population of 154 million people live in urban centres. And of this figure, 62.93 million (representing 85 percent) live in rented houses across the country.

This also implies that of the estimated 17 million inhabitants of Lagos State, 14.45 million people live in rented accommodation.

In a recent presentation on ‘overview of the housing finance sector in Nigeria’, Roland Igbinoba, President of Pison Housing Company, noted that informal housing is most prevalent in the urban centres of the country, with more than 80 percent of the population living in settlements that are unplanned with poor living conditions.

“The informal urban settlements are visible in the Lagos metropolis and other major cities. The Mowe and Ofada axis in Ogun State (close to Lagos) provides an example of this kind of settlement, with unhealthy conditions due to overcrowding and lacking adequate infrastructure.

“Housing in these settlements is built incrementally and completion of buildings can take as many as 10 years. The formal sector, which constitutes about 15% of the housing market, is insufficient to meet demand. Where supply exists, this is targeted at high-income earners, while houses categorised as low income are mainly outside the reach of low-income earners.

As a result, rents and house prices are high. This sector is predominantly a seller’s market where rents are paid on average of two years in advance. The cheapest apartments for sale in the suburbs of Lagos cost about N2 million – N3 million, on the outskirts of Lagos around N5 million, while in Lagos itself the figure is closer to N10 million,” he stated.

Igbinoba lamented the weak state of the nation’s mortgage industry, noting that the sector generated less than 100,000 transactions over a period of 50 years – between 1960 and 2009, representing an average transaction of 2,000 per annum.

“The contribution of mortgage finance to Nigeria’s Gross Domestic Product (GDP) is close to negligible with real estate contributing less than 5%, and mortgage loans and advances at 0.5% of GDP, compared to 77% in the US, 80% in the UK, 50% in Hong Kong, and 33% in Malaysia. Within this scenario, the few low-income earners who own their houses usually acquire land and build incrementally with their savings.

“Another challenge in delivering affordable housing to low and middle-income households is the affordability gap. This is defined as the difference between the required monthly mortgage repayments on the least expensive house, and the 33% (an industry standard as recommended by the International Labour Organisation) that can be deducted from the total salary of a potential homeowner.

“The gap affects 52% of the population or 65 million households. While some households achieve affordability with supplementary, informal income, this is not counted in loan origination procedures,” he added.

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