Obaleye: Why Mortgage Sector Contribution to GDP is Less than 0.5%

Dele Ogbodo in Abuja

The Managing Director of Infinity Trust Mortgage Bank (ITMB), Mr. Olabanjo Obaleye, at the weekend said Nigeria’s mortgage sector contribution to the Gross Domestic Product (GDP) was less than 0.5 per cent annually because mortgage banks find it difficult to access long-term funding from the capital market.

The situation, he said, is different in the United Kingdom (UK), Canada and US where the sector contributes about 60 per cent to GDP, adding that the operating environment is hostile to the mortgage industry.

Obaleye said: “If you see the performances of mortgage banks in the country you will see that it is nothing to write home about and this is because of the hostile environment in which we operate. Most of us that is still operating in the sector is because of the emotional attachment that we have to home ownership, otherwise we can as well move our capital to other areas and sectors the economy.”

The MD who made the disclosure at the 10th Annual General Meeting (AGM) of the bank, in Abuja, said some mortgage banks within the last two years have converted to commercial banks because of the harsh the operating environment.

He said: “There is little that a mortgage banker can do with shareholders’ funds. You have to do your work with capital from third party. The Nigerian economy is not where you can get long term capital easily.

“If I want to finance mortgage and I want mortgage to penetrate the Nigerian industry very well then it has to be at single digit interest rate, but where do we really get that from?”

According to him, government has to really tinker with their policy framework to ensure that this sector contribute meaningfully to the economic development of Nigeria.

“Without mortgage sector, it will be difficult for Nigeria to really move forward at the rate and speed that is needed,” the MD said.

On the secret to accessing mortgages, he said: “Anybody that is earning and can save about N30,000 every month should be able to live in his or her home. People that are paying N500,000 annually for rent should be able to use that to pay for their mortgage in their homes. It is possible; it is just the necessary environment if it is created.”

However, he said there is need for government to urgently intervene in the sector, adding: “On why we need government in mortgage is for the cost of land and the cost of registering title which must be meaningfully adjusted and made flexible.”

On the difficulty in getting Certificate of Occupancy (C-of-O), Obaleye said: For instance before you can register and get government consent it takes several years.

“In fact we have applied for a C of O for some of our properties and for 5 years we have not gotten it, meanwhile, if government makes this cost less expensive, affordable, more people will voluntarily pay.”

He said this tedious process is in inimical to housing development, adding that this is inimical to housing development because un-perfected mortgage is not a solid mortgage and not ranked as ‘A’ mortgages.

“We should also bear in mind that government owns land up to 95 per cent and so most government believes that land is their natural resources so they have to sit tight to it.”

On how to restore confidence in the sector, he said mortgage should endeavour to deliver what they promise, adding that at ITMB, their words have been bond.

“We are also working towards government making affordable to people and no matter what it is if you don’t get mortgage at single interest and for about 15 year period there is no way it can be affordable and so we are working towards this.

“There is hardly anything that you can do for the mortgage sector without government coming in and making things easy. Most of the problem that we are having is that we haven’t gotten anything for mortgages yet. NMRC is onboard now they need everybody’s support for them to get to the promised land.

“Their role is developmental in nature as they are supposed to provide liquidity in the sector to re-finance the mortgages”, he said.