3rd Annual Affordable Housing Africa Bridging the Gap: Housing Finance & Policy Developing Primary and Secondary Mortgage Markets to Provide Accessible and Affordable Housing in Nigeria Charles Inyangete, PhD Chief Executive Officer, Nigeria Mortgage Refinance Company (NMRC) Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
Right to Adequate Housing The United Nations Committee on Economic, Social and Cultural Rights has underlined that the right to adequate housing should not be interpreted narrowly. Rather, it should be seen as the right to live somewhere in security, peace and dignity. - The Right to Adequate Housing, OHCHR Developing Primary and Secondary Mortgage Markets to Provide Accessible and Affordable Housing in Nigeria Charles Inyangete, CEO NMRC Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
3 rd Affordable Housing Africa Theme Achieving sustainable economic development through the integration of effective policy reforms and a blend of conceptual and technological advancements Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
AFRICA 2016 estimated population of 1.2bn people Source: www.worldpopulationreview.com
Africa s Investment Prospects
The Infrastructure Deficit In Africa Approximately US$75bn/annum is required to address Africa s infrastructure deficit o US$38bn/year for new investments o US$ 37bn/year for maintenance Current funding gap is estimated at US$ 35bn/year Over 60% of the current funding (US$40bn) is provided by the public sector Investment Required For Africa s Infrastructure Distribution of Investments US$ 37bn Operation and maintenance US$ 35bn Current Financing Gap 23% 10% 44% 4% US$ 38bn US$ 40bn 19% Infrastructure Development Source: World Bank 2011 Current Spend Power Transport Irrigation Water Supply and Sanitation Source: World Bank 2011
The Nigeria Infrastructure Master Plan (NIIM) The Nigeria Integrated Infrastructure Master Plan (NIIM) was approved by the Federal Executive Council on 3 rd September, 2014. Objective: To raise Nigeria s stock of infrastructure from 35-40% of GDP to 70% of GDP in 2043
NIIM Projected Infrastructure Investment in Housing The projection is that $350bn or 1% of the estimated $3tn would be invested in housing and regional development. Spread over a period of 30 years this translates to $11.67bn annually
Impact of Infrastructure on Housing Affordability It is estimated that the cost of housing can be reduced by about 30% by providing infrastructure (Roads, Drainages, Water, Electricity etc.) 30% reduction in housing cost due to infrastructure savings will improve affordability by a factor of 1.4285 or 42.85%
Housing Catalyst for Sustainable Economic Growth The housing sector has the potential to catalyse sustainable economic growth, and can contribute significantly to GDP.
HOUSING INVESTMENT /FINANCE: CHALLENGE VS. OPPORTUNITY Returns on Investments ENABLING INVESTMENT ENVIRONMENT Marketable Assets Enabling Laws
Housing Value Chain (and Opportunities)
Africa Housing Market Absorptive Capacity With the exception of South Africa, Africa housing markets lack the capacity to receive big money. - Africa Housing Finance Year book 2015 Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
Helped eliminate barriers to securitization With strong linkage to the socially relevant agenda of housing, significant institutional support has been provided to develop Mortgage Finance Globally, government-supported housing agencies and similar nodal agencies have played a constructive role in development of domestic residential mortgage and bond market Several agencies have expanded their scope of activities and have accepted a larger share of the associated credit risks Initiated more systematic issuance of MBSs Improved access to housing finance for households Provided liquidity to FIs Nigeria India Malaysia Canada Japan USA Role Explicit Government Guarantee Issues MBS Refinancing Regulatory, developmental and refinancing * Refinancing Has Securitization Guarantee Programs Provide a stable supply of housing finance Provide liquidity to FIs Purchases mortgages from Banks Mortgage Insurance * Only issues MBSs on behalf of private financial institutions Source: KPMG # As part of Mortgage Credit Guarantee Company Copyright 2015 Nigeria Mortgage Refinance Company. The information contained herein is subject to change without notice. 15 #
Helped eliminate barriers to securitization With strong linkage to the socially relevant agenda of housing, significant institutional support has been provided to develop Mortgage Finance Globally, government-supported housing agencies and similar nodal agencies have played a constructive role in development of domestic residential mortgage and bond market Several agencies have expanded their scope of activities and have accepted a larger share of the associated credit risks Provide Liquidity to FIs Improved access to housing finance for households Provided liquidity to FIs Nigeria Egypt Tanzania Jordan Brazil USA Role Refinancing Refinancing Refinancing Provide a stable supply Refinancing of housing finance Provide liquidity to FIs Explicit Government Guarantee * Issues MBS Purchases mortgages from Banks Mortgage Insurance * Supported by the Central Bank Source: Compiled from Various # As part of Mortgage Credit Guarantee Company Copyright 2015 Nigeria Mortgage Refinance Company. The information contained herein is subject to change without notice. 16
Innovation: Key to Unlock Housing Finance PRODUCTS TARGET MARKETS INNOVATION IN HOUSING FINANCE MLF PLAYERS APPROACHES Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
Housing Affordability in Nigeria Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Source: Centre for Africa Housing Finance in Africa, October 2015
NIGERIA HOUSING MARKET CHALLENGES Source: Paper Presented at the Presidential Retreat on Housing Finance 2012 My Vision and Strategy For NMRC 2014-2016 - Prof Charles G. Inyangete - Sept., 2014 2
Mortgage Market Key Issues Short Tenor High Interest Rates Regulatory (Title Transfers, Governor s Consent) Housing Costs (High Land and Building Costs) Foreclosure (Lengthy and Complicated) Mortgage Insurance (Lacking / Limited) Underwriting Standards (New - NMRC) 6
Nigeria Housing Market Opportunities The Nigerian real estate sector is growing faster than the average GDP at a rate of 8.7 percent (GDP growth at 7.4 percent). BMI estimates that the real estate industry value will grow over the next 2 years, from USD 11.4 billion in 2015 to USD 16.5 billion. Nigeria needs US$363 billion to meet current housing deficit -Centre for Africa Housing Finance in Africa, October 2015 Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Adapted from: Ayere, Towards a Brigther Future, October 2015
NIGERIA MORTGAGE REFINANCE COMPANY VISION To be the dominant housing partner in Nigeria MISSION provide liquidity, accessibility, affordability, and stability to the housing market in Nigeria. Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
HOUSING AFFORDABILITY IS KEY. The Nigeria Mortgage Refinance Company Plc is a housing policy intervention incorporating conceptual and technological advancements for sustainable development. Property Price Household Income NMRC Mortgage Rate 1.Accessibility To Long term Finance 2.Sustainable Finance 3. Affordability..by Connecting the Capital Market
Avenues to Facilitate Affordable Housing. Cost of housing affordability can be reduced between 20-50 percent by; Unlocking land at the right location Reducing construction costs through value engineering and industrial approaches e.g new technology Increasing operations and maintenance efficiency Reducing financing costs for buyers
NMRC PROMOTING AFFORDABLE HOUSING Land Acquisition and Compensation New Mortgage and Foreclosure Law Mortgage Finance Capital Market (Bonds / Investments etc.) Titling and Registration - New Mortgage and Foreclosure Law Construction Costs Pension Contributory Scheme, Mortgage Guarantee, Deposit Insurance Products etc. Quality Assurance Uniform Underwriting Standards
Nigerian Mortgage Market A Critical Enabler A sustainable secondary mortgage market requires an efficient primary mortgage market. Standardisation Legislative Reforms Performance Data NMRC s Uniform Underwriting Standards for eligible mortgage loans has now been finalized This process will effectively convert mortgage loans into commodities and lower costs of due diligence It will enable investors and rating agencies to quantify credit risk The Model Mortgage and Foreclosure Law is being finalized for passage by Pilot States Successful passage will fast track the process for creating legal mortgages, ensure timely resolution of disputes and create an efficient foreclosure process NMRC is initiating an IT Framework that will link NMRC s system directly to the participating mortgage lending banks mortgage information system Availability of credible historical performance data on mortgage loans (e.g., default and prepayment) will enhance risk assessment and pricing of NMRC s credit risk. NMRC has devoted considerable time to technical activities important in managing the risks inherent in mortgage lending and improving the enabling environment for the long-term benefit of market development and sustainability of the mortgage market DIALOGUE ON THE CAPITAL MARKET January 2015
Growing Middle Class Income Nigeria s fast expanding middle class holds huge potential for the mortgage industry Source: KPMG Copyright 2015 Nigeria Mortgage Refinance Company. The information contained herein is subject to change without notice. 28
Nigeria Mortgage Market Overview Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Adapted from: Ayere, Towards a Brigther Future, October 2015
The Nigeria Mortgage Industry Structure at a Glance Supervision/ Regulator Mortgage Bankers Association of Nigeria (MBAN) Nigeria Mortgage Sector Central Bank of Nigeria (CBN) Providers of Finance Secondary Market Nigerian Mortgage Refinance Company (NMRC) The Infrastructure Bank Federal Mortgage Bank of Nigeria (FMBN) Capital Market 40 21 Primary Market Primary Mortgage Lenders Commercial Banks FHA Homes (PML) National Housing Fund (NHF) Private Sector Players Government Operators/ Institutions Real Estate Development Private Developers UAC Properties UBN Property Ltd., etc Federal Housing Authority (FHA) Federal Ministry of Housing & Urban Development State Housing Corporations LSDPC OPIC, etc Consumers Home Owners LSPDC: Lagos State Development and Property Corporation OPIC: Ogun State Property and Investment Corporation 1 7 PMLs have national authorization, 33 have qualified for the State PMLs. Source: KPMG Copyright 2015 Nigeria Mortgage Refinance Company. The information contained herein is subject to change without notice. 30
MORTGAGE REFINANCE MULTI-SECTORAL INTERVENTION FOR AFFORDABLE HOUSING INDUSTRY REGULATORS PRIMARY MORTGAGE LENDERS CAPITAL MARKET MORTGAGE REFINANCE GOVERNMENT INSURANCE INDUSTRY PENSIONS FUNDS
NMRC - The Capital Market Tapping into Potential Growth In Housing
NMRC - The Pensions Sector
NMRC - The Insurance Sector
MORTGAGE REFINANCE AND AFFORDABLE HOUSING Deep Primary and Secondary Mortgage Market Sustained Availability of Affordable Housing Sustainable long-term finance for Mortgages
NMRC CONCEPT Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
NMRC STRATEGIC THEMES Encourage mortgage lending through long-term funding Increase maturity structure of mortgages and reduce mortgage rates Increase efficiency of mortgage lending lead role in driving changes and standardising mortgage lending Introduce a new class of high quality long-term assets to investors (pensions funds and other investors) Deepen Mortgage Coverage Increase Capital Market Access/ Capital market development Activities Ensure Operational Effectiveness Strategic Themes
Deepen Mortgage Coverage 1 Promote mortgage inclusion across different market segments and income classes 2 Increase efficiency of mortgage lending through standardization of key lending procedures 3 Increase access to mortgage facilities by home buyers
NMRC BONDS LISTED ON FMDQ-OTC Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
FMDQ Listings and Quotation Platform OTC Securities Exchange Government securities, corporate bonds, commercial paper Gives global visibility through inclusion in FMDQ Bloomberg e-bond Trading System, transparency and price discovery Member of the African Securities Exchanges Association (ASEA) and affiliate of International Capital Market Association (ICMA) Market size Turnover value N104 Trillion ($520bn) in 2014 higher than the Nigeria Stock Exchange of N1.3 Trillion ($6.5bn). In 2015 Turnover N137 Trillion ($685bn) Adopts IOSCO s principles for financial benchmarks and documented governance standards over NIBOR CPs quoted N80.4bn ($402m) (StanbicIBTC, WEMA Bank) Established 0.88 correlation of between crude oil price and the Naira 2016 Development Development and listing of non-interest Islamic (Sukuk) products 4 0
African Capital Markets Competitiveness
Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Adapted from: Ayere, Towards a Brigther Future, October 2015
NMRC CONNECTING MORTGAGES TO THE CAPITAL MARKET Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Adapted from: Ayere, Towards a Brigther Future, October 2015
Bridging the Gap: Housing Finance and Policy. July 18-20, 2016 Adapted from: Ayere, Towards a Brigther Future, October 2015
NMRC BONDS CAPITAL MARKET PROJECTIONS 2019 N440bn Introducing a new class of high quality long term assets to investors 2018 2017 2016 2015 N8bn
NEXT STEPS - GOING FORWARD Second round Equity Issue up to N6bn ($30m) Q3 2016 Second tranche Bond Issue N20bn ($100m) Q3 2016 Non-Interest (Sukuk) Bond New Market target INCLUSIVENESS Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
PERSISTING CHALLENGES High Inflation environment High Interest Rates and High Bond Yields Fixation on single-digit Mortgage Interest Rate Subsidy to achieve single-digit rate. Who Pays? Developer Finance Construction Warehouse Facility Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
Path to creating Mortgages Rent-to-Own Shared Equity Ownership Scheme Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
NMRC DRIVING INNOVATION IN DATA MANAGEMENT TECHNOLOGY - The Nigeria Mortgage Market Information Portal: is a collaboration of the Nigeria Mortgage refinance Company Plc (NMRC), Central Bank of Nigeria, National Bureau of Statistics, Federal Mortgage Bank of Nigeria, Ministry of Power, Works and Housing and other stakeholders to address this challenge. - The NMRC Mortgage Market System: an innovation aiming to capture online-real time mortgage data from primary mortgage institutions from point of request. * Information asymmetry will be significantly reduced. Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
NIGERIA S CAPITAL MARKET QUALITY The Capital Market Master Plan Four Market Quality Dimensions: Size Liquidity Depth Breadth Critical Missing Dimension - RESILIENCE
Capital Market Resilience
CAPITAL MARKET RESILIENCE RESILIENCE Speed or ability of prices / rates etc to rebound after a shock. Resilience is critical for ; Sustainability Enhancing Investor Confidence Signalling for managing volatility The same applies to the larger ECONOMY Diversification drives sustainability
The Capital Market is Key to Housing Finance The Capital Market provides veritable source for long term housing finance. Housing is a potential strong driver of economic growth The Nigeria Mortgage Refinance Company Plc is connecting the Nigeria Housing Industry and its stakeholders to the enormous potential of the Capital Market for sustainable housing finance economic development. Capital Markets must be RESILIENT to sustain affordable housing finance and economic growth Bridging the Gap: Housing Finance and Policy. July 18-20, 2016
ACCESSIBILITY & AFFORDABILITY CAPITAL MARKET LIQUIDITY SUSTAINABILITY Resilient Capital Market Sustainable, Affordable Housing Finance
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