Research has shown that lack of access to housing and land is responsible for social evils. While the housing deficit has been pegged to be between 16 to 17 million, a good percentage of Nigerians are low income earners as such having a mortgage system that works to enable access to cheap loans with little interest rate is very expedient.
Considering the importance of access to fund in the built sector, the federal government created the National Housing Fund (NHF) scheme in 1992 in order to address the challenge of long term loan for housing finance. The NHF was created to enable every Nigerian have access to loan with affordable interest rate however they have to be contributors to the NHF scheme.
Section 14(2) of the National Housing Fund Act Cap N .45 of 1992 stipulates that a contributors can access a loan for the purpose of building, purchasing or renovation of existing homes or houses.
However factors such as lack of access to land, inadequate funding, inaccessibility of mortgage loans due to lack of proper title to properties, low income of prospective borrowers, and cumbersome procedures for obtaining governor’s consent to land transactions have really worked against contributors from benefitting from the scheme.
To address this issue, the FMBN created a new product called FMBN Home Renovation Loan (FHRL) which will allow a greater number of Nigerians access loan for the renovation or improvement of their existing homes.
Explaining how the product works, the head of department corporate affairs Mr Lawal Isa noted that only contributors to the NHF can access the loan. The maximum loan amount for this product is N1 million, which is subject to the income limit of the beneficiary as well as the ultimate cost of renovation.
He said that it is proposed that FMBN will approve and disburse the Home Renovation Loans through the Federal Government Staff Housing Loans Board (FGSHLB) for federal civil servants and through the Office of the Head of Service or any other body recognised by the bank at the state level, in the case of state civil servants.
At the federal level, applications are to be aggregated by the FGSHLB while at the State levels applications are to be aggregated by the relevant authority and forwarded to FMBN through the state controller of the particular state.
While for employees in the organised private sector the applications shall be aggregated by the permanent secretary or chief executive of the organisation.
Lawal Isa explaining more on the product stated that, “Approved loan amount shall be disbursed in lump sum to the FGSHLB in the case of federal civil servants and directly to the account of beneficiaries in the case of State Civil Servants and employees of the organised private sector, after acceptance of offer and the fulfillment of conditions precedent to draw-down.
“The loan tenor shall be a maximum of three years or employee’s remaining years of service, whichever is less. Repayment of the loan shall be through monthly repayments for a tenor not exceeding three years via direct deductions by the FGSHLB and the respective Head of Service/ accounts office of the states. Monthly repayment shall not exceed one third or 33.3 per cent of applicant’s monthly salary/ income. The interest rate shall be 8 per cent for the duration of the loan. This is because of the high risks involved as well as the less cumbersome process and documentation required. The facility shall not be available to any contributor who has enjoyed an NHF loan to buy or build a house. The facility could be taken jointly by a couple, subject to the income assessment of both parties. The loan can only be taken once in five years.
Beneficiaries may however, be eligible to apply for NHF loans for home purchase after fully liquidating a Home Renovation Loan earlier taken. Applications are to be submitted with certified Bill of Quantities indicating the amount required for the renovation.
Speaking on the FMBN’s renovation loan, the managing director Interra network Mr David Onu noted that anything that can address the issue of housing is welcomed. He however advised that more efforts should be geared towards providing affordable housing considering the high percentage of Nigerians that lack access to good and affordable homes and also the loan should be more accessible.
On his part, Lawal explained that FMBN home renovation loan will definitely improve the standard of living of beneficiaries, enhance the bank’s social housing programe, spur more Nigerians to contribute to the scheme, increase access to the benefits of the NHF scheme by more contributors and enable FMBN to reach out to a larger number of contributors with less resources, among other benefits.
Improving Access To Loans Through FMBN Home Renovation Plan
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